Inventory and data trading are the future of online display, and likely online video, mobile, and addressable TV, among other digital media. This isn’t a doom statement for publishers or even ad networks, just that a significant amount of data and inventory will be refined by traders going forward. From the earliest days of a stock exchange there has been the concern that exchanges will commoditize a market and ruin personal relationships. Suffice it to say, no one today can imagine purchasing or merchandising a stock without the exchanges on which they’re traded.
Agency trading desks like Cadreon and VivaKi have launched successfully with investment spending from their parent corporations. In order to thrive in the eyes of their holding companies and stockholders, though, three simple rules will need to be put in place.
Client Compensation Mustiness Change
Clients ar so focussed on acquiring the last price in paying their agency that many, I believe, would rather be happier knowing they got the lowest price for the agency’s services rather than knowing they got the best results for their marketing dollar.
Interclick and ValueClick, two publicly traded ad networks report gross margins in the mid forty percent range. Yet Interclick’s net income was around 4% of its revenues. This tells me Interclick isn’t getting rich off its clients. They’re continuously spending to innovate and keep pace with (or, they hope, ahead of) the industry. If a client wants to keep an agency and/or its trading desk in the 15% (or worse, 10%, 3%, or 1.5%) model, they will get commensurate results. No digital agency can operate on these margins and generate great, measurable selling results for their clients. And, what of the clients who put clients on retainer, and as a result feel as though they’re adequately funding their portion of the desk?
See the third rule below!
It has always amazed me that the executives within major car companies only drive their own product. Why not rotate competing brand’s cars among executives each month (and among the engineers astatine that) to find what other companies are doing better and differently to help stimulate innovation? The same will need to apply for agency trading desks if they are to succeed. Not everything can be home-grown, and if they ne’er work with other outside trading desks and networks, they won’t get introduced to new ideas that work as quickly.
When I was on the agency side I was sometimes taught that shuttering outside ideas saved the agency. Having been on seller, client, and agency sides now, though, I can see this is clearly not the case. Both clients and agencies would be smart to mandate the uninterrupted testing of outside co-opetitors, this link http://blogs.wsj.com/cmo/2014/07/25/why-advertisers-are-questioning-how-agency-trading-desks-work/ had something to say..
Internal Compensation Must Change
Wall St. lures the best and brightest with the prospect of making millions before you’re 30. Holding companies woo young grads to Madison Ave with the hopes of making over $50k before you’re 30. Yet to be a great digital media trader, the skills aren’t entirely different. This isn’t to say that traders will need to make $1MM to succeed, but the current employee comprehensive model – driven by the poor comp model thrust upon agencies by their clients as mentioned above – makes communion the wealth impossible. If a client’s campaign goal is a $25 cost per reservation and the trader achieves a CPB of $21, shouldn’t they share in that success financially? The same would go for helping the agency earn a fair profit on each campaign such that they can continue to innovate, and so on.