Commentary
Marketing Technology Will Collapse The Digital-Ad Supply Chain
- by Dave Morgan , Featured Contributor, January 28, 2016
I’ve written a couple of times recently about my views on the rise of marketing technology and its implication for our industry. Lots of folks have been reacting to it, so I’m taking that as a message that I should continue to push forward on this meme.
I believe that the rise of mar tech is going to have an enormous impact on the structure and operation of the digital advertising supply chain. Put simply, it will obliterate the supply chain as we know it today.
That the digital ad supply chain is problematic has been a top-of-mind issue among industry leaders for years. The supply chain is massively complex. It leaks tons of data. It leaks tons of money. It is a patchwork quilt of thousands of companies and different technologies and protocols that has been exploited by fraudsters, bots and zillions of redundant intermediaries for billions of dollars a year.
If that's not enough, the supply chain’s end product, the consumer’s digital ad experience, has become so poor that tens of millions of consumers have turned to ad blockers in the last year alone to remove, declutter and de-clog their digital devices of redundant, irrelevant, annoying ads.
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Most of the technology driving digital advertising today is designed to serve the needs of the ad ecosystem -- but not necessarily the needs of marketers. Impressions, cookies, bidding, headers, etc. are bought and sold again and again. These aren’t necessarily things that explicitly drive sales and ROI for marketers. However, what they do always do is drive revenue for the people that buy and sell and trade things, and for the people making the technology to help them do it.
That is going to change. As Peter Drucker taught us, the purpose of marketing is to create customers: nothing more, nothing less. As more and more companies connect their back-end customer and sales systems to their front-end communication channels, activities that provably create customers will get more resources. Those that don’t will be starved.
That level of scrutiny and accountability is going to be applied across all marketing activities, the vast majority of which are now digital, or at least are now all digitally measurable, such as with TV.
That kind of scrutiny will have a clarifying and purifying effect on the digital-ad supply chain. Like gravity on the mighty Mississippi, outcome-based accountability will help marketers’ dollars find that fast and best path to customer creation, cutting right through the hundreds of dams, dikes and canals that ad-tech companies have constructed along the digital ad supply chain's banks (to mix a metaphor here) to siphon off some of its money and power for their own purposes.
Over time, the hundreds of miles -- and thousands of companies and their little towns and hamlets -- of the meaningless, meandering watercourse that the ad tech supply chain has become, will be bypassed, left fallow to turn into ghost towns as ad-dollar nourishment dries up.
Sound farfetched? I don’t think so. What do you think?
That coincides with my vision of the future. I've never seen a marketplace so ripe for disintermediation. $100 goes in the pipeline on the advertisers side and less than $50 reaches the creators of audience and value - content creators and their publishers.
In domestic terms that means that $30B+ goes to ad servers, trackers, validators, targeters, auctioneers, etc. Are my numbers correct?
Throw Nielsen ratings into the same Con game as Barry Diller stated a few months back.
All the benefits you mention are for the gatherers and distributors of information/data of the population who prop up the salaries and profits of the gatherers and distributors of information/data and round and round about to sell and control what the population thinks and buys to pump the profits to the gatherers and distributors. Somewhere between the client and the G&D's, huge sums of profit disappears into thin air or fraud or who knows. What does the population/spenders get besides higher consumer prices to support the G&D's ?
You are correct.
Have a look at the work of Joseph E Tainter, the US scholar, on the collapse of complex societies.
And what have the Mayans, the Romans, the Chacoans and ad tech all got in common?
When there wasnt enough reward to go round, the system collapsed.
And people built again. Bottom up. Simply. Locally.
Nothing changes.
Leonard, just for the heck of it, I revisited that video where Barry Diller makes that statement to the effect that Nielsen is a 70 year "con game". He was one of several current and former TV execs talking informally and after making the statement you note so often, he incorrectly described the original Nielsen ratings as based on "diaries", then wandered off with a few comments about advertisers relying on ratings to negotiate time buys and , finally, just wound down his comments, all the while looking rather tentative and unsure of himself regarding this rather technical subject. CBS's president then chimed in with some observations aboout Nielsen having difficulty measureing "all" of the network audience, afterwhich I got bored and tuned out.
Frankly, I doubt that Barry was making a grand expose nor that he has anything to back up his "claim". More likely he was just chewing the fat, without any preparation, as a member of the panel and out came his "bombshell". However, I might be wrong on this so I invite anyone who cares to see the video for themselves to take a look. Just Google "Barry Diller: Nielsen Is a Con Game" and the video should pop right up, folks.
Brilliant Rick! It will be interesting to see what artifacts survive :)
Dave
this a wonderfully nuanced conversation - and please keep it going
having come into AdTech 5 - 6 years ago as a MarTech person gives me a good understanding of the strengths and weakneses of both - the inevitablity is that these will collapse into one - as you suggest - in an 'Always On' eco-system.
but there are good things and bad on both sides here:
- AdTech has mastered speed but not necessarily intelligence
- MarTech is the opposite - we use a deep and wide pool of data to make decsions - whereas AdTech data can be ephemeral and incomplete
- the concepts we apply in MarTech - the management of a relationship across the lifecycle is certainly lacking in AdTech - but that is going to be the key to being more comprehensive in an approach to AdTech from the MarTech side
- honestly, I do not see a lot of folks from MarTech that truly understand AdTEch and that is something that needs to be addressed - starting with the way client orgs are organized
all that said - technology vendors need to be aware of how much time needs to be spent with clients to understand where they are in their evolution and where the want to go
just add water and stir tech vendors beware - there is a lot of hand holding
keep it coming Dave!
best
Charlie
The overvaluation of ad tech reminds me of the financial crisis. Impressions are sub-prime mortgages, ad tech intermediaries the lenders, IAB the credit rating agencies, and digital agenices the bulge bracket banks?
Charlie, thanks so much for the great insights. I think that you are right on target. Adtech has matered the speed, which most of martech hasn't. I suspect that we'll see lots of adtech vendors morphing their products to try to fill the voids on the marketer side. They will need to bring in analytics of a type that most are not familiar and will probably oversell their speed. For sure, it will take a while for the evolution to happen and much of it won't be pretty.
Great ideas Dave! You might check out the chart in Chris O'Hara's article that talks to a $10 spend being reduced to a $3.75 exposure. Factor in fraud, and you can cut that in half. It's pretty impossible to make ROI numbers like that work. Ad-tech is not worth the expense.
http://adexchanger.com/data-driven-thinking/programmatic-3-0-the-next-paradigm-in-inventory-procurement/
Love it Al. Very fitting given today's news between 4A's and ANA.
Thanks Larry. Great article. Without question, a big focus of marketing technology will be the maximiation of "working" media investments.
Great post! Totally agree with every single bit of it; I have been a great proponent of this same message, but you put it very nicely in this blog post. Having said that, one thing I joke when talking about disruption in the digital ads industry is what will happen to Google when businesses really stop paying attention to digital Ads? Google is trying hard to make ads relevant, but the point is that at the end of the day an Ad is an Ad is an Ad... And people don't like to see that.
First, adtech doesn’t just fail to serve the needs of marketers. It fails to serve customers so royally that hundreds (not tens) of millions have turned to ad and tracking blockers. And that’s in addition to telling survey after survey that privacy is a huge issue for them. Here are three surveys, among plenty more:
http://www.pewinternet.org/2015/05/20/americans-attitudes-about-privacy-security-and-surveillance/
https://www.truste.com/resources/privacy-research/us-consumer-confidence-index-2015/
http://customercommons.org/2013/05/08/lying-and-hiding-in-the-name-of-privacy/
https://www.asc.upenn.edu/news-events/news/americans-resigned-giving-their-data-new-asc-findings-suggest
Second, Drucker also said, "The purpose of marketing is to create and keep a customer." What does marketing do today to keep a customer? To answer that, look at the relative spend by marketing on sales vs. service.
Third, what exactly is martech, and how does it bypass adtech?
Hey, we all agree adtech is a mess. For what it's worth, I've been writing about it for years here: http://j.mp/adbwars. (Though I tip my hat to best I've seen on the subject, Maciej Clegowski's The Advertising Bubble: http://idlewords.com/2015/11/the_advertising_bubble.htm. Nicely unpacks that Mighty Mississippi metaphor.)
Advertising will fix itself by pushing adtech aside and getting back to respectful non-tracing-based ads. Marketing will fix itself by also spurning unwelcome surveillance of people, and by truly letting customers take the lead. For example, with privacy, which I just wrote about here http://j.mp/privjob and here http://j.mp/privjob.
Meanwhile I see few signs that marketing, as a whole, is ready to respect customers as sovereign, independent and private human beings that bring far more intelligence to the marketplace than can be extracted by surveillance fed to Big Data mills.
But hey, maybe I’m missing something.
Doc, I'm in 100% agreement with you that it is customers who have been most royally under-served (screwed, actually) by the current ad tech ecosystem and that Drucker's definition of marketing both explicitly and implicitly includes the retention of customers, not just their initial creation. My hope is that a rebuilt ecosystem focused on serving the only two real pincipals in the selling and buying of goods and services - the seller and the ultimate customer - will get us much closer to a marketing and advertising world where the customer is delivered fewer, more relevant ads and are actually delighted with information and offers of goods and services that they are interested but were previsously unaware of. That said, I am not so naive to believe that marketers and technology built to serve them are likely to cause them to perfectly align their practices to their customers'. They haven't acted that way in much of their direct marketing practices when they untold numbers of uninterested recipients of phone calls, postal mail, email and banners, all in the hopes of the sales they will make on the sub 1% of responders. I do beleive that the future will be owned by the customers and that, as you have taught us, we will eventually have an economy built and controlled by customers' intentions. Marketing tech's collapsing the current ad tech supply chain won't be a silver bullet, but at least it will move us onto the next thing, which can only be better for customers. Thanks so much for your comment, insights and inspiration Doc.
Thanks, Doc. Most people need to hear this over and over if we're going to successfully drive the industry towards real change. Here is a piece i wrote two years ago on the same topic before joining DCN. Still holds true.... Publishers and their consumers are geeting screwed to use Dave Morgan's word. Now adblocking. http://digiday.com/publishers/publishers-data-trackers/
Great column, Dave, as always.
Yes Dave, but you left out who was responsible for this mess. It was the VC's that poured billions of dollars into ad tech companies that promised to "automate" the selling process of media. They were the ones driving the PR, the conference sponsorships...etc....essentially paying the way for this to happen. They crammed the trading desk and all of its re-warmed, unsold inventory (that nobody bought in the first place) down everyone's throats. Google ensured they remained the casino owner with everyone playing "against the house" with their algorithm changes. I've never seen online advertising in such deep trouble. Next big hit? I predict the Privacy issue.
Dave, what mystifies me is how is this catastrphic mess going to be sorted out? So far, the big players all seem to be going their sepoarate ways and the IAB, doesn't have the clout, nor, I suspect, the mandate, to offer the level of leadership that is required. The way things are going, it wont be long before 65-70% of digital users have resorted to ad blockers to bring some level of control and sanity to their "digital" experience. By that time it may be too late.
Ed, I agree. I am hopeful that the discreionary fuididty of media/marketing spend will be our friend here. As more of that spend can be tied to ROI we will see whole chunks of the digital supply chain fall away. How we win back the trust of users will be the hardest part. I believe that Doc Searls is right on target. Not all marketers have been great at both respecint and delighting customers when it comes to direct communications. That area will take time.
There are three real problems with outcome-based accountability.
It assumes that marketers have:
The first is the easiest to obtain, but requires humility. "Sell lots more of our stuff so I earn my bonus!" is more of a pipe dream than an ideal outcome. A better outcome would be to "sell to people who have the potential to be long-term customers" and "learn about who we serve best, who we could serve better, and who we should not attempt to serve at all."
Without clarity about desired outcomes beyond proxies like impressions, engagement, and even conversions it will be hard to ensure that a marketer is moving in the right direction. For example, it's possible to boost sales among customers who are a poor fit while ignoring those who would be a great fit.
Lastly, we need more humility about our ability to dictate or maximize outcomes. Now more than ever, marketers would do well to focus on the fundamentals. Is this really a good product? Does it really do what people need it to do? Is it really a good value? When companies make really good products, marketing becomes pretty straightforward.
A major clue that marketing is not doing its job properly is when the products are a mess but the advertising saves the day via a massive Rube Goldberg adtech/martech machine. It's a LOT of effort to try to fool all of the people all of the time, and there's only a matter of time before people realize there's a marketer frantically spinning his or her wheels behind the curtain.
Martech is indispensable not so much because it makes us magically better at advertising, but because audiences are now so scattered that it's our only hope of reaching someone at all.
The real work of building truly better products, creating brand portfolios that are intuitive and make sense to buyers, and making the brand's value obvious and clear all still needs to be done.
We forget that at our own peril.
Thanks Tom. You hit on the most critical point relative to the outcome theme: are marketers (and the rest of the ecosystem) truly ready for an outcome-based theme. It will require much more than just new technology, but organizational changes, new talent, new incentives and much more.