Dear Mr. Sorrell,
I read your comments from Cannes in The New York Times article “Ad Leaders See Web’s Threat and Promise” [June 23]. While I appreciate the competition you perceive from online ad networks and technology providers such as Google and Microsoft — and why you’d like to acquire a position in that space — I’d like to suggest an alternative strategy.
Up until now, agencies such as yours have provided value to clients in two main ways: the strategy, design, and production of creative and the distribution of that creative through media channels.
You didn’t own the radio, TV or print channels through which ads were distributed, but their fractured structure gave you an opportunity to coordinate media buying — and earn nice fees doing so, which largely subsidized the creative.
The problem now is that companies such as Google and Microsoft offer Web services to let any marketer manage the distribution of ads — and not just for online vehicles. These ad platforms are siphoning money from your media coordination cash cow, as well as double-dipping from the channel.
But will ad networks be the center of power in marketing’s future?
Ad networks are intermediaries, matching publishers, advertisers and audiences. If there’s one thing the Internet has been, it’s the ultimate disintermediation machine. Especially when it comes to data. And the heart of any ad network is really just data.
Google may always have a gold mine in its search engine (which is more of a “publisher” itself), but will it be able to monopolize how other publishers and advertisers connect with each other? Not as likely — at least not for envious fees. As marketers and publishers get savvier, and as more competitors flood that space, more downward pressure will be exerted on intermediary prices. There are simply too few barriers to entry.
To be sure, networks connecting advertisers and publishers will always be important. But similarly, just because the underlying fiber optics of the Internet are important, that doesn’t mean the telecoms have been able to extract great economic value from them. In fact, I believe that the dominant ad network will eventually be an “open source” model, with no single corporation controlling it.
This can be very good for you.
You want ad networks — along with technologies for targeting and tracking audiences — to be standardized and commoditized. You’re not alone either: Publishers and in-house marketers want the same things, to bring order to the confusion of overlapping marketing technology vendors and to have full transparency in the costs and distribution of ads.
Instead, you want value to accrue where it arguably should have in the first place: with compelling strategy and creative — and its seamless execution.
This is where the Internet can shift the balance in your favor.
For most online marketing initiatives, you can now prove the quantitative value of great strategy and creative. Anyone can buy a keyword. But put a mediocre ad and an amateur landing page up against truly masterful creative, and the outcome will be 100 percent to 1000 percent higher conversions for the professional version.
This is clear, measurable and a source of major competitive advantage. And unlike the mechanics of placement and distribution, it can’t be boiled down into an algorithm.
You face three big challenges though:
First, you need to expand the scope of Internet marketing. Three lines of text in search engine ads is not a large enough canvas to deliver value. Although you can — and should — push the envelope with more innovative ad formats in banners and video, the real battleground is what happens after the click.
You need to open up new space between ads and corporate Web sites. That space is post-click marketing. It consists of landing pages, microsites, widgets, etc. These devices have the capacity for real substance — to lever not the cost of a click but the value of a click — and the people who are leveraging them creatively are achieving phenomenal results. But only a tiny fraction of marketers are doing so today.
You must take post-click marketing mainstream.
Second, you must absorb marketing technology savvy into your DNA. Although creative cannot be bottled into a computer program, the nature of creative is changing. More than ever the message and the medium are fused together. You need to wield targeting and tracking software as part of the creative mission. To do this, your companies need to be populated with marketer-technologists — a new career track tightly integrated into your core business.
This is the key to competing with technology companies: You must show that the real value is not in the tools themselves but in the way in which they are employed as part of marketing strategy, creative and execution.
Third, you need to rally your industry — both agencies and in-house marketers — to push ad networks and technology vendors to greater standardization and transparency. Metrics and methods for advertising and audiences in the digital landscape need to become open standards so that strategy and creative can transcend the grasp of any one proprietary vendor. This is how the Web itself was able to thrive — shifting value to people creating awesome sites, far more than to the companies building routers or HTML editors.
These won’t be easy standards to forge. The dynamics of Internet marketing are complex and subtle, and they’re evolving rapidly. You will need to cooperate with your peers and allies to a degree you haven’t had to before. The technology players will resist, mostly in passive aggressive ways. And there will be standards wars.
But if you pool the collective influence of your industry — hundreds of billions of dollars of marketing — and encourage competition among ad networks and technology vendors wherever possible, you can tip the balance of power.
Marketers everywhere will thank you for it.
I know these are big challenges. But who else can do this? Google isn’t going to be the next-generation creative services empire. Instead of losing your time and money fighting it directly, play the game that draws upon your strengths and the spectacular kaleidoscope of talent in your portfolio.
In the future, where everything is networked, automated and optimized ad infinitum, intellectual capital and creativity — and the organization to exercise it effectively — will be the dominating source of value.
Remember that transformation IBM made from proprietary hardware to open services? There’s inspiration.
Good day and good luck.
Chief technology officer