The Yahoo! acquisition of Tumblr has occupied the attention of every digital media blogger and wannabe trade journalist over the past few weeks. We were subjected to endless pieces on the reasons for the deal: Social. Mobile. Millennials. Native. Porn. The list goes on. $1.1 billion dollars is a lot of money - and those journos and professional observers, who will never truly understand the mechanics of this deal, ultimately demand satisfaction.
ExchangeWire is not here to second-guess the thinking of Marissa Mayer. She is a very capable lady, and there are so many reasons why she is the CEO of Yahoo! and none of the rest of us will ever be. We will say this briefly, that this could well be a massive opportunity for RightMedia to offer programmatic 'content sponsorship' (or native, bah) on both Yahoo! and Tumblr properties. A comeback is potentially in the cards.
The Tumblr deal aside, the other recent big M&A action has been the Accenture acquisition of Acquity. The deal was only for $330 million dollars (three times revenue) - a ridiculous multiple given the amount of money paid for Tumblr, which did $15 million dollars in revenue last year. VCs can argue whatever crazy economic model they want, but the price paid for Tumblr seems like lunacy. What was so significant about Accenture's acquisition was that it bought an agency.
It is just another example of how consultancy firms are encroaching on traditional agency territory. As the enterprise marketing and ad tech worlds collide, Accenture sees massive opportunity in growing its digital marketing business - but why now? What has changed to make companies like McKinsey and Accenture move into traditional agency territory?
Data-Driven Planning: Automating Core Media Buying Functions
It might not be publicly admitted by Agency Trading Desks, but the process of media buying and planning is becoming automated. The rise of programmatic buying means that increasingly buyers/planners at the coal face are actually being divorced from the execution/optimisation process. Maybe this has always been thus, given that ad networks have been doing the heavy lifting on behalf of agencies over the last ten years.
With the introduction of programmatic buying, that ad net function has either been replaced by specialist agency units (ATDs, etc.) or even by - recently-pivoted - buying platforms like AudienceScience. Let us also not forget about the enterprise players making inroads into ad tech, such as Salesforce and Oracle. The $2.5 billion dropped on an email solution provider, Exact Targeting, shows how serious Salesforce is about owning the enterprise marketing stack.
Accenture has been looking on as this part of the media buying process has undergone significant technological evolution. If the process does become even more automated, is there a chance that Accenture could go to a Google, AppNexus, MediaOcean or Turn and outsource this buying/planning function. Buys informed by data and tech would allow Accenture to sidestep an increasingly low-margin business. This is what media planning/buying has become - increasingly a race to the bottom.
So, why would Accenture move into this business? Its recent deal with BMW suggests that Accenture wants to deepen its relationship with existing clients. Owning the entire relationship (including the 'automated' media buying process) would allow it to upsell high-margin business, like analytics and tech integrations. Acquity was an inroad into the e-commerce consultancy business - and really one of the big groups should have bought it.
Accenture: The New-Age Agency With Tech & Data at its Foundation
We, as an industry, have been throwing around terms like 'big data' and 'data-driven' for the past three years, as if we had made some massive leap forward. This could not be further from the truth. Traditional agencies have been actively trying to build this capability into its DNA, but it is not an easy task.
It takes many years for this transition to happen. Accenture is fundamentally a tech and data company. You cannot say this is the case for the likes WPP and Publicis. These groups are led by accountants and traditional agency men/women. The change required will need to be significant - a top down approach.
When some of the top-tier finally step down, maybe agencies will need to hire a CEO/COO who truly understands tech and data at its very core. If they are to successfully compete, they will need to hire someone from IBM, Google or McKinsey who can effect a cultural change within the organisations.
This is not a slight on existing talent within the agency world, but just a reality check on how the advertising game is changing. We are now at a crossroads on how data and tech is fundamentally changing the process.
RTB and programmatic might not have significantly changed the buying chain within ad tech (we still have media plans, we still have networks), but outler players are now seeing the opportunity in automation. If and when TV finally goes down the programmatic route, we will see even more aggressive moves.
How Do Agencies Protect & Grow Their Business?
In fairness, many agencies have been attempting to transform their models over the past three years. Analytics and data-specialisation have been given priority. New business units built on data-specialisation and outsourced tech have become important features at the big groups.
Is it enough, though, to meet the changing requirements of marketers, as their goals and objectives become increasingly informed by offline and online data? How customisable is this proposition? If this function becomes more integrated into the enterprise marketing stack, can the agency really compete with the likes of Accenture, without having the core in-house tech capabilities required?
This will need to be addressed. How this is done is for another post (...or highly-paid consultancy gig...?). Acqui-hires or acquisitions could work. Buying in talent and locking them into performance payouts could well infuse agencies with the requisite talent and skillset. The recent purchase of Elisa DBI by Havas was a smart move, giving the agency access to strong tech and data capabilities. A start, but agencies also need to foster a tech culture to attract the staff that will help evolve the agency model.
Local Digital Buys Shifting to Global Execution
The one area that seems to be overlooked by the industry is globalisation. Traditionally, much of the buying processes have been done locally. Now, big brands like P&G want to use a central platform to manage all P&G data and make the buys. P&G let agencies plan, but do not actually execute/negotiate the buys on a global basis. Witness the recent Accenture deal with Ford - consolidation of local strategies into one central process. We will see more of this. How prepared are agencies - or even the ad tech industry - for this shift in strategy in digital buying?
In many respects, ad tech exists in a bubble - oblivious to the core requirements of marketers. We talk to ourselves for the most part. However, the next evolution in programmatic and data-driven advertising will be the intersection of marketing tech and ad tech. This is something we cannot ignore.
Agencies are not to be written off yet, and invariably have a knack of surviving significant changes in the industry.
ATS London will explore these themes in greater depth and will again bring together the key constituent players, including those that will ultimately shape the enterprise marketing and ad tech space over the coming years.
We only have a handful of early bird tickets remaining for ATS London - so be quick to grab them before they sell out.