I was doing some research for a forthcoming post I’m writing and came across some fun charts. See below – you can see where the opportunity is (and isn’t).
I was doing some research for a forthcoming post I’m writing and came across some fun charts. See below – you can see where the opportunity is (and isn’t).
This post is inspired by Fred Wilson’s recent post entitled, Does Price Matter. When you purchase a product or service, it has a price tag associated with it. That price tag is based on what the seller wants to make (cost + profit) based on what they think they could sell to their anticipated target market.
Traditional “price” for products/services though in itself is flawed, IMHO. It only takes into account one side of the equation: the seller. There are a few promotions such as the recent one done by apparel seller Uniqlo but most [private] pricing is determined by the seller. And for financial instruments, an open market determines the cost: NASDAQ and NYSE are examples for that.
There were a few websites back in the day such as Mercata (shut down in 2001) that allowed groups of users to purchase based on the demand that they have and almost dictate market pricing. I’d imagine this type of service is coming back in some form or another: the more people buy, the lower the price becomes.
I’d argue that price does not always reflect value. Value is generally what you will receive once you actually buy something: and that value should be at or better than the price that you paid for it or you will most likely look at your transaction with negative taste.
People say that paying >$4 for a cup of coffee is expensive. While pricing sounds expensive, what is the value to me? If that $4 cup of coffee allows me to sit at a table, read the NY Times or WSJ and answer emails early in the AM, the valued delivered is much more… at least to me.
This post originally started out as an email/Quora exchange between me and @jonsteinberg but thought that the world would benefit from reading about this so I decide to open it up. Note: These are my thoughts and not necessarily representative by my employer.
Here is the initial tweet by Jon.
Last night in episode 4.11, Sterling Cooper Draper Price lost it’s key client American Tobacco of which has been a loyal client for decades. Like in most industries, the advertising industry is no different where they are a few “key” clients that make up the majority of revenue (I like to say “keep the lights on”) and then additional clients that are just as important, but are smaller in size. For SCDP, this is a major loss because it’s a backbone client.
During the partner meeting in the episode, one of the agency partners mention that $20MM of gross billings is not enough. To the uneducated agency world, this sounds like a grandiose and absurd statement (maybe why Jon picked up on this) so I’d like to clarify this.
$20MM in revenue is different than $20MM in billings. How it was positioned in the episode was gross billings. This in the digital media startup world would be like saying a startup has $50MM in gross sales, or Groupon did $500MM in gross sales last year (or something along those lines). If a startup spends $50MM to achieve $50MM in gross sales, then it’s not a healthy business.
Within the agency world, the $20MM in gross billings may go into media placements, production (significant since most was TV), staffing, etc. At the end of the day, a couple hundred thousand or million may be left over, but not much more. Thus, why there is so much debate on Madison Avenue right now for alternative compensation models.
For SCDP, losing $20MM in gross billings from it’s backbone client has ripple effects: all the things you can imagine. Agencies like to leverage their scale to afford resources for many of their clients and when a major account is lost, sometimes that resource must be forfeited. Examples of this resource could be research, talent, infrastructure, and other capital expenditures. Without a backbone client, their service levels may degrade for all their other clients… thus, why you saw Glu-Coat (?) pull their business.
The way the agency should have phrased this was “we lost $20MM gross billings AND our backbone client.”
If I were to write a substantive post today, it’d probably get lost in the Advertising Week black hole. I can’t compete with all of the AOL announcements.
However, I do want to put a few things out there and see what sticks… and maybe I’ll turn them into full posts in the coming weeks.
1. The web is UGLY. Step back and look at the majority of the web; it’s may be developed but not designed. The Huffington Post website reminds me of Conway on 34th and 8th here in NYC. I’m not saying this because I’m part of the AOL Creative Consortium, but I’m saying this because experience and design needs to step up their games.
2. My daughter (and son) may never use a desktop computer. How unbelievably weird but awesome is that? It’s crazy to think this but what are the implications? I remember my first Apple IIe.
3. I think I have a crush on online & offline products- products or services that can be delivered and touched thru both means. An example of this is Threadless and their pop-up shop. I think there is an opportunity for web-only retailers such as Zappos and Amazon to open pop-up shops for the holiday season… it’s less about retail and more about marketing.
4. I’m amazed at how many people play Fantasy Football. Myself included. Fantasy Sports is a REAL category.
As always, leave your feedback.
I’m in the process of unsubscribing from the Groupons of this world because in aggregate they send me way too many offers that are not relevant to me and the value they do deliver to me does not outweigh the disservice of cleaning out my inbox.
Note: by Groupons of this world, I mean LivingSocial, BuywithMe, SocialSteals, DealOn, and others.
In a world of customization and personalization, you would think that these services would employ Hunch-like personalization. Currently, they are no different than old school offers delivered thru digital vehicles. As a consumer, I almost expect customized coupons in 2010. I’d rather not receive a coupon if it’s not relevant to me. Heck, even the television commercials on ESPN are more relevant.
I often have conversations with clients about what their key performance indicators should be for their campaigns. Quite a few times, clients want to use the CTR as the main proxy for performance and I squirm. While I can talk for hours about why this is not a good idea 99% of the time, I wanted to hear the voice of the industry talk about it.
I asked a few friends to write a a few sentences about the famous “click thru rate” and if it should die or not.
While this is August 2010, the debate has been around for the past ten years. I uncovered an article on CNET from 2001 entitled “Is the click-through history?”
The cable vs. television war is not about price (IMHO), but more about ease of use. Though someone could argue that there is a usability curve that can be overlaid across ease of use (we pay more for simpler, pay less for complex). Cable is mature and has worked through the majority of the usability kinks in it’s product, thus, consumers find it easy to use. We pay a premium for this.
Early in 2010, we created a document at The Media Kitchen called Cable Cutters. We posted this on Slideshare for all to see. The document outlined the options that consumers have to “cut their cords” and skip using a traditional cable box. There is a growing community of people doing this and it’s something that if you are a television advertiser, you probably want to study.
I was reading the NY Times this morning while on vacation and saw The Sofa Wars article and In The Living Room, Hooked on TV. These obviously triggered this post. I also thought back to the Mark Cuban vs. Avner Ronen debate during SXSW.
It’s simply too damn difficult for the majority of people to leave cable and get the same or similar channels…. today. Even if the hardware/software was free, it’s too complex to setup and use time and time again.
What this looks like tomorrow is not-known but there are billions of dollars invested in this cable infrastructure, billions of more dollars in media contracts, and SAG rights that are still in flux re: digital. This will evolve.. but not as fast as we’d like.
Anderson’s post re: the Internet is Dead would mean that we don’t need a browser to watch our favorite shows… they would appear directly on our television set. I can’t wait for this… and open up the potentially millions of channels.
If this is the case, what becomes the TV Guide for next generation television? Is is companies like Milabra or Affine Systems who do image recognition? Or is it meta-tagging companies who trigger off of structured data?
I covered all different areas in this post and wasn’t as structured as I like… but hopefully it spurred some thoughts. Please leave comments on the blog or thru Twitter (@dherman76).
One of the most amazing things about starting a business is being able to provide career opportunities for people at all stages of their life. I’ve listed a few opportunities below and if you or someone you know is interested in one of these, please do not hesitate to reach out. The company is Varick Media Management which is the demand side platform and infrastructure for MDC Partners agencies and brands directly. The team is located at 160 Varick Street in New York City. I will refer all qualified candidates to the HR coordinator and the respective designee at VMM.
Investment Manager (Top Line Revenue Growth Driver): Looking for someone with 1-3 years of experience to evangelize and drive top line growth of VMM to agencies and brands. We are looking for someone who has experience in making the complex very simple; someone who is extremely personable; and who can present themselves well to a group. Compensation is based off of a package of competitive base salary + performance + benefits. If you are interested, please contact me.
Chief Marketing Officer (Strategic Sales): We are looking for someone with 10-25 years in the business who has sold into strategic accounts ($10MM+/yr) for the past 5+ years. Will be responsible for driving the direction of the Strategic Accounts as well, as, overall company marketing and identity. Candidate may have an immediate open-to-hire for junior marketing coordinator to help with internal and external marketing efforts. Responsibilities will be to drive top line revenue growth for the direct to brand channel and will have a new client goal quota. Re-iterating that this person will be responsible for targeting specific clients (directly) and signing a specific number each year. Compensation is based off of a package of competitive base salary + performance + benefits. If you are interested, please contact me. Looking for someone who has played a similar role at former ad agencies, research firms, ad networks, and top tier publishers.
Infographer: We are looking for someone who is a master of data manipulation and visualization. We’d like to bring someone on board who can tell stories once given a data set. The ideal candidate will be able to recognize patterns within data, illustrate complex scenarios in simplistic forms, and create visuals that are easy to comprehend. Visuals will be used both internally and also sent to clients to illustrate a particular problem or solution. This role with support marketing, account, trading, and investment management. Compensation is based off of a package of competitive base salary + performance + benefits. If you are interested, please contact me. Ideal background would be a mathematician + design.
VP Client Services (title to be figured out): We are looking for someone who wants to run the Client Services team and work closely with Investment Management. Should have 10+ years experience within market research firms, agency brand planning or account management, or account management at complex advertising technology solution houses (ad networks, exchanges, etc). Must be unbelievably personable, academic curiosity, a born leader, and detail oriented. If you are interested, please contact me.
These guys get it and are for real. I’ve known Mike Duda (@mikeduda) for a few years now and he’s onto something. Let me explain why I think they have an opportunity to help create a new type of investor class that adds real strategic value.
The Front Man
Who doesn’t want to take a phone call from a player who has been a 2X NBA league MVP and 7x NBA All-Star? Think you can get a meeting with someone? I’m going to bet that Steve Nash can open more doors than the above average biz/corp dev person. If you are one of his portfolio companies, Nash should be able to open the door anywhere. For the sheer fun of it, I’d take a meeting with Mr. Nash and let him tell me about any of his portfolio companies. Recently, WFAN 660AM took me out to breakfast with Boomer Esiason… a future hall of fame NFL QB. That was awesome though the conversation wasn’t. While the reporters loved Nash’s internship at Deutsch, I promise you that he’s not going to be sitting in the office working on campaign slogans… that’s the ad-mans turf.
The Ad Man
For those of you who are not familiar with Deutsch, it’s one of the top integrated shops left on Madison Avenue. My agency, kbs+p is often compared to it and even Mike worked there back in the 90s. Buddy Mike was one of the youngest partners ever at Deutsch and was directly responsible for some of their largest business including running the Anheuser-Busch InBev and Under Armour acccounts. Duda also launched some businesses for Deutsch to much success and is highly regarded as one of the industries top ad-men operators.
Why Take Their Money?
In these frothy capital-rich (crazy to say that in a recession) days where it seems everyone is opening a seed/venture fund, the actual money to invest is just the table stakes. What separates early stage investors from one another is the network that they keep and the value that they can add from a strategic and tactical planning perspective. Many major early stage investors have been technical guys who were either product managers or startup CEOs that made it big… but I rarely, if there is even anyone out there, see people coming at it from a marketing angle. Steve Nash has built his own brand which is world renown and Mike has built up multibillion dollar brands. Startups need to understand how important their own brand is when talking to the world as it affects every conversation that they are having with consumers, investors, acquisitors, and potentials.
If you look at all the companies who get hyped on TechCrunch, TechMeme, GigaOM, AlleyInsider, and others, more times than not, their brand stands out. Goodwill counts.
A Serious Bet
While GigaOM posted about another celebrity moving into tech with weak results, I see this celebrity having an awesome sidekick in Duda. The area that I’d love to see them fill out is on the investing front end and they will have a nicely well rounded team. Lets revisit this post in 365 days from now and see where they are… but want to send the boys’ Duda and Nash my most sincerest regards and best wishes!
Note: I’m not an investor in their fund or currently working with them in any capacity. I’m just excited to see some innovation in the space I love: Marketing and Investments
Using data to make better business decisions is nothing new but since 2008, it’s been a very hot topic. It’s been covered in almost every issue of Advertising Age, a whole new web destination now exists: AdExchanger, and agencies spun up new trading desks that are essentially high powered SWAT teams that combine rich data-sets with media for exceptional results.
Google has built a $154 billion company based on the use of lots of data to make the right decisions for it’s advertisers. The data sets that Google are using are based off of search queries, which one can argue is one of the most powerful data sets that exist as it’s pure “hand raising.” Over the past ten years, the big search engines have integrated with search engine marketing platforms such as Marin and Kenshoo to provide access to that marketers and agencies can use these tools to make better decisions which should improve performance and create workflow efficiencies (amongst many other reasons).
The trend we are going to see in 2H2010 and certainly in FY2011 is the emergence of these tools within the display, video, and mobile world and combining SEM with them. While I can’t speak for any one tool directly due to confidentiality reasons, we are going to see many of these once SEM-only players move upstream to capture additional ad dollars and to use all-data (search+display+video+mobile, etc) to make better decisions.
As illustrated below, agencies such as Efficient Frontier are moving into this space as well, as well as, tools/platforms are integrating into biddable display sources. These are not the only companies moving into the space but are illustrative of the trend.
What does this mean for the standalone display side platforms? For the standalone SEM platforms?
An operational hurdle that will have to be addressed within the media agency world is that search and display is generally bought from two separate groups so either a) these groups will need to be combined or b) we need to provide clear roles and rules for each group. I think option (a) is a much better choice as I’m all for integration.