If you have been reading this blog over time, you will have read previous posts where I talk about the growing “advertising operations” line item on media plans. For those not familiar with “advertising operations,” we define it as non-working media that enables the plan to be executed, usually paying for technical infrastructure. This includes but does not limit to ad servers, business intelligence dashboards, data management platforms, and the like.
Thanks to lots of the innovation in the advertising technology sector, this line item on the media plan is growing. A couple cents to this vendor. A couple of cents to that vendor. A dime here, and a dime there. While any one point in the ad tech stack is fairly inconsequential to the entire media plan, when you add up all the items, it could amount to material dollars. The dollars you attribute to non-working media are dollars that are not working to distribute your message or communications to the audience you think would be most receptive (or even moreso these days, an audience who wants to hear from you).
Technology has been bought by Madison Avenue virtually two ways in the past three to four decades. It’s been purchased thru licenses and seats for many backoffice tasks such as billing (big winner here is Mediabank/MediaOcean, etc) and for front of house tasks such as access to research (Nielsen, SRDI, etc), ad serving and light analytics (Doubleclick, DG MediaMind, Facebook Atlas, Adobe Omniture, etc). Much of this technology equates to 8-15% of a media plan, which if a marketer is investing $100MM in media, $8-15MM of that goes to fund the famous Lumascape. Per a recent article about digital ad spending on AdExchanger, GroupM expects that Internet ad spending will reach $113.5B, which is about $9-$17B for infrastructure/advertising operations (per my calculations).
The question I’ve been asking many folks in our industry – both on the sell and buy side, is whether point solutions will win-out or full stacks will win-out?
I believe that the cost of a point-solution derived stack will prohibit them and over time, full advertising operations stacks will win out. Not a fantastic analogy but when I buy a car, I go to Tesla to purchase a car, I don’t tend to build my own car from scratch and purchase each piece from a different vendor. Economies of scale happen with a total stack from one vendor. If this is the case, look for roll-ups by larger players like IBM, Oracle, Salesforce, Marketo and others. These folks will look to strengthen their marketing offering with the acquisitions of point solutions.