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Chinese Walls in Media Buying Can’t Make Anyone Feel Good

Was reading AdExchanger today, like every good digital arbitrageur, and thought he had some interesting highlights from iMedia Connection’s recent article by Tom Hespos.

Tom expresses concern that starting an ad network can create conflicts of interest for agencies.  A Razorfish-ian responds back that they incorporate them separately and that addresses the conflict:

“I don’t think anyone disagrees with your point, ‘you can’t ask a media seller to solve high-level business problems.’ Most of the agencies who are pursuing this opportunity break out the inventory-selling part of their business as a separate company (Havas’ Adnetic, IPG’s Cadreon, Razorfish’s ATOM Systems, etc). I think this resolves any conflict of interest, and cleanly separates the strategic/planning arm of the agency from the transactional arm.”

My immediate reflection on that remark was: “Yep, that is what they said about analysts on Wall Street during the first Internet bubble”.

I do have to say, I think we have already seen some of the challenges in making that work.  Let me illustrate a couple of examples of theoretical problems that maybe have manifested themselves in real life:

  1. Would another agency ever buy from an agencies network?  My impression is “no”.  Without aggregating demand, can an agency actually achieve the scale necessary to have strong network reach, much less the volume of behavioral data necessary to build true behavioral scale?  It seems unlikely.
  2. Clearly, the only hope for this is to force all of your advertisers to buy via your platform.  The key to enabling a lot of volume via a single platform is complete transparency.  If site/placement details are hidden as part of the buy, then buying the network becomes “one of the things you buy” rather than buying many sites via a network.  If there is complete transparency, then the publishers should be requiring market rates, destroying the network leverage.  If it is rolled up, then it becomes a tiny part of the buy.  I believe that all of this is part of what happened with DrivePM, which seemed to me several years ago to have the organization, team, relationships, and opportunity to become a major player.  Unfortunately, they disappeared never to be heard from again.  While I never heard any details, I always felt like being a part of an agency held them back.

2 Responses to “Chinese Walls in Media Buying Can’t Make Anyone Feel Good”

  1. John Ebbert Says:

    Interesting points regarding agencies and rates. I’d say that from a holding company perspective, the “behavioral scale” you suggest is possible. Trouble is trying to parse that out to the agency parts and the technological integration/maintenance necessary. I suppose it will be done, but I think its years away. Agencies need to concentrate on servicing clients and maintaining relationships – their core IP, in my opinion.

    As for transparency, arbitrage and other network-related sticking points, I think it all becomes transparent and transactional for agencies – unless they engage in performance-type deals with clients. Competitve pressure will not allow for arbitrage ultimately.

    Expertise in using the future tools, platforms, etal. of media optimization combined with managing critical client relationships is the secret sauce, in my opinion, for agencies. And, as has been suggested by others, this will be a change in culture for the agency – even the lowest levels of the agency will have to have a high degree of acumen in the new digital world.

  2. brent Says:

    Agree with this stuff, generally. In a competitive world, I wonder if there is margin to justify building your own behavioral scale when behaviors are a commodity (see zillions of my other posts on this blog).

    Also, if competitive pressures don’t allow for arbitrage is it productive to invest in introducing another intermediary into the value chain (in the form of owned and operated networks, etc.)

    The good news for agencies is that the kids are more computer savvy than we are! Furthermore, I think for many brands, marketing spend will be less about media buying and more about community interaction: Great news for agencies because less spend is pass through and more spend is consultative billable hours.