Thursday, June 30, 2011
Thursday, June 23, 2011
Wednesday, June 08, 2011
Just for completeness, here's the video ecosystem, certainly no less complicated than display. One important omission on here is http://www.liverail.com which should be in the video ad servers bucket and is most likely going to be circled in red shortly as well.
This is one of my favorite charts, recently updated again and highlights all the different segments of the online display advertising market. Now compare that to TV - the digital space is just a tiny bit more complicated...
By the way, if someone wants to give a little talk about this at an Alloy Digital lunch and learn, please contact me.
Interesting chart from Business Insider; not surprisingly, Facebook, Linkedin and Twitter are the net recipients of tech talent and Google, Yahoo and Microsoft are bleeding. If that's a predictor for future stock prices, I'd say MSFT, YHOO and GOOG will stay flat for the next couple of years and follow the example of MSFT. Get your hands on those juicy IPO shares in Twitter and Facebook!
Thursday, June 02, 2011
Hey, you kinda look like me. Let’s be friends.
New York Times columnist David Brooks notes how we flock to similar-looking people:
Sean Mackinnon, Christian Jordan and Anne Wilson did research for the Personality and Social Psychology Bulletin in which they analyzed seating distance. They found we sit closer to people who share our physical traits. People with glasses sit closer to other people with glasses. People with long hair sit closer to other people with long hair. The assumption seems to be that people with similar physical traits will also share similar attitudes. We’re more likely to be accepted by people like us.
Furthermore, we’re more likely to socialize with folks who are immediately around us. After all, it’s much easier to ask the guy next to you what his favorite book is than the cute gal across the room. Sociologists have a word for this proximity-based clustering: propinquity.
Which suggests that—when you think back to the high school klatches of tan popular girls, pale goth dudes, or bespectacled geeks—youngsters often self-select their membership in cliques based on similar appearances.
Basically, New York media people who used to be awkward but now are hot, you all chose to hang out with losers who looked like you.
Accent theme by Handsome Code
By Christian Busch on Thursday, June 02, 2011
Over the past few years, digital media agencies have embraced buying ad inventory in a manner akin to how Wall Street traders purchase stocks. Now some agencies are accused of embracing the flip side of Wall Street: greed, recklessness and insider access.According to multiple industry sources, some prominent brands are growing increasingly uncomfortable with their digital agencies funneling money to sister company trading desks (the holding company divisions that purchase ad inventory on exchanges). They are asking questions about how these trading desks earn revenue and whether clients are being charged more than once for executing the same media plan. The shift to programmatic audience-based ad buys through exchanges is undeniably an important advance to the online ad model, but agency holding companies have also taken it as an opportunity to update their own outdated business models in ways that are likely to leave some procurement chiefs scratching their heads.
The questions are murkier when it comes to the issue of "mandates." There has long been talk that orders have come from the highest levels of agency holding companies for its agencies to redirect spot ad buys through the in-house trading desk rather than ad networks. Holding company and agency reps rebuff questions on this, but their words don't always match up with reality. In some cases, holding companies are incentivizing their individual agencies’ media planning teams through revenue goals and even bonuses, according to several sources.
For example, Digiday was shown an email from a planner at a top Publicis agency stating that her team was not allowed to work with any networks and exchanges. “We are not authorized to buy networks and exchanges,” read the email from a buyer at a major media agency. “We are required to use [Publicis trading desk] Audience on Demand.” One prominent agency executive explained that over the past year her planning team was given quarterly goals to allocate more client budgets to exchanges, which she ignored. Other agencies compensate their teams for shifting more spending to trading desks; it’s actually in some planners' contacts, she said. This is causing major friction in some cases between planning agencies and their trading desk partners, said a source.
Madison Avenue Meets Wall StreetAgencies for years chafed at the role ad networks played in the online ad world. Agencies relied on ad networks to reaggregate the disparate online media world yet, in the process, gave up big margins of 30-50 percent. Meanwhile agencies, beaten down by procurement, scraped by with margins in the low single digits. Trading desks were set up with the implicit -- and sometimes explicit -- goal of cutting out the networks and recapturing lost margin in the process.
Trading desks were set up as "independent" companies within holding companies. Publicis kicked things off in 2008 by forming VivaKi, which manages the Audience on Demand trading desk. These days, pretty much every major holding company is in the game: Omnicom has Accuen, MDC Partners has Varick, IPG has Cadreon while WPP has Media Innovation Group. Each one operates differently, but all are growing rapidly, helping holding companies boost profits. MIG, for example, now has 60 employees in the U.S. alone.
“It was a better way of doing things versus the blind ad networks,” said Forrester Research analyst Joanna O’Connell, who helped build the first trading desk at Razorfish, prior to its acquisition by Publicis. “Networks were making 50 percent margins. Agencies are making money, too, and there was an opportunity for better margins, but they’re not just raping clients. Seventy percent of clients' dollars were being lost. Now it’s 20 percent. It’s a justifiable argument.”
Theoretically, trading desks are open for business coming from any direction. In reality, their business comes from agencies in the same family. That presents a serious question: Are media agencies choosing the in-house trading desk because it's the best option for a client or because it is owned by its parent company? What's more, should a client pay a fee to the agency, then another fee to the trading desk -- again owned by the same parent company -- to execute an ad buy?
New Model or Old Conflicts?There are a few ways to view trading desks. One is that they are something entirely new for the agency business, operating more as technology integrators than service providers. In this argument, the trading desk is more akin to an ad-serving company or other tech vendor that is common outside holding companies. Some in the industry liken trading desks to search engine marketing shops, many of which started as independent units but were then acquired and folded into big media agencies. This point of view rejects the comparison to an agency that spends money on media properties it owns.
“It’s not media,” said Curt Hecht, CEO of the VivaKi Nerve Center. “The ad networks didn’t own the media either. [Thinking of this like a media business] is a naive point of view. That’s coming from someone who doesn’t really understand the business. This is a specialized buying service.”
Another view is that trading desks, many of which rely heavily on technology and employees from independent demand-side platforms like Turn and Invite Media, are a way for agencies to double dip. The more often they recommend that clients spend dollars with their own trading desk, the more cash the agency earns. One digital industry veteran used the analogy of an interior decorator who happens to own his own furniture company, which he continually steers clients to. Or as another insider put it, there’s a reason Hollywood agents are not allowed to own stakes in studios.
Trading desks don’t hide the fact that clients can end up paying fees to a planning agency and a second set of fees to a trading desk. They essentially contend that trading desks are sophisticated, specialty-buying services that cost money. Adnetik, for example, has built a proprietary targeting tool called AIM Index. Some argue that trading-desk fees are similar to creative services or even ad-serving costs, which are commonly passed on to clients. In fact, some trading desks lump in a portion of their costs with ad serving, ad verification and other fixed fees.
"Both the planning agency and Varick Media Management earn fees from clients based on the delivery of specific and different services,” explained Varick president Neeraj Kochhar. “The planning agency typically earns their fees for recommending strategies and allocations across media channels. Varick earns its fees for providing highly specialized services focused on the automated and programmatic buying of audiences in real time across digital channels.”
Executives from Cadreon and Accuen could not be reached before press time. But Mediabrands' chief digital officer Quentin George, who helped found Cadreon for IPG, has spoken out at various industry events against the practice of trading desks marking up ad inventory.
Mandate? What Mandate?The issue of corporate mandates handed down from holding company executives to spend through trading desks is a touchy subject. When it was broached with one holding company, a representative hinted at legal action. Agencies are understandably sensitive to any perception they are acting in ways that aren't in their clients' best interests.
Yet there persists talk within agencies that, in ways big and small, client teams are led to use the in-house trading desk. It would be a great coincidence, after all, if the in-house solution was always, always best for every client. Does that mean there is a "mandate"? It might depend on how you define it.
Multiple ad networks and demand-side platform companies complain that agencies affiliated with trading desks shut them out, telling them they are allowed to purchase any exchange inventory only through their own desks. This might be brushed aside as vendors unhappy their products weren't chosen. But in a few cases, the networks provided evidence. What's more, interviews with former agency executives bear out the expectation to use the in-house desk.
"The agencies have clearly put themselves in a very conflicted position of acting as an agent and a vendor at the same time, and we are seeing the predictable outcome," said Zach Coelius, CEO of Triggit, a DSP. "I suspect that as clients start to understand this conflict and as the media dollars that flow through trading platforms increase, quite a few of them will ask their agencies to choose one side or the other."
Executives from GroupM would not comment for this story, but in a detailed statement provided to Digiday, the company said that both the advertisers and the agency benefit by yanking dollars from ad networks.
“We believe that agency use of trading desks will rightly move more of that value towards clients and away from ad networks who currently re-sell such inventory at substantial margins," the statement said. "Agencies should legitimately participate in the value created to reflect their significant investments in technology, in processes and in the people that operate them.”
GroupM in particular has been accused of compensating its planners to spend more client dollars with MIG. The company denied this practice, but didn’t exactly condemn it or rule it out for the future.
“Yes, we encourage our agencies to use our own trading desk,” read the GroupM statement. “The more volume that flows through it the smarter the system becomes and the greater the value created for our clients through the confidential use of their data as well as data from third parties. As stated above and as a matter of good practice we always use third party vendors to benchmark and verify performance.”
The statement continued: “We have not as yet incentivized individuals for driving volume to our own trading platforms but believe it is not an inappropriate approach and would be consistent with our efforts to incentivize our people to create value for our clients.”
VivaKi hasn’t been hit with charges of compensating its agencies to shift dollars. But VivaKi has publicly made declarations that it is committed to working with Google and Microsoft through its trading desk. In fact, VivaKi is said to have negotiated a discounted rate for online advertising with Microsoft when spending hits a certain level as part of Publicis' acquisition of Razorfish in 2009. Thus, there are lingering questions about whether the company has made dollar commitments to those companies that it must lean upon its agencies to meet.
No so, said Hecht, who said that while Audience on Demand uses Invite Media, Google’s demand-side platform, most buys are currently executed through Yahoo’s Right Media. “Our agencies buy whatever they normally buy," he said. "Whatever inventory at the right price.”
Client ConcernsSome clients are beginning to ask questions about the trading desks, which are presented as a great way to bring needed efficiency to the frustratingly hand-crafted method of ad buying. One former executive at a major Web advertiser said, “I just never felt right about it. I didn’t like the idea of our agency investing in technology and data on my dime.” Another major online retailer said she was beginning to wonder why she saw her agency’s trading desk continually turning up on her company’s media plans. “I question the objectivity,” he said. “I wonder, ‘What opportunities am I missing?’ It seems like a conflict of interest.”
That is not to suggest there is a widespread revolt brewing on the client side. By most accounts, it hasn't yet become a critical issue, particularly with the efficiency and advanced targeting that trading desks promise. The overall CPMs clients are paying are far lower than what they used to pay ad networks with better results in many cases. There's also the "bright shiny object" syndrome that makes trading desks the cool thing in the otherwise drab world of media buying. And currently, the dollars flowing through trading desks are a tiny part of the general display market -- let alone the billions that go TV.
Plus, the trading desk model is complicated and hard to understand. It can be difficult to tell one apart from the other. Some are true tech enterprises, while others outsource most technology and even the services to make buys to a DSP. There are trading desks, according to one industry advisor, that are little more than logos. And to be fair, not everyone in the agency world smells a conspiracy. Several prominent buyers said they had no first-hand knowledge of any mandates to buy through trading desks. Others theorized that if agencies were favoring their company’s trading desks, too many other vendors in the market would be tempted to squeal to the client.
“I don’t think there is mandate,” said Forrester’s O’Connell. “But there is probably pressure. Planners are inherently suspect... and want to stay relevant. You can’t make clients do anything.”
The FutureSo what’s next for this space? As audience-based buying becomes bigger -- and moves out of remnant display buys and into other media -- individual digital agencies may look to wrestle back control of exchange buying by training planners to purchase inventory this way. Some predict that holding companies may be forced to spin off their trading desks and to start working independently. That’s essentially what Havas did when if formed Adnetik in 2009. Now fewer than half of its clients are tied to Havas.
"There are many reasons we wanted Adnetik to be independent," said CEO Ed Montes. "That is one of them. We need to be able to sell to everyone. Any trading operation dealing with exchanges needs to be independent to be able to be the principal in the transaction and to minimize risk and liability."
The future of media buying is destined to be more algorithmic, which in turn will make executing these buys less specialized and more expected. One industry analyst suggested the trading desks will see their margins compress as more clients ask questions. What today is 12-15-percent margins will end up following the pattern of search management to arrive back at the 1-2 percent range.
"I believe that margin evaporates in near future as programmatic buying will be a cost of doing business," said an executive at one trading desk.
Good article about the ever evolving display buying market - agencies trying to double dip on media buying - not so cool, especially if the performance isn't great.