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Managing Marketing: Digital media buying and are marketers getting the benefit?

David Angell Podcast 2
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Managing Marketing is a podcast hosted by TrinityP3 Founder and Global CEO, Darren Woolley. Each podcast is a conversation with a thought-leader, professional or practitioner of marketing and communications on the issues, insights and opportunities in the marketing management category. Ideal for marketers, advertisers, media and commercial communications professionals.

David Angell is Head of Media and General Manager at TrinityP3 and has his own podcast called Media Angle where he interviews media influencers on all the media angles. But here he chats with Darren about the evolution of digital trading models and how agencies are changing but that perhaps advertisers are not taking full advantage of the changes in the way digital media buying is done today.

You can listen to the podcast here:

Follow Managing Marketing on Soundcloud or iTunes

Transcription:

Darren:

Welcome to Managing Marketing and today I’m sitting down for a conversation with David Angell, General Manager of Australia New Zealand and head of media at TrinityP3. Welcome David.

David:

Hello Darren, nice to be here as always.

Darren:

Look it’s always good to talk about media because I’ve had some feedback from the engineer who puts our podcasts together for us. Jared was saying he finds the media conversations the most interesting followed by data and digital, so we are doing this one just for Jared.

David:

We’re doing something right which is good, yes. This one goes out to you Jared.

Darren:

He also says he gets more listenership of any of the topics.

David:

That’s what matters.

Darren:

Clearly media is the hot topic, but it seems there are a lot of issues around media and most of them seem to be cost related.

David:

Yes, I think the definition of the importance of cost in the overall value of media; what does cost actually mean? I think there’s a lot of traditional perception of media cost both in terms of what the agency should be delivering and what represents a benefit to the clients, and the hunt for lowest common denominator thinking as I call it which is basically let’s buy the cheapest media possible, has all sorts of implications for the quality and the transparency with which agencies are able to trade.

Darren:

It’s a hot topic because people often disagree. And it’s interesting because Tom Denford from ID Comms recently shared on LinkedIn (only in the last couple of days) about how a global pitch had stayed with the existing agency and it was largely decided on price or cost and how terrible.

That was a missed opportunity. They could have done more with that whole pitch process than just negotiate price. And the head of marketing procurement for quite a big advertiser wrote a comment that I thought was very telling, it was ‘ it’s incredibly naive to think that cost is not a major consideration’.

David:

It sort of says it all doesn’t it?

Darren:

That’s why I shared it with you.

David:

Look the short answer to that is Tom is absolutely right and the commentator there is at best myopic. Nobody would suggest that cost is not important however it is a sub-set of value, not the other way around. It is a lever, one lever of many that drives overall value of an agency’s output and overall value that the agency generates for the client.

Ultimately, that value should generate business outcomes of one form or another and if cost is the only lever then that is simply not going to happen because the quality of what you are buying will decline.

Tom probably only said half of it actually. I have been involved in pitches where cost is not the only consideration during the pitch and the agency is put through hoops on strategy, and it’s put through hoops on relationship, and chemistry and everything else for weeks and weeks and weeks only for cost to then be, the be all and end all factor, so my question in that circumstance is well why then do anything else? It negates the entire process.

Darren:

If you can just buy cheap. The fact is this is not just a modern consideration. You could buy cheap media. When it was the television world it was daytime television or late night, you know midnight to dawn was when you bought cheap television. To buy radio you’d get those same late-night times. Outdoor you’d get those spots that no one ever drove past or had trees growing over them, so no one would ever see your ad. There were always opportunities to do cheap inventory weren’t there?

David:

Well I think there are two things. There’s always opportunity to do cheap inventory, you didn’t actually necessarily need an agency to exploit those opportunities either. The other component of it is that of course the agency bought scale, in terms of buying clout by aggregating pools of money from various different clients and buying that cheap inventory even cheaper.

That was the original proposition and premise and reason for being with a media agency; okay we’ve got more scale and clout in the market therefore we can buy things cheaper and you get a saving. That might have worked in 1960 or 1970 but it certainly doesn’t now.

Darren:

Oh no, Harold Mitchell was still pushing it in 1980 and 1990 as well, David.

David:

Well, I’d be that last person to criticize Harold.

Darren:

I’m just saying it was still relevant in the 80’s and 90’s.

David:

He’s a titan of the industry but I think even he would probably admit that the cost as a component evolved over time right. Yes, it use to be the be all and end all and it still remains important and scale remains to a certain extent a factor but certainly with modern media agencies and with modern ways of trading and modern ways of thinking, not the only factor by any stretch.

Darren:

The danger is, and I think it’s driven by the fact no one wants to pay more for the same piece of inventory than anyone else cause then you feel ripped off. The danger is that if you are only using the one dimension of cost, you are not actually comparing like for like.

David:

Of course not.

Darren:

In all of those tangible examples I used before of TV, outdoor and radio, you can see them. Fast forward to today with the digital world and of course there’s infinite opportunities for cheap inventory, the thing is that as an advertiser you can’t really see it and as many have discovered neither can their customers.

David:

Lots of computers can in deepest darkest Russia. Programmatic trading and let’s not forget programmatic is simply a means to an end. It’s just automation, that is all it is, but it has given rise to things like, biddable buying tactics which is one type of programmatic buying which doesn’t rely on a fixed rate card or fixed cost. That is good in a sense that to your earlier point; yes, one advertiser doesn’t want to pay for the same piece of inventory less or more than another advertiser.

Darren:

They are happy to pay less.

David:

They’re happy to pay less they don’t want to pay more but that ignores the fact that that piece of inventory may be worth much more to advertiser A than advertiser B in relative terms, so it should be about the outcome.

Darren:

And that’s due to targeting and environment which can make a big difference can’t it?

David:

At the end of the day you want every ad you put out to lead to a sale. If this particular environment is good for advertiser A then advertiser A should be prepared to pay a bit more for it because in relative terms the return is still going to be greater. That’s the main premise of biddable advertising.

Darren:

It’s interesting, and you are way too young to remember these days, but I remember late 90’s and early this century, the promise of digital media was its ability to target individuals and the whole conversation was framed almost around direct marketing. Here was an opportunity, unlike the traditional media which would broadcast to hundreds of thousands, millions of people; here was this opportunity to target individuals.

It’s interesting because that was the conversation for the first five, ten years of online media, let’s call it online media. Then the global recession happened, you know the financial meltdown and I think also the investment by all of these private equity firms in technology companies like Facebook and Google and suddenly they realised selling individual digital ads is not going to make us a lot of money. We need to flip the proposition to not that you can target individuals but that you can reach millions of individuals really cheap.

David:

Yes, it flipped completely on its head and now it’s gone a third way or a third dimension which is, target people individually but also at scale. So, trying to have your cake and eat it too type of thing. I think there’s so much inventory out there and the promise of not only being able to buy that inventory very cheaply but also under the guise of or the premise of and we are still retargeting these individual browsers, or these individual customers.

It has been sold as a big shiny thing where cost has been a huge component in marketers chasing the traditional cpm, which almost everyone who talks publicly realises is not the way forward; chasing cheap inventory. But at the same time many people continue to do it, many organisations continue to do it and many agencies continue to do it.

Darren:

I think it is easy to sell to the CEO and the board.

David:

Correct.

Darren:

That if my CPM was X per thousand and today by investing more and more in digital social channels it’s now half X per thousand then look at the amazing job I’ve done.

David:

That’s right and of course that’s a spray and pray mentality. That’s one of the reasons that there’s now 6.3-billion-dollars of ad fraud in this business. Bot net fraud and ad fraud have been able to proliferate in that kind of environment where people are just buying reams and reams of inventory. It becomes very easy to hide and disguise yourself when it is actually impossible for a human being to really understand exactly what has been bought.

And that’s even before we get into the murky world of ad exchanges, multiple DSPs, quality of inventory issues, long tail of inventory. Fundamentally though if cost continues to be the major driver, ad fraud will continue to thrive and the effectiveness of digital advertising will forever be a shiny thing that’s never quite realised.

Darren:

Which is sad really because it had so much potential but while we are selling it the way you’d sell tonnes of coal from Newcastle (if they still mine coal in Newcastle) it really does undervalue the opportunity that that media presents doesn’t it?

David:

Treat it simply as a unit cost and you are missing at least 50% of the picture, probably more. And any sensible media agency, frankly, would agree with that. There are all sorts of other ways in which you should be able to assess the value and outcome of your digital advertising.

Buying cheap and buying large is fundamentally not efficient or effective. It’s completely flawed.

Darren:

But then we had the big outcry, 2015, about transparency, we need transparency. And in response to that agencies are now coming back and saying to their clients ‘well, we can do a disclosed model where we disclose and give you complete transparency into the bits that we control or a non-disclosed model. Can you explain the difference between the two?

David:

Yeah, a non-disclosed model is where an agency is effectively buying inventory on behalf of the client as per normal, but the client is not able to see nor is it able to audit the actual cost being paid by the media agency for that inventory.

Nor is it able to see the associated costs of the flow-through in the supply chain in the form of commissions or rebates. So, it is non-disclosed in the sense that the media agency is capable of essentially on-selling the inventory at a mark-up and the client has no idea of what that mark-up is.

It’s also known as principle-based trading or arbitrage, a form of arbitrage. Agencies, because of the transparency outcry to a certain extent have had to come a bit clean about this but the fact of the matter is that clients have generally speaking signed addendums to their contracts that allow the agency to do this.

I’m not suggesting for a minute that agencies have acted anti-contract or illegally in this regard; they are making profit. The problem has been clients haven’t realised this and there is a fine line between profit and profiteering so the cynical would say the agencies have been profiteering at the expense of the clients.

The agencies, on the other hand, would say, ‘hang on we’ve bought all this inventory upfront—that’s what principle-based trading is; you buy a bulk of inventory and then you on-sell it. We’ve taken all the risk in buying that inventory because the clients may or may not want it.’

Darren:

Yeah, right.

David:

Yes, debatable.

Darren:

Sorry, was my cynicism showing?

David:

We can be cynical about that but that is often the argument that is put forward, that there is an upfront risk, that we have outlaid expenditure to purchase this. And the other argument that agencies make is that because we have been able to buy in bulk we can buy it cheaper. And notwithstanding the fact that we are marking it up and that you can’t see what that mark-up is you are still getting inventory cheaper at a cost per 1,000 perspective.

Darren:

So, that’s non-disclosed?

David:

That’s non-disclosed.

Darren:

Tell me about disclosed.

David:

Disclosed models are essentially the reverse of that in the sense that the advertiser has the full ability to see the cost of the inventory. The agency is not (contractually) allowed to mark that inventory up or if it does mark it up it is a disclosed mark-up as opposed to an opaque one.

And generally speaking other things like associated technology costs that flow through the supply chain, ad serving, double-click, big management tools and all of this kind of stuff get disclosed on media plans or contracts as line items.

So, the client has much more understanding of exactly where its media dollar is going and how much of its media dollar is being invested in actual inventory as opposed to associated costs. And it prevents the agency from trading in bulk from a principle trading point of view and extracting unseen profit.

Darren:

I just want to share with you a conversation I had with a very senior trading person in Asia. And they said to me, ‘I don’t know why everybody is carrying on about transparency’ and I go ‘because it’s the hot issue’.

And they said, ‘well, we offered our clients non–disclosed and said you’re likely to get cheaper inventory compared to disclosed where you end up paying whatever the rate is that is negotiated on the day. But we will almost guarantee it will be cheaper if it’s non-disclosed and 100% of our clients went for non-disclosed.’

So, is it a fact that the industry wants transparency as a concept but isn’t willing to pay for it?

David:

Yes, is the short answer. My experience in this market has been very similar to that. It’s almost a case of they talk the talk but then don’t walk the walk. To be fair to agencies there are two things; they have come to the table with disclosed models. My personal experience is that clients very rarely take them up.

Darren:

And then complain about lack of transparency.

David:

And then complain about lack of transparency so from that perspective the agency is between a rock and a hard place and it all comes back to the same thing. If cost is being used as the ultimate lever or if media is being considered in unit cost terms then of course, ultimately, the client is going to want cheap.

Darren:

And guaranteed cheap.

David:

And guaranteed cheap no matter what the cost of the inventory.

Darren:

Even though they’re the same clients that down the track go ‘oh my god, brand safety—the agency has let us down again’.

David:

Yeah, that’s not great either. The other thing is there are shades of grey. One thing I do say to clients when I’m working in this space on these projects; let’s not forget here that every company on the planet has a right to a level of privacy. No company is 100% transparent about everything it does.

Do you tell your customers about the constituent mark-up in tin of beans and all of the ingredients in that tin of beans? No. But, as I’ve said, there is a fine line between profit and profiteering. And there is also a fine line between marketers and advertising clients understanding what it is that they’re signing. And in that I think some agencies have been complicit in some challenging behaviours over the past years.

Putting addendums in front of clients that have signed so that’s on them but without really much explanation as to what it really is that they’re signing and that I think, personally, has been a challenge. And clients have multiple times when we’ve done media output and media assessment work come to us and said ‘we signed it and we signed it 5 years ago (we’ve done another podcast about the importance of contracts).

We signed it when programmatic trading for example was in its infancy. I didn’t really understand it then. I don’t really understand it now.’

Darren:

And now I’m pumping 5 or 10 million dollars through it.

David:

Absolutely correct. I’ve literally had people say to me ‘I know that I should be doing programmatic, but it feels like a black hole of money.’ Let’s start with I know I should be doing programmatic—why? And secondly, if you don’t understand where your money is going, well that needs to be challenged.

It doesn’t necessarily mean the agency has to immediately reveal all, but it does mean that the agency needs to be a bit more scrupulous about offering different servicing options that might cater to different levels of comfort, which is what they’ve tried to do, to be fair to them, with disclosed and non-disclosed trading agreements.

Darren:

I absolutely believe that agencies have responded every way they can to address the issues, but you also have to put yourself in the position of the marketer/ advertiser, right? They’ve, for a long time, been delivering the cost expectations of the company, which is to drive down marketing costs.

They get lower budgets, less money to spend and yet they’re under more pressure to deliver results. If one of the results you can deliver is a lower cost per thousand (even though cost per 1,000 is no longer a relevant measure in the digital ecosystem/ media supply chain) to then turn round and say ‘you know what? We’ve been lowering the cost but unbeknownst to us we’ve been buying more of stuff that is potentially dangerous to the business reputation and brand and is possibly not actually being seen by anyone, in at least one out of two cases, and could be funding terrorism, crime, and other nefarious activities all around the world and to solve that we need to go back to spending more on media.

Now how do you reckon that resonates with the CFO and the CEO?

David:

That is a big call to make for any marketer.

Darren:

It’s effectively, here’s my resignation.

David:

The only point in everything you’ve just said that I would dispute is that we need to spend more on media. We might need to spend more per unit cost of media but that doesn’t necessarily translate into a larger media budget.

Darren:

Good point; we’ll just buy less but better stuff.

David:

Buy fewer, bigger, better, right? But that is a big call for marketers to make. I completely understand how they’re in that position. It takes a Mark Pritchard. Mark Pritchard has emerged as really the first serious marketer to globally stand up and say you know what? This whole thing is murky.

We’ve been complicit in that. He doesn’t just blame the agencies. He blames himself, his own organisation and then they have had the guts to then test accordingly. So, PNG famously pulled $140 million of advertising out of digital media and it had absolutely zero effect on their bottom line or their business results.

Therein lies the challenge; cheap media does not necessarily lead to better outcomes. So how do you measure the effect of media or the attribution effect of media on a business outcome? If you can crack that then all of the problem of is it cheaper than last year or is it cheaper than my competitor goes away? Because ultimately you are delivering return on marketer investment.

That’s what this should be about but learned behaviour and, over time, contracts have stated the aims of signed contracts where they have to deliver the lowest common denominator costing and marketers have been measured on that too.

And the first thing to be looked at is media because it’s the single largest bucket that most marketers have to play with.

Darren:

It’s a commoditisation process that largely doesn’t believe that it’s a return on investment. It largely says that these are units that if we buy cheaper we are in a better position. I’ve noticed all the way through this conversation that you keep talking about the reason that you advertise in media, buy media is to drive sales, is to get people to buy things.

And the great thing about digital is that you can actually track people’s responses. It can’t tell you why they do it, but it can absolutely tell you what they do. It is, and it used to be called interactive media. Do you remember that period? Before it became digital media it was called interactive media.

Why was it called interactive? Because you could put something out there and people could actually respond to it like clicking on something or going somewhere or reading / viewing something or providing some information in real time. TV and the other mediums are just catching up to that.

We are starting to see interactive television, but I think most people when they get in front of a television aren’t wanting to interact with anything except maybe the fridge and the mobile phone.

David:

It’s important you mention the mobile phone because yes, they are interacting with the mobile phone and the laptop and multi-screen but that’s a whole other conversation.

Darren:

That’s a whole different issue. But getting back to that would be a really powerful way for marketers to show some sort of performance metric other than cost.

David:

It’s always struck me as a huge irony all the way through my career that the largest bucket of spend is treated with the least respect from that perspective. Marketers spend more on media than anything else and yet it is the most commoditised part. We have been so forced into a myopic position on it. It’s hugely unreal.

Darren:

I worked largely in a creative agency and I joined JWT, the last agency I was with before I set up Trinity P3, at the time that media was leaving to become Mindshare. And I remember even then when they had a new branding—Mindshare with the purple red–that every presentation to a client where there was media and creative it was strategy for 25 minutes, creative for 35 minutes and then the last 10 minutes was here’s a couple of excel spreadsheets with some plans and let’s look at the bottom line and off we go.

I think the whole industry, not just marketers, has taken that attitude often towards media.

David:

That’s a whole other conversation. But people gravitate to what they can understand easiest. People gravitate to shiny things, things being sold well. And media agencies have traditionally not sold themselves well in terms of articulating simple strategy or simple approaches to what it is they do.

I’m old enough to remember the spreadsheet on the back of it. There are a lot of smart agencies out there now who are wrapping media and broader advertising and marketing services into a much bigger CX loop, a much bigger ecosystem of owned, earned and shared and paid channels and are getting to making some truly agnostic decisions about where marketers should spend their money in that context as opposed to what part of the paid network should you be spending your money on.

O.K. maybe it shouldn’t be in the paid part or we should devise a strategy where our paid investment comes down.

But for that to happen, obviously people need to get paid properly for the work that they’re doing, and the agreements need to be transparent and you can’t just be chasing cheap media because otherwise it won’t work.

Darren:

And in fact, we’ve seen some really interesting companies; HeartsandSciences, MDC Media Partners, companies that are embracing data (and not just customer data but the big data) to actually inform decisions on media placement. And then to measure real performance, not just cost per 1,000s or the number of likes in social media but actual performance linking it all the way through to businesses growing.

David:

It’s the magic bridge isn’t it? Bridging the gap between marketing cause and marketing effect: the effect marketing is having on a business. Translating the stereotype of marketing is a cost centre into marketing is a profit centre for a business. And media is obviously a massive part of that.

The agencies you mentioned are fascinating examples. I would add agencies over here like CHE Proximity have invested a lot in trying to create that bridge between properly articulated strategy and actual outcomes, but it takes a lot of work and a brave client.

And it takes technology and things like attribution modelling. And approaches like attribution modelling have evolved hugely over time but one thing they have to do on the client side is trust that those models actually work and deliver and be prepared to stand by it if the paid media budget gets brought down. That’s often been a big barrier.

Darren:

You always know when a speaker at a conference is a little bit unsure of their topic when they bring up ‘and as Lord Leverhulme/ John Wannamaker famously said, ‘half my advertising budget is wasted; I just don’t know which half’. But the fact is these companies and approaches use big data, customer data to inform and make media decisions and then specifically target and combine cross-media platforms, so use television and online and various media but then to be able to flow through and show that return on media investment completely blows that away.

There is a horizon that says 10% of my advertising budget is wasted and I’m willing to live with that.

David:

In the work that we do we are seeing more and more clients with these customer-led data-driven transformation programmes that they are at various stages of trying to complete and media is often a big part of that.

But at the same time, I see organisations with that ambition putting together KPIs for the media agencies based on can you get me cheaper cpm than you did last year? So, there is a complete disconnect between those two things. One behaviour has to catch up with the other.

Darren:

Well, I think it’s the organisation needs to change their priority in regards to marketing from being a cost to business that needs to be reduced to an investment that needs to provide results.

David:

Yes.

Darren:

And once the business changes that then that will flow all the way through to the poor little media strategist or media buyer who’s not just trying to reduce cost per 1,000 but is actually focused on delivering the right metrics: business growth.

David:

There is no accident or coincidence in the fact that when we’re doing this kind of work we are seeing more and more of the C-Suite getting actively involved—you can see it.

Darren:

And the other thing that really cracks me up is the number of times traditional companies and their marketing departments go ‘what are the start-ups doing?’ Now, it’s really interesting because every technology company, every disrupter that you look at comes from a performance base.

They don’t do marketing and advertising just to move some soft metrics; it’s always based around performance. It’s about getting growth. Don’t ask what they’re doing; ask why they’re doing it because they’re doing it to grow. They’re not doing it to hit soft metrics or reduce costs; they’re doing it because they’ve got a big upside.

And maybe those traditional companies have forgotten what it means to grow because most of them are in defensive mode trying to reduce shrinkage rather than thinking about growth.

David:

Yeah. I’ve worked with organisations where a) they’re starting to create things like chief customer officers or chief growth officers (the latest, chief media officer) and those people are going out to Silicon Valley and looking at start-ups.

Darren:

Sorry, David, I saw chief brand safety officer.

David:

Wow, how much time have we got left? Here we go, brand safety, another whole topic.

Darren:

Speaking of which, we’ve run out of time but if people like Jared want to hear more about media and are really interested in this topic then I guess they should be tuning into your new podcast: media angle, which is you talking to various stakeholders in media about some of these issues and more.

David:

Yes and going beyond what I hope are the more traditional–there are going to be some great agency CEOs in there but also marketing clients, procurement leads, media owners and a wide variety of people because there are so many different perspectives on these issues that it’s always interesting to explore them and that’s the premise of the podcast.

Yes, they will be available soon and I will be recording them all as we speak.

Darren:

So that’s on Soundcloud and iTunes and it’s called Media angle with David Angell and it’s media from every angle.

David, thanks for joining us.

David:

No problem—a pleasure.

Darren:

I’m just trying to think of that question that is going to torture you.

David:

Make me laugh at the end.

Darren:

I think we’ll just skip it this time.

David:

I’m glad to hear it. Thank you.

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Darren is considered a thought leader on all aspects of marketing management. A Problem Solver, Negotiator, Founder & Global CEO of TrinityP3 - Marketing Management Consultants, founding member of the Marketing FIRST Forum and Author. He is also a Past-Chair of the Australian Marketing Institute, Ex-Medical Scientist and Ex-Creative Director. And in his spare time he sleeps. Darren's Bio Here Email: darren@trinityp3.com

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