Agencies Grapple with Ad Technology and its Place in a Services Business


 

There’s been a wave of innovation in online advertising over the past year; new ad technology made just for ad buyers (DSPs) are quickly gaining traction as a way to improve media effectiveness and realize operational efficiencies. DSP’s give agencies a powerful new tool, but the emergence of “buy side technology” is forcing them to grapple with a tricky new issue: how best to build a new technology core into an old services business model.

Some agencies have decided that forming strategic partnerships with external technology providers is the way to go.  Others believe that the best strategy is to try to develop the technology themselves.  While it’s too early to conclude the winning approach, this is an issue that smart clients will monitor as the digital era marches on because it will affect not only agency performance, but also the basic economic structure of the agency-client relationship.

In-house ad tech
The in-house technology approach is probably best embodied by WPP, with its 2007 acquisition of ad network and technology firm 24/7 Real Media.  Since the acquisition, WPP has done a nice job of using these assets to grow an internal innovation engine known as MIG (Media Innovation Group).  In a recent interview, MIG’s Brian Lesser explained some of the reasons for their continued investment in proprietary ad technology:

  • More holistic media strategy – can alleviate issues that result from a fragmented media buying approach and result in a more efficient media spend.
  • Data-driven marketing – integration of client data throughout the agency’s decision-making process informs the marketing strategy and results in more valuable insights to guide the clients’ campaigns.
  • Less data exposure – with in-house ad technology, proprietary data is pushed solely through an agency’s platform and is thus able to be leveraged exclusively by the agency.

Third party ad tech
Alternatively, Publicis and Omnicom have weighed in as favoring partnerships with external ad technology providers.  Curt Hecht of Publicis’ Vivaki business unit recently discussed with AdExchanger their partnership with Internet giant Google, which includes use of Google’s new “house DSP” Invite Media (acquired by Google last month).  And  Omnicom’s Randall Weisenburger explained to ClickZ that they have opted against building an in-house DSP because of the vast benefits technology partners can provide to clients:

  • Greater access to innovation – when agencies partner with outside technology vendors, they can innovate more quickly and better align with client needs.
  • Focus on core competence – agency resources can be focused on larger strategic considerations that are core to the agency.
  • Less risk of agency bias in media buying decisions – advertisers can be confident that an agency’s recommended technology strategy will not be influenced by an in-house proprietary service.

Ultimately, these different approaches are still very new and only time will tell what truly makes the most sense for the agency and for its clients.  But just as advertisers want to know about an agency’s creative approach, it’s now best practice to dig into their technology roadmap.

– Mike Baker, CEO, DataXu

(**This piece was also posted on the MarketShare blog at Forbes.com.)