The cost of executing digital campaigns
"The high-volume, low-dollar, high-complexity nature of digital programs makes it the most labor-intensive medium in the advertising industry."
This quote is from the 4As (American Association of Advertising Agencies) 2009 report, "A Marketer's Guide to Understanding the Economics of Digital Compared to Traditional Advertising and Media Services". In that report they estimated that digital marketing campaigns may actually cost around 12 to 15 percent of the media plans to execute. According to Google, "Managing display ad campaigns can take up 28 percent of the budget in overhead, compared to 2 percent for TV. Technology provider, Nextmark recently conducted a multi-agency study and concluded that digital campaign execution is about 10 to 12 percent of spend.
And these numbers do not include agency markup. Agencies are allowed to make some profit, right?
The complexity has only increased over the years. What's really pushed this issue to full steam is the rise of self-service media buying platforms. Until recently, most media planners purchased impressions, traffic'd ad tags to publishers, and called it a day. The expectation now is that agencies should be using these direct buying systems which offer the promise of low-cost, highly targeted impressions for their clients. For example, Facebook's PPC self-service platform now runs more display media impressions than any other single publisher.
But someone has to physically manage that media. And it's more than just Facebook. It's Twitter. It's LinkedIn. It's a bunch of new Demand Side Platforms (DSPs) and trading desks accessing billions of display banners, mobile banners, and online video ads. There are even digital-out-of home platforms, radio ad buying platforms, and the trend is that this buying tactic is growing and growing. You can't just hire kids out of college and expect great results. You need experienced analysts to handle these big budgets and complex technologies. I can confidently say that this is the future of our industry.
There has been a lot of industry reaction to the trading desk fees. Industry pundits have cried foul over what they see is double dipping. Although I'm sure there have been some disreputable practices (what industry doesn't have any bad apples), what these critics don't seem to grasp is that bypassing the middle men and legacy red tape, the ability for agencies to provide more value for their clients has increased.
John Bauschard, president and CEO of industry leading technology, MediaBank, (a guy that talks to as many agencies and advertisers as anyone I know) commented to me on how clients should be evaluating these costs:
"Focus on outcomes, not on direct costs. Many of the new tools are incredibly cheap, when compared with their true impact on the client's objectives. But a focus simply on the costs doesn't allow them to make the comparison."
If your agency is scared to bring up the discussion of costs with you, then you could be missing out on some very powerful marketing. They could be so fearful about how a fee discussion might negatively affect the current relationship that they may go on buying over-priced media that they could be buying more efficiently because the more expensive, legacy way of doing things won't get questioned.
Unless you evolve the conversation and demonstrate that you're eager to talk about the value behind these fees, you could really be missing out on some truly powerful opportunities.
The previous four points are not the only ways to evolve the agency and client relationship -- they're just four steps I humbly feel are in the right direction. I'm absolutely certain that there are many of you out there that have great relationships with your partners and don't experience any of the pain points I've identified. The fact remains, however, that you can always evolve any partnership discussion in other ways. What's most important is that neither side feels pressured to hold back from doing great work because of simple issues that can be solved with a better and more effective dialogue.
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Understand each other's point of view from the start
What's your approach and what's our approach to marketing? Where do we differ and why? Where do we agree and why? I wish we had more of these conversations. Many of the agency and client kickoff meetings I've attended are very straightforward with what has been done in the past and what the goals are for the future. Maybe some of that work has been done in the agency evaluation stage, but those conversations generally involve execs at the highest level. It's absolutely fantastic when I see both sides of the table on the front lines ready, able, and willing to speak to marketing style and point of view.
One of the reasons why this is so important in our industry versus other industries is that digital marketing is a young business that is still working out the kinks. Standards and best practices are few and far between. If you ask a group of industry vets what their POV is on a certain hot topic, you will get a variety of answers especially if their backgrounds come from different sides of the industry.
Of course, that initial knowledge transfer meeting has to happen. However, I'd like to see that conversation evolve to a much deeper level where both sides air their stylistic similarities and differences. Once you understand the why and the how of the person sitting across from you, the what makes much more sense. This can be a very scary prospect for industry folks who haven't yet perfected their craft or are capable of articulating their aesthetic. Explaining your approach can leave you open for criticism and you could even turn off the listener if they don't agree with your point of view.
And that's why this doesn't happen enough. Even though many clients would be more than willing to have this conversation, if there's even the slightest possibility that the client side isn't interested in this dialogue, then agencies might not risk rocking the boat. But imagine the upside -- it would force both sides to get a better handle on what they actually believe to be the essence of great marketing and raise the conversation to a higher level. Plus, by going through this exercise, both sides would have a better understanding of the motivations and goals of the other which is unbelievably helpful in any partnership.
Agencies need to be treated like experts and live up to that level of trust
Just five years ago, online marketing was primarily email, search, and banners. But today, with mobile, social, online video, apps, RTB, etc., this industry is innovating at such a fast pace that even experts who spend their entire day focused on digital marketing are having trouble keeping up to speed. When you also factor in that most client contacts only spend a portion of their time focused on digital, the need for advertisers to rely on outside expertise is more important now than ever before.
Yet, agencies can't expect everyone to take whatever they say at face value, especially when part of a client contact's responsibility is to be risk adverse and question everything. Part of the job at an agency is not just presenting ideas, but selling them in as well. And I don't mean "selling" them in terms of "BS-ing" anyone -- you have to learn how your client best digests your recommendations and provide them in that format.
Agencies -- if you feel that your client counterpart is hesitant to immediately accept what you're saying, don't take it personally. It's probably just cautiousness stemming from their aforementioned need to be risk adverse. However, some of it also stems from the fact that many agencies seem like black boxes to advertisers. A lot of processes and knowledge is shielded from clients as things agencies might feel clients don't need to know or are too busy to take the time to understand. Unfortunately, when there's mystery involved, it can be very natural to be dubious even when there's nothing to be suspicious about. An advanced dialogue helps build trust through transparency.
To evolve the agency and client conversation, I'd like to see more leaps of faith on the client side. On the flip side, agencies, if the client does put that trust in our hands, we have to live up to our end of the bargain. We need to know our clients' businesses as well as they know their businesses and we need to bring them advanced, well conceptualized ideas that are aligned with their brand and goals. We also need to present the information with the right timing (don't bring a Q1 idea in the middle of Q3) and in a way that is very palatable for them and portable enough to pass around to their teams.
Measurement and holistic digital advertising
As a media technologist and analytics practitioner, I support web measurement and data insights as much as the next guy. There's certainly a ton of directional evidence that can be used to best plan and buy digital campaigns. But, (and here comes the "but") I'm constantly floored with how much emphasis this industry puts into the absolute numbers. There are just so many discrepancies and footnotes with how data is collected and viewed that I could fill 10 columns on iMediaConnection. For example, consumers now use an average of 10.4 different information sources before making a purchase -- and use multiple devices (I've heard between four and seven) to access digital content. Most of these touch points are untrackable, or if they are trackable, they can't be perfectly integrated into the overall measurement strategy.
The analogy I use most often in this discussion is the U.S. Economic Index. The Economic Index is a set of ten key variables that the government (and most economists) uses to judge the health of the American economy that include things such as the unemployment rate, building permit registration, consumer confidence, etc. But no economist in their right mind would narrowly focus on a single variable and declare any confident conclusion.
Recently, comScore's Josh Chasin remarked that everyone on Madison Avenue knows "that digital is the most measurable medium," and then made the observation that the corollary is, "that sometimes digital ends up being the medium with the most measures." At some point in our industry's past, we forgot that the metrics were there to help us build informed insights. Instead, we have spent our time trying to affect the metrics. Not to say that conversions aren't important -- they are, especially for direct response dollars in a strictly, online-only business, but you have to know what you're actually looking at to make any concrete conclusions.
Advertisers, you should know that your agency is going to tell you how they feel but are going to do what you say. It's very hard for an agency manager to try to reset this complex topic with their own colleagues, let alone with clients who have been working in a metrics and conversion focused world for years. It's not anyone's fault -- the entire industry has pushed this direction for years, and to change this mindset is going to take a lot of work on both sides.
I think most experienced agency execs would rightly say that you need to pick and choose your battles, but a unified measurement approach is one of the most important needs facing our industry. A lot of folks are simply winging it and are focused on getting your metrics up without necessarily forwarding the true campaign goals. It starts on the front lines with agencies and clients having this dialogue. When agencies don't feel like they can have this dialogue, the entire industry is held back.
Advertisers, in many cases the metrics you're tracking might actually be perfectly suited for your campaign. But a good place to start would be to ask your agency what they really feel about the metrics they're presenting to you every month and provide them a safe forum to bring up some of these more debatable ideas on measurement like attribution. You might have to prod them a bit. They have to feel that they won't get their knuckles wrapped if you disagree with what they present. I'm not saying all of the numbers need to be thrown out -- just make sure that both of you aren't completely evaluating campaign success on arbitrary metrics going up or down. Evolve the conversation and you will get rewarded for it.