“The only sustainable competitive advantage is an organization’s ability to learn faster than the competition.”
–Peter M. Senge
In the digital advertising industry, there is a fundamental division that boils down to mindset. This division can be seen in both the digital marketers that work within companies, and the programmatic media buyers that work at agency trading desks. But, before we begin to describe what these two mindsets look like, it is important to state that the people or cultures that subscribe to these mentalities can be found in both agencies and brands.
The Media Mindset
Here is how this mindset plays out within an agency: Programmatic buyers (or “traders”) at trading desks view and approach DSPs as vendors that must prove their worth and produce results – or else they’re off the plan. That explains why industry reports show that agencies prefer using a multitude of buying platforms: they can test them against each other on behalf of their clients. The ones that deliver the results get the budgets. On the surface, this seems harmless.
However, by putting the responsibility of the results on the DSP vendor, it cannot be the agency or media buyer’s fault if the campaign underperforms. The DSP is ultimately at fault. Either their managed services or their algorithm failed, which means that the agency and the programmatic buyers are absolved of responsibility.
Also, the common compensation model for agencies – percentage of ad spend – further encourages this lazy approach. After all, if ad spend determines the agency’s revenue, then their primary focus should be delivery. While learning, optimization, and performance become of secondary importance – mere retention factors.
Agencies and programmatic trading desks also often have limited visibility into the client’s overall marketing mix. They are often tasked with tactical execution, not strategy. And with that tactical focus, it’s no surprise that they rely on managed services and algorithms from DSP vendors: they care only about the line items on the insertion order and about delivering. Given this limited role, they have no problem spending tens of thousands of dollars to help a vendor’s bidding algorithm get smarter. In fact, it’s in their best interest that the algorithms (or in many cases, the humans pulling the levers) be as smart as possible, since it makes their lives easier by requiring less work.
The obvious problem with this mindset is that the agency is basically an order taker and money allocator for the client, which is ultimately self-defeating because it doesn’t add much value. It’s quickly becoming a commodity and ultimately putting such agencies at risk of being cut out.
For agencies to remain relevant in the future, they will need to think differently. They will need to evolve into far more strategic roles with their clients. The old-school mindset of being an outsourced execution arm won’t cut it for much longer, and the value of being a mere order taker will continue to diminish. However, the agencies that can help their clients learn faster than the competition will inevitably become indispensable partners.
The Analytical Mindset
Progressive companies that adopt an analytical mindset are typically more hands-on when it comes to taking control of their campaigns. The same industry reports show that the majority of brand marketers prefer to ultimately settle on one DSP vendor, which makes total sense. You want all your data in one place, whether it’s historical campaign performance or audience data. You don’t want it spread across dozens of different platforms. Obviously, there is still an evaluation period that any customer should go through before settling on a platform of choice, but the goal should be to eventually settle on core relationships.
After the right fit has been established with a vendor, the next step is to take control of the campaigns, which means taking responsibility. Algorithms can be a nice solution for talent-constrained teams that also happen to have large testing budgets at their disposal. But as many experienced marketers and media buyers know, taking control of the wheel, so to speak, and optimizing your own campaigns can also be extremely effective. When combined with transparent and granular campaign reporting, it can yield insights that no black-box system can beat. The lessons learned from the optimization process are the ultimate drivers of long-term success – not just of campaigns, but also of organizations.
Marketers are also in a unique position to have full visibility into their own cross-channel marketing mixes. They are primarily responsible for strategy, but also for execution. If given the choice between investing tens of thousands of dollars into making themselves and their organizations smarter, or a third-party black-box algorithm, you would expect them to choose the former. They also know that by personally discovering insights, they can apply that knowledge across other marketing channels. A perfect example of company that does this well is Netflix.
At the end of the day, whether a campaign achieves its goals or not, the forward-thinking, data-driven marketers know that they are ultimately responsible for the analysis, optimization, and results of their efforts, whether those results are concrete performance metrics or valuable insights that steer future strategy and tactics.
Smart companies understand that learning – and learning fast – is a true competitive advantage. But learning requires transparency and control. And if there is one universal truth in advertising and in life, it’s that, if possible, it’s better to have control than to relinquish it.
The marketers of the future will be those that embrace a progressive mindset, leverage powerful technology to gain actionable insights, and take responsibility and control of their organization’s destiny.
Regardless of where you sit, though, the conclusion is the same: to survive the current evolution in digital advertising, your organization must learn to adapt to change and learn faster if it is to become truly self-reliant.
Taking Control of Programmatic
Several years ago, in the early days of programmatic advertising, agencies took the opportunity to capitalize on the novelty and used it to their advantage. They painted the ad tech ecosystem as complex and unfriendly, their clients as victims of this complexity, and themselves as the heroes: saving the day in this new frontier. Some still do, but things have changed.
Programmatic advertising is not really as complex as portrayed, at least no more complex than search marketing. In fact, programmatic display and search are quite similar in many ways, which is why search marketers happen to make the best programmatic display marketers, in my opinion. The learning curves are not significantly different. And many companies already have in-house search teams, so how is programmatic display different?
It is no coincidence that most marketers are puzzled by programmatic advertising and also wary of bringing it in-house. It’s understandable for marketers to rely on agencies and managed services as a stopgap measure if internal capabilities are lacking, or are in the process of being developed. However, the ideal for all marketing departments should always be a focus on control, self-sufficiency, and education: the pillars of empowerment.