Darren Herman

Regarding the "future of ad agencies" question at hand:

Who is helping individuals communicate to vendors?

Hi Sir, i am new. I'm italian. I patentend a new advertising system (paypervox). I'd like to have a opinion . Can i tell you?

Awesome discussion going here!

I think the future of advertising is not traditional "interruption marketing" as it has been for years, but a way for brands to interact or "engage" willing consumers, who have opted in to a set of data. Yes people often lie/don't care about what they say they are interested in, but 5,000 users opted in to information about skiing is worth more than 50,000 visitors who "we believe through 2nd and 3rd party tracking/measurement are males 18-34 making over $60k." At least in my opinion/experience, but I don't think mainstream marketers have gotten there yet. I believe they will soon...
Already mentioned, but I wanted to reiterate - The proliferation of a single sign-on web will make breakthroughs in the second half of '09. If publishers were able to access, and allow users to opt in accordingly, to all the 3rd party data that is in Facebook, Twitter, and Google accounts, and serve ads against this data then all ads will essentially become "direct marketing." Going past Cookies and creating a more user-based version of ad targeting.

During 2009 offline measurement of digital will be made more feasible. "Print this coupon/mention this website"- even coupon codes - will not suffice. There is currently some interesting technology being developed in this field. and I think its going to get very exciting next year. The fact that there is so much speculation about the end of display ads will force the issue IMHO. Better data beyond click-thrus and "engagement" (way beyond impressions) will encourage bigger ad shifts from traditional media to digital.

Its an exciting time to be in advertising and technology because the two are combining and supporting each others advancement. But as some one mentioned already the power of a handshake and face to face (trust) will be more important than ever in this economy.

Happy Holidays!

Darren,

Great comments thus far....I will add my .03 cents to the valuable dialogue.

Firstly, I do NOT see agencies displacing (disintermediating) 3rd party ad networks. As someone who participated in the early growth and success of Ad.com I can tel you first hand that the "cream of the crop" (top 10 networks) do much more than simply "buy and sell media"......there is a TON of work that gets done on every front -- (sales/relationships/technology/arbitrage/managing loss/maximizing wins) that go into a successful networkk -- that it is a huge challenge.

Now, I am speaking about the big players here -- the other 295 networks CAN AND WILL BE replaced at some level...but not the big 5 or 10, and here is why......

Managing losses. In any network -- a "lions share" of the focus, and attention is not simply around maximing gains or profit -- but managing losses. Sometimes it is called an "opportunity impression or opportunity advertisers..."

"How do you keep a top publisher in the network happy -- when no advertising campaigns are generating profit on their inventory? How do you maintain their "take rate" (impression accepted when offered from any given publisher, a certain % is the norm) -- this is one of the issues.....

And now the "elephant in the room, that no one in agency land wants to answer regarding them getting into the 3rd party network business...."

When an ad network buys media from a publisher -- they buy the impressions and data on behalf of the NETWORK. An IO (insertion order goes out from network X to publisher Y) buying media and MANAGING THE RISK ON BEHALF OF ALL THE CLIENTS OF THE NETWORK. It is an unspoken understanding that the network, manages the risk -- and arbitrages the media -- but the NETWORK OWNS THE DATA.....the company analyzes across their portfolio of publishers and advertisers the best way to get results and either --MAXIMIZE WINS OR MANAGE LOSSES.

Now, if an agency tries to do this....

Will the largest client be "footing the bill to build a network?"

If clients A's largest client by a factor of 10 -- is client Y -- will client Y be effectively paying for the building and architecting of an ad network? Will the client not be the anchor of the entire operation....?

An now, the most important question --

Who owns the data? The largest client of an agency? Will there be a sharing of 2 critical elements of building a agency ad netwrok business

1) knowledge sharing across the agency

2) sharing of data across clients

Knowledge sharing across agency -- in a network it is expected and part of the business that both account management and delivery share what "works and does not work" across all publishers and advertisers......sometimes, this is FROWNED ON in agency land. I recall having a conversation of a IBM brand manager who told me one of his major concerns was that his brand was paying for the "agency to learn, and IBM to SHARE our gains and knowledge..." This is a huge issue. Communication across client will be tantamount to success -- and I'm unconvinced clients will allow it.

Issue #2 is data. What happens if agencies largest client leaves the agency? Who gets data? Will the agencies largest client (client Y) be funding and paying for all the agencies 3rd party learnings and data? Is data being shared across the agencies client? Who benefits the most -- agency or client? Will the smaller agency clients disproportianlly benefit?

And, the most critical aspect of building a 3rd party ad network that gets little attention:

"When it comes to managing losses, as opposed to maximizing gains -- which agency client gets that placement?" Remember, in any tremendously successful network -- minimizing losses in real time is as important, (if not more) than maximizing gains....and, I'm not sure agencies are SET UP TO DO THIS -- no matter the technology - (exchange/trading floor/etc)...

Just my .04 cents...

Thanks DH.

Andy Monfried

There's a change coming. It's from push to pull. Learn more at http://www.rightsideup.net

A few words on advertising creative... It is widely accepted that display creative side of the business has quite a long way to go. The vast majority of a marketers' resources (time and $$$) are invested in media and web site development. While, relatively speaking, next to nothing is invested in display creative design, development, testing, and optimization. Additionally, very few agencies know how to develop creative work that drives results. Most design on gut feeling rather than common sense Best Practices or historical learning. Typically it's a web site designer who is charged with designing display creative. Unfortunately, the two require very different disciplines and expertise. In my role, I see hundreds of display ads every month. Everyday I see excellent creative concepts miss their opportunity due to poor design structure, usability, and call to action. "Learn More" is not a call to action. Les Wunderman, the grandfather of DR marketing, pioneered a 3 point winning formula over 40 years ago that applies to successful digital marketing today... 1. Listen: to audience and customer 2. Measure: communication must elicit a measurable response 3. Innovate: use the learning on what works for your brand to continuously improve results. Display creative should never de "done". It should be viewed as a hypothesis. What if we reversed the colors? What if we increased the font size? What if the call to action is more prominent? etc. Look for new tools that efficiently power dynamic display ad content to thrive over the next few years. Those that succeed will help to streamline creative production, ad versioning, and optimization This will make it easier to apply Wunderman's 3 key principles to maximize results - whatever "results” may mean to the brand.

A few things come to mind (nothing original here, just rephrasing/combining ideas):

As the role of decentralized communication platforms ("social media" -- sorry gross word) becomes more and more important, advertising will look a lot more like customer service. If brands want to succeed and drive purchases they'll have to get their existing customers to pull more weight.

So... "advertising" at scale will have to mean doing customer service at scale. Using ad space to reach your customers very well could make sense; and if it does, technology will have to enable that.

How do you scale customer service?

What if this is just about refocusing [some portion of] messaging and targeting to communicate to existing customers? Or rethinking how firms invest in existing customers (if they even think in those terms to begin with ;-)

As noted below, GetSatisfaction is another answer.

GetSatisfaction is one direction (users helping users). I don't know
the answer though. Worth thinking more about.

Two predictions - the beginnings of the erosion of the wall between traditional media buyers and digital media buyers within the same agency or brand. We've talked to brands who have bought exclusively TV, but as TV numbers erode, it becomes harder and harder for them to get the reach that they need to fill their budget. My sense is that publisher sales guys who are able to figure out how to speak "TV Talk" instead of "Internet Talk" will be the most successful. Hard to say whether this is a 2009 thing or a 2012 thing, but my sense is that we're going to start seeing the first cracks in the wall in 2009. Or maybe it's just wishful thinking on my part, but I've seen some early signs pointing in that direction.

Second - 95% of what any of us predict here will not come true :P

So Darren asked a very loaded question. What is the future of advertising.

Media as a Platform (macro level disintermediation)

The answer is advertising is disorganized and needs to be organized better. It's a workflow issue. The future is platform technology. On the sell side, Brian O' Kelley and appnexus is building the first lucid advertising exchange. On the demand side, well I can show you a demo :) ...

Taking back the budget

The second thing to think about is the shift in agencies. The current agency model is dead. Media buying and planning is a commodity and is still not managed properly and creative tends to not properly be tested in the traditional branding/agency world. A good friend of mine Pete Krainik (former CMO of DCLK) runs TheCMOClub and always likes to say the agency model is dead. Pete is probably the most connected CMO in the world and the CMO's are the real pay masters. There is discontent. A down economy gives companies a chance to significantly renegotiate, cut and swap around their ad budgets across the board.

Shift towards results

We will see a shift over the next 2 years towards metrics and goals. This happens in any recession though. Direct Response reigns supreme (or branded DR etc..) because companies don't have money to blow.

Agency as a network (micro level disintermediation)

Agencies owning ad networks started out as a dirty little secret with Avenue A owning DrivePM and since has moved on to become the norm. I estimate there to be about 2000 ad networks of various types worldwide. The key reason most ad networks exist is laziness. How does the typical network deal happen "Hey david, i started a new network, can you run my tags?" - after an attempt to get them to pay a fixed cpm, it goes live as a test and if its decent enough it stays for 1-2 years - why? laziness. the sales rep and the yield manager at most publishers tend to leave network code up when it doesn't make sense to do it because it takes time to test. However with the rise of pubmatic, rubicon etc... automated solutions to manage ad networks are taken hold. With that said, lots of ads will still be run due to laziness. On the super high volume savvy publisher level there will be a shift though as they will (and have) cut out a lot of their 3rd party ad networks to go direct to arbitrage guys (the primary buyers from ad networks) and to exchanges. However there is a serious problem with an agency owning an ad network. It is a CLEAR CONFLICT OF INTEREST if an agency is buying media on behalf of a client and steering budget to a place where they get 30% margins and offer little to no benefit over competing ad networks. At some point this will get out to CMO's and we will see a shift towards independent shops and a need for transparency.

Agents of Experiences

Adam Broitman likes to say that the role of agencies will change from media shops to experience managers or essentially strategists. The key to successful advertising is creating unique and effective campaigns. The media buying is essentially commodity so the agency shouldn't be compensated as much on commodity but rather on the actual strategy. Media buying can be outsourced to DR shops which are a lot more efficient than traditional agencies.

New Approaches will be tried and occasionally be successful.

Engagement, audience profiling, retargeting and other great and sometimes effective mechanisms of advertising will be tried and may even work but they will not change the landscape. Engagement is great but only is useful in specific situations (goals) and the new profiling technologies and processes I'm seeing make sense but you can't change the way people think of media You can change the process by which they buy because you are making their life more efficient but you can't change the way people think about it without owning the ecosystem (top down) and I don't think any major agency will implement these "new" mechanisms holding company wide. sure they may test and use for some clients but it won't change the fundamental game of advertising.

Master of Manipulation

To conclude the masters of manipulation that are the most successful marketers will use the tools available and will craft effective campaigns. The key to the future of advertising is measurement, standardization and actually caring about results.

Amen. As television becomes digital, we'll see more and more TV being bought out of digital media budgets, as well, as the combination of TV/digital budgets. I'm excited to see where that leads. Navic, Canoe Ventures, and other folks are digitizing set top boxes.

Media Strategy should be integrated.

Media Buying should be through a platform. Efficiency.

I remember reading somewhere that Linkedin, for example, was planning on becoming a third-party ad targetting provider by cooking their users and allowing *other* publishers to use that cookie information in serving ads. Privacy issues aside, this would be great for publishers and probably readers as well.

they technically have an ad network. their data is actually valuable since its based on functional things people have done vs. facebook which is how people claim to space out.

Branded audience segments. Love it.

Good conversation. I'm happy because there's just so much shit out there to play with and I will continue to entertain, conversate, inspire, educate, optimize and create provactive relationships between good companies and their customers.

I don't think anything will be all important or unimportant. Context vs behavior targeting, depends. Entertainment or conversation, depends. Analytics or gut, depends. I'm gonna make my living playing with all of it.

And that's the beauty of all of this. There is no single path to the top of the mountain. We keep on testing/playing and optimizing.

What I am trying to get at here is what people are looking for in the coming years that will help build the foundation for the future of where agencies need to go.

+1 on the engagement bits mentioned already. To me, the trend will continue to move towards customer driven involvement and away from passive (and interruptive) approaches...the challenge as I see it (and what will make agencies still a crucial part of the mix) is to have the different parts (ie. brands and companies) build relationships with each other in a way that makes sense for the consumer...

What I mean by that is moving forward, consumers are going to only become more in control of what, when, and how they are exposed to 'brands' (and I feel the average consumer now comes pre-programmed to detect and ignore intrusive and obvious advertisting)...for example, it's going to be less and less likely that someone is going to follow a 'Coke' Twitter account...instead Coke is going to have to continue to build relationships with real Twitter users who are real coke drinkers and fans...and through that relationship, Coke will need to keep those fans informed in a real and personal way...with the hope being that the real people, with real followers will spread the word...to me, the agencies will be critical in helping to find, build, and manage those relationships while the other parties (in this case, Coke, Twitter, and real people) continue to focus on their own/other interests...

Anyway, as someone on the outside of the advertising business, that's just my two cents...

Agree with all the comments so far, and would underline/bold/italicize notion that macro-econo-pocolypse will support most efforts that help drive an authentic return to basic trust building. What's old is new again. Again. There's a repeatable art form in the atlantic city boardwalk pitch, when married to a legit product with real value. Study the masters of one-to-one engagement. Twitter and their ilk are the front porch screendoors of our age. Say hi. Be kind. Make a friend.

How do you see the industry re-tooling themselves to account for this? Who will benefit? Who will not?

A few things come to mind immediately. Looking at Brands as Apps vs products or services. How does a brand enable community/tribing/whatever you want to call it. Again, looking to what we might learn from creative history [or Cristory as somebody with too much time on their hands will no doubt one day call it ;-) ], you can see old-world models in avon parties and tupperware parties and SIGs of all sorts, car marque clubs, etc.,etc. The brand becomes the campfire around which the nomadic tribe comes together to share the stories that both grow and preserve the CULTure.

The authenticity and honesty and trustworthiness of the storytelling is paramount. The fate of social organism is dependent on it. 'Course, it's also gotta be bitchin' good and engaging storytelling. or the young'uns will disappear into the woods faster'n you can say "Little Big Man".

Great comments so far and in one way, all of them will probably bleed into each other.

From Carrot Creative's perspective, advertising will be part of the two way communications shift. Instead of advertisers relying on agencies to push the brand message out, brands will look for ways to continue the conversation with the consumer directly through relevant new media channels. Never before has it been so easy to connect and dialogue with the consumer. The relative speed at which these technologies are being adopted is forcing a rapid and radical rethink of the traditional brand monologue.

We are already addressing this need for two way communications by embracing the right channels for the right customers. This opens the door for meaningful dialogues with consumers and allows our partners to more effectively monitor and benefit from a diverse marketing mix.

Are brands capable of dealing with the volume of conversations? This could be counterproductive if you can't converse with all people talking about your brand, no?

The key to conversations is to spark it and steer it. Control isn't needed. Some constructive feedback makes the brand stronger.

with that said... i don't think this will happen in scale though its happening a little at a time ... F1000 doesn't like changing their ways and this is a fundamental shift.

I'm not in the ad industry, but i feel different streams of innovations, improvements could happen ...

First, the facebook model, social ads, still an embryo today, could have tremendous results and impact. I think it's potential is enormous. The influence of the group on the individual is maybe even bigger than any thing contextual. And the rise of Google Connect, Facebook Connect, OpenId in general, might make it easier to deal with social ads cross networks, cross channels, cross supports, cross subject (i.e. context).

Second, would/could it be possible for advertisers to pay for buzz ? Imagine a CPB (cost per buzz) or CPV (cost per viral), ... There might be an unexplored field between advertising (whether CPM, CPC, CPA) and affiliation where the price of the campaign depends on the viral effect of a campaign.

?

Couple of things:

1. the way people bill for advertising can only change on the micro individual campaign level. Trying to launch a new way to charge for advertising is extremely tough and requires a confluence of factors, top level relationships, timing and luck.

2. Social Targeting does not work. Social data is interest NOT intent. Look at social media, cubics etc... they rotate the same slate of DR advertisers. Nothing fancy there. People say they are interested in a lot of things but in reality don't really care and do the opposite.

VideoEgg has their CPE model (cost per engagement)

Buying will move (in part) away from more "publisher specific" spot buying, and more towards audience. In other words, it won't matter so much which site a user is on (as long as it's brand safe), but instead who that user is (i.e., what audience is that user a member of). This will be facilitated by an adoption and move towards cookie-level / user-level information, including at the agency level. Call it "distributed audience."

Are the winners in this space the data houses (BlueKai, Media6's, Exelate's, etc) or the media folks (RMX, Specific, Ad.com, direct pubs, etc)?

Darren, the future of advertising can be captured in 2 words -- engagement and amplification. We've heard about engagement for years and years. And it's been a buzzword for a long time, over- and miss-used for years. But 2009 is the year that advertising is all about engagement and the amplification of that engagement. Engagement and amplification won't be just the goal -- the smartest advertiser will actually only pay for the engagement and pay again for the amplification of that engagement to a consumer with a higher likelihood of buying the company's products or services.

I see this first hand in the branded app space. We're on the leading edge of what I'm calling performance-based engagement marketing.

Earlier this year, Buddy Media launched the BuddyBrain. This technology has truly made social marketing accessible, accountable, and results-driven.

I'll let the findings speak for themselves. In particular, users spent an average of 2 minutes and 35 seconds engaged with our branded applications, or 75 times greater than the time consumers spend interacting with traditional banner ads and five times greater than the time spent watching a typical TV commercial. And 85% of our users returned for multiple interactions with our app-vertisements, with 56% of the total user base returning 9 times or more during the month of testing.

Branded apps aren't the first type of marketing to be engaging. But they are some of the first formats that let advertisers pay for just the engagement, the post-click experience, and not the impressions that lead to it. The impressions are waste. The engagement is gold.

The smartest marketers won't stop at engagement. They will want to talk to consumers post engagement and that's where amplification comes in. How do you continue to talk to the consumer and build a relationship? Many channels and all will be used -- re-targeting on the display front and Twitter, Facebook, blogs and more apps on the social front.

Happy holidays!

Lazerow, I consider your company a the leader in Branded apps. I think your work has been nothing short of brilliant. But many changes must happen to allow the engagement to not only be scalable, but an engagement that really matters to brands. But since we are all in the 1st inning, we must all think about lasting the full nine innings. Re-targeting... no brainer, need to constantly re-engage. Need to observe the shopping cart on the brand site and show lifetime value for each " hand raiser " Understand the latency from the time they either engaged in the app, or saw and ad to the conversion metric. You need to understand if you technology is helping in the manufacturing of search queries. An app can have a powerful positive impact of new unique search quieries leading users back to site. Again, when talking about engagment, we are really speaking about the social committment that brands must have to keep the conversation going. take a holistic view. Work with Companies like Media6 ( i had to :) ) to help observe the these actions takers on site level, bring you the data of their close neighbors and serve 3rd party interative ads to them that land to the brand app. Did I mention the surveys for brand recall..across 3rd party sites. You do this, you will be a brands " crack " and they will want more and more.

Happy and healthy new year to you are your family

Herman, thanks for starting the conversation!
Dh

Thank you for helping to continue the conversation!

Engagement is a very broad word. How do you map back ROI or ROAS to engagement? Have you (Buddy or any other company you know of in your space) teamed up with Atlas's Engagement Mapping product? What have the results been?

2 mins and 35 seconds involved with a branded application means nothing unless there is brand recall afterwards.

Thoughts?

Key word I hear in this economy is "collaboration" - - how can new media, start-ups, media publishers find ways to collaborate to bring value added services and fully integrated campaigns directly to clients without ever having to involve a traditional agency.

Media, digital, production, and publishing companies begin to staff strategic, creative, publicity and media experts on their teams - as a result, traditional agencies are left to be in charge of "brokering the deal" for their clients between the above mentioned companies. Commissions from that deal [and not fees for servicing/production] become a new source of revenue.

Or is there a total disintermediation of agencies?

Ad networks may become disintermediated as the technology they provide are starting to exist within agencies.

I think that's right on the publisher's end. Publishers, especially larger ones, will likely focus on daisy-chaining and optimization of their remnant chain, there's going to be no reason for advertisers to not simply allow their campaigns to be inserted, directly, into those chains. All that needs to be built is a front-end for the advertiser.

I think Project Wonderful (http://www.projectwonderful.com/) is the closest thing to that right now, if you're looking for a decent albeit incomplete example of where I see display ads going.

Isn't Project Wonderful basically an exchange similar to RMX or AdX?

It's not a perfect analogy (and I'm not familiar with RMX), but the basic idea is a fluid auction where the advertiser can buy the space with perfect information. The publishers are going to focus on ad optimization via daisy chaining anyway, so why not offer your spot to an advertiser who is willing to pay 5c CPM more?

RMX is Right Media Exchange (now part of Yahoo!). Read up on Ad Exchanges and you will find them very, very interesting. Layering data ontop of these exchanges makes them extremely valuable.