Will IBM Crush Madison Avenue?

You might dub these last few months the Summer of IBM.

On July 21, IBM announced its launch of an analytics suite for marketers and advertisers. Just over two weeks later, on Aug. 3, IBM announced its completed acquisition of Web site analytics company Coremetrics. On Aug. 13, IBM announced plans to acquire marketing technology company Unica for $480 million.

We’re currently living through a complete transformation of the media buying landscape. Not just IBM, but a slew of major IT and intelligence companies are entering the media planning business. If I were a CEO of a Madison Avenue media buying business, I’d be losing sleep. I’d also take a page from Adobe’s playbook (which I’ll explain later).

With media buying increasingly an area that relies on precise analytics, rich data and sophisticated technology, it was only a matter of time before IT and intelligence businesses joined the media-buying field. And it isn’t just IBM that’s joining the fray. In early January, Cisco led the $27.5 million series C funding of Quantcast, an online audience targeting technology. Meanwhile, Accenture participated in last October’s $31 million funding for advertising optimization technology Adchemy, and purchased assets from consumer buying behavior technology CadenceQuest.

Far from a shift of focus of one company alone, we’re seeing the IT and business intelligence communities enter media buying en masse. You get a sense of how serious this challenge is when you compare war chests. With IBM’s market cap around $160 billion, Cisco’s close to $120 billion, and Accenture’s around $27 billion, each of these companies dwarf even the largest advertising holding company. Omnicom’s market cap holds around $11 billion, for instance; IPG stands around $4.4 billion. The media holding companies are the David’s to the challengers’ Goliath.

But capital is only part of the issue. What’s more critical is the issue of DNA. Media buying came of age when most media plans incorporated relatively few buys across a limited number of distinct, disconnected media channels. The concept of cross-platform analytics was completely foreign, the chief skills media buyers needed were strategic planning and price negotiation — and media planning largely played second fiddle to the advertising businesses’ creative shops.

Today, that’s all changed. Media buys are extremely fragmented, deeply intertwined and highly accountable-making it increasingly critical to apply sophisticated analytics to every media plan. Meanwhile, between DSPs and new platforms launching every day, coders are becoming as critical to the media-buying landscape as media buyers and even creatives.

And in an era when media buying revolves around analytics and technology, Cisco and Big Blue have huge advantages over Omnicom and WPP. Which is why Madison Avenue CEOs have real reason for concern.
How should Madison Avenue face the current challenge? My suggestion is to take a page from the Adobe playbook-and to think seriously about Adobe’s acquisition of Omniture last October.

Graphic design — Adobe’s core marketplace — is another sector that’s also increasingly becoming a numbers business in which creative decisions are determined by analytics and testing. And as design and analytics become increasingly intertwined, design tools will only work as well as the data they can incorporate. Conversely, providing an edge on analytics can make a design software a far more attractive buy for creative professionals.

Realizing this, Adobe acquired Omniture, the industry standard for online analytics, for $1.8 billion last October. The result is a new company that can both deliver solutions for creatives and statisticians alike.

It’s easy to overlook what a radical change in thinking it took for a business servicing the creative industry to enter the analytics world. The immediate reaction from the business community involved a lot of head-scratching. (Even the move’s supporters dubbed it weird.)

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