Operative Blog

On Monday, November 7, I was fortunate enough to introduce a panel discussion at the IAB Ad Ops Summit on the topic of Consolidation and Operational Efficiency.  The audience consisted of Ad Operations leaders from a variety of different companies – large and small – and as a speaker, I was asked to provide content that would enable attendees to better, and more effectively, lead their organizations.

The panel was asked to address the following question:  Does the consolidation of the industry’s operating systems mean less complexity and more efficiency – or less choice, less competition, less innovation?

For me, there are three questions at the core of this topic:

1. Is consolidation really happening?
2. Should publishers have to choose between efficiency and innovation?
3. What is an operating system?

Is there Consolidation?

There certainly have been a good number of acquisitions in our industry, but innovation is also happening at a rapid pace.

Just look at the data…

For example, the number of IAB vendor members continues to increase.  Whereas there were 25 members in 2005, the number has climbed to 140 in 2011.  And the 2011 number is still higher than the 2010 number which cited 125 members.  Just last week, Brian Morrissey of Digiday mentioned in his “What if the Music stops in ad tech” article, that there are over 200 vendors listed on the LUMA Partners slide, and that’s just the display slide!  Here at Operative, the number of requests to integrate with our platform is three times what they were just two years ago.  These numbers and the activity in the space indicate to me, that consolidation is not happening.  The reality is that for every company that is bought, two to three are being created, and driving the need for solutions that solve very big problems.

So consolidation is just not happening, nor will it in the next five years, which means publishers cannot and should not rely on it to achieve operational efficiency.  In fact, M&A activity within the ad tech market is just getting warmed up.  While many people refer to the proliferation of solutions as fragmentation, a word with negative connotations, what they are really talking about is specialization.  In an industry that is changing as quickly as ours, a lot of individual innovators are required to help address the change.  We just need a way to manage it all, which brings me to my next question.

Everybody calls this Fragmentation. I call it Specialization.

Do YOU Have to Choose Between Innovation and Effectiveness?

The answer is quite simply NO.   You HAVE to do both.  You can NOT choose.

You must be able to run the car and change the engine at the same time if you want to survive in an industry going through this much disruption.  Our industry is complex but it’s not THAT complex relative to other industries.  The question should be how to balance innovation with operational effectiveness?

This may seem impossible to imagine today, but there was a time thirty years ago, when other industries were experiencing major challenges and pains managing their complex supply chains, demand channels and changing market dynamics.  But they overcame those challenges and pains, and they did it with business management software, or what we call them in this space, operating systems or platforms, that integrate with all suppliers, buyers and innovators.  These systems enabled these industries to effectively balance innovation with operational efficiency.

What is an Operating System?

Why do we even have to definite what an operating system is?  It’s because everyone calls themselves an operating system nowadays, which is creating more chaos and confusion.  We need to get beyond the hype and understand what it truelly means to have an operating system.

So how do we, in this industry, define what an operating system is?  By technical definition, an operating system:

• Is a program that manages other applications
• Is a Hub
• Integrates with other technologies
• Uses a common language

 

For a company, an operating system is a business tool or central hub that brings it all together.  It allows the company to grow and innovate, while being more efficient.  Our industry still operates in production systems and in order to become more efficient, to embrace innovation and effectively compete in this dynamic market space, we must begin operating in Operating Systems.

Imagine if when you bought a car from a dealer, they had to input the order into each and every robot on the manufacturing line.  That’s inefficient – HIGHLY inefficient, but that’s what we do in this industry, day in and day out, with our excel files and outlook databases.  We need to work differently, and simplify, in order to embrace change.

When I think about the state of our industry and I hear the pains and challenges customers are experiencing, I am reminded of the following quote:

“Nearly all men die of their remedies, not of their illnesses.”

- Jean Baptiste Moliére

This quote reminds me that solutions chosen out of expediency, out of desire to solve just the immediate problem, will quite often lead to longer term problems and pains.  It’s a good reminder to all of us in this industry that we need to think more broadly, and long-term, about how we solve or pains and problems.

Criteria for Choosing an Operating System

So how do we go about selecting an operating system and move beyond the hype?  Well for starters, you don’t want it to compete with you.  The system needs to be agnostic.  Can you imagine entering your business data into Windows, and Microsoft turning around and using it to create a competing business?

In selecting an operating system, be sure to ask yourself:

• Does the vendor compete with me?
• Do they want to replace me?
• Do they want to commoditize me?

The operating system must also be enterprise-wide, so that the entire organization is utilizing it.  This will create efficiencies and enable you to manage the entire yield curve.  And lastly, it must have scale so that it can integrate with other applications.

Operating Systems in Media

So if this is the criteria for selecting an operating system, then who are we left with in our industry?   We do not lack people and innovation to drive operational efficiency and innovation, but there is a lack of companies whose business models provide the infrastructure that enable YOUR efficiency and innovation, and prioritize driving YOUR company’s value above driving their own.   I believe we are left with only a handful of players – Operative, Media Ocean, Oracle and SAP among them.  While there are others on the image below, we do question their scale and ability to support you in the way a true operating system should, as defined above.

We believe the future consists of two main operating systems:  one on the buy-side and one on the sell-side.  And this is one reason we were excited about the MediaOcean announcement a few weeks back.

So how do Ad Ops Professionals Lead the Charge? 

The job of today’s Ad Ops professionals should be to take a step back and ask, what is my approach to building an efficient company that continually innovates?   And the answer to this question is how you lead and become the change your organization needs in order to effectively balance innovation and efficiency, or, to have your cake and eat it too.

Do you depend on someone to run your business whose business goal is to eat your lunch?

Andrew Wallenstein of www.paidcontent.org just published a great article yesterday about Netflix’s recent 10-K filing in which they disclosed the risks associated with their Amazon partnership.

It is obvious that Netflix is facing serious competition from Amazon in their primary business.  But what was disclosed is an additional threat from Amazon, and risk to Netflix.  Amazon, according to the article, provides “mission-critical” web services that enable Netflix to remain in operation.  This same supposed “business partner” is about to become a major competitive threat to Netflix as it looks to offer an online streaming video service to customers that will compete directly with the Wall Street darling (NFLX).

Netflix depends on Amazon to allow their business to scale.  Netflix depends on Amazon to innovate their services so that they can better compete against Amazon.  If they don’t provide that innovation, Netflix will be at a disadvantage.  Is that a safe bet?

And what bets are you placing every day?

David B. Yoffie and Mary Kwak wrote, in their famous Harvard Business Review article entitled, With Friends like These: The Art of Managing Complementors, that “Executives often overestimate common interests with complementors and repeatedly under-estimate the potential for conflict.”

How often are we (the digital ad industry) depending on competitors to provide sufficient innovation to our mission-critical platforms, and protection of our data, in order to grow our businesses? Do the people that have access to your data want you to win?  Do the people that provide your business systems – from business intelligence and inventory optimization, to user data and customer data – really want you to win?  Or do they just want you to win long enough until they can commoditize your value?

Here are some questions you need to ask yourself to determine if you are putting your primary business assets at risk vis-à-vis a current or potential “partnership:”

-          What are my most critical assets?

-          Who has access to them?

-          Who do I depend on to monetize them?

-          Do they compete? Now? In the future?

-          Are my “frenemies” going to share their innovation, or keep it themselves?

-          What would happen to my business if they stopped serving my interest?

Once you have the answers to these questions, you will be better equipped to know a) whether or not there are risks you need to disclose to investors and/or b) whether or not you should continue to engage in those relationships at all.

Co-opetition is part of our life, it is here to stay.  But engaging with partners that compete or may potentially compete with your primary business and source of revenue is a significant risk that should be carefully evaluated.  Furthermore, you must have the foresight to know whether or not these “partners” have the potential to one day become a competitor, forcing you to predict the future market landscape by running if-then scenarios. Simply disclosing the risk to investors is not enough – and in fact, it’s probably too late.  Understanding the implications and risks before you even have to disclose should be the first step businesses take in evaluating their mission-critical business relationships.

So who’s guarding your henhouse and what will you have to disclose to investors in your next 10-K filing?

I would love to hear from you on related scenarios that may exist in our space where there is exposure of critical business assets and/or partnerships because one partner is preying on the other(s). Comments welcome here or via email.

http://paidcontent.org/article/419-what-worries-netflix-about-amazon-isnt-just-competition/

According to the Bain Study “Building Brands Online”, in the next 3 years, brand marketers will spend close to 40% of their budget on cross-platform campaigns (up from roughly 25%).  That’s about $52,000,000,000 being spent on cross platform campaigns in the near future.  Unless you start making changes in your organization to satisfy this new rise in demand, you won’t get a dime of it.

Let’s explore why.

What do these new demands look like for marketers?                            

A marketer looking for ‘cross-platform’ means they want to use multiple advertising platforms or vehicles to convey an advertising message.  For example, a brand like Nike may want to reach women at home, on the move, during recreation and at work.  To do that, Nike needs a number of options to distribute the advertising message: display media, online video, mobile, social media, TV, outdoor, newspaper and magazines.  And, the list continues to get longer.  For example, in the last 2 months, hundreds of publishers scrambled to build their iPad app, knowing that a decent percent of their audience will flee to the digital magazine version of their product. 

Marketers are starting to require multiple touch points in their campaigns, increasingly digital.  The people who spend the money are aware that digital is an accountable, efficient way to build brand equity and are putting pressure on their marketing departments to become more cross-platform as a result.  They are looking to get a single message to a consumer across different digital and non-digital advertising channels.  In fact, according to the Marketing and Media Ecosystem 2010 Booz & Company analysis, 89% of all marketers are developing ideas that cross media platforms, including digital.        

What can media owners and publishers do to keep up with these demands?

Let’s take a break from the macro-level talk and get into the day to day reality of the situation.  The media buyer that you met at a cocktail party nine months ago calls you up. 

“Hey – long time, how are you?… Great, great…Listen, we are doing this thing for my client and they are trying to reach men between the ages of 18-49 that are interested in buying a car.  And um…they are really trying to do this across multiple outlets…something that covers all the standard online ad units, but something that’s custom too.  So, if you could put together something that’s standard, custom, across video, mobile, online, social, that’s targeted to male car buyers between the age of 18 and 49 that live in the north east, that’d be great.  Oh, wait, I need it by this Friday OK?  Thanks, you’re the best.”

Only 1 type of publisher will get this order- the one who CAN execute.  If you can’t scale, you’ll spend all of your time reacting to these requests and looking for data.  This leaves very little time to sell, brainstorm and get creative. 

Translation – you likely won’t get this deal. 

So, what’s holding publishers back from executing cross-platform campaigns?

1.    Technology and data fragmentation is still a huge problem.  A typical publisher uses 30+ systems to run their business.  The data is fragmented, yet absolutely necessary to access to stay competitive in this new market place.  There’s one ad server for video, one for mobile, and one for display.  If you want to include a TV component or a print component, there’s a whole different set of systems to access to see if the inventory even available, and at what price.  If you plan to offer ad space on an iPad app, well you have that to deal with now too. 

2.    Business resources necessary to complete the RFP or contract oftentimes don’t even sit on the same floor- let alone same office. You may have other sales teams within your company that you may need to consult with to get them on board with your client’s ideas.  They are usually removed from your digital business goals, have not been vested in the process of selling to this client, and have their own agendas in mind. 

3.     Ad operations teams are typecast and segmented by the media they implement.  For many publishers, one team traffics standard and display rich media.  Another team traffics mobile or uses an outsourced mobile ad network.  TV and print production teams don’t even sit in the same office as you.  These are not ideal conditions for selling a cross-platform deal.

What can publishers do about it?

1.    Take a leadership role by getting all of your data in one place for Sales.  Plan for the future.  According to the Ecosystem study mentioned above, 67% of media owners said they need to upgrade their supply chain capabilities in 2010.  Part of this investment translates into having one screen to access your inventory, products and rate cards available for video, mobile, display, social and even TV, radio and newspaper.  This needs to happen, regardless of the number of ad servers or execution systems you may use.  Integrate it all into one central place so at the time of proposal, Sales has all the information they need when they get the call from that media buyer. 

2.    Centralize ad operations teams and production resources.  Fragmented ad operations teams are unable to help sales drive revenue that comes from cross-platform.  While it would be difficult (today) to have the same ad ops team that implements TV also traffic digital, there are steps you can take to move in the right direction.  Get everyone communicating with each other through one platform.  The carrot is integrating their specific ad system into the platform that everyone uses.  This will make them want to be on that platform.  By merging several departments onto one system, new proposals, orders, demands and alerts from a cross-media sales teams would be visible to everyone. 

How do these steps help publishers deliver cross-media campaigns?

By implementing these steps, Sales will be able react quickly to client demands.  They will also have more data to educate buyers and move upstream in the buying process, getting closer to the people holding the budget.  Executives can get a larger share of wallet from existing and new customers.  Ad operations and production resources can become a strategic partner to ad sales teams and help provide a competitive advantage over other publishers competing for the same dollars.

Of course, this is not easily done.  Someone with influence in your company needs to step in and be the VP of Change.  Someone who has power.  Someone that cares about revenue.  That cares about your brand.  Someone that is forward thinking enough to adapt before it’s too late.  If you can get the right people behind you, integration of data becomes easier, centralization of operations starts to fall into place and the company will start to rally towards a common cause- $52,000,000,000.

For more information, please click here.

The day of ‘seller defined media buys’ will decrease as publishers understand the who, how and where in the context of a media buy.  Sellers need to not only understand the revenue picture but also the value of the audience.  

The question is not WHO owns the data, but WHAT can we use the data for? 

Advertisers and publishers hire vendors to solve their business problems.  The two sources of real data are from advertisers and publishers.  All of data is incomplete. 

Does data equal revenue? 

Are we managing data to get a stronger revenue stream? 

Data ownership is a false paradigm.  It is all about how we USE the data.  We must be respectful of the consumer and prevent legislation at the same time.  If we eliminate data and data usage, it will cause everyone more problems.  Controls are important for both publishers and advertisers.

Advertisers want to buy on frequency and modeling for maximum reach of a targeted audience.  We need a combination of trust and responsibility.  The holding companies want to be transparent and open.  

Big publishers and holding companies are afraid of start-ups who are doing non-ethical things that effect the revenue model for everyone.  But the truth is that big players need to take a lead in the marketplace.  There is a big disagreement between agencies and publishers as far as who can do what with data.   This is a fundamental issue that might not be solved for years.  Right now data is all over the place, no one trusts each other, and advertisers want to buy on an audience basis. 

So, what the value of targeting without context?  

What can publishers do to protect themselves moving forward?  

Don’t work with ad networks. 

Create a business policy on any 3rd party tags. 

Consider search and the influence of site indexing. 

One great way to think about inventory and data, is that we need to evaluate opportunity cost for each partnership.  The first step for everyone has to be transparent throughout the buying and selling process.

For more information, please click here.

Welcome to the IAB Annual Leadership Meeting, “Ecosystem 2.0, Revenue the next wave“.  650 digital media leaders are here in Carlsbad, California- 30% more attendees than last year.  It’s Monday morning, February 22, and one of the resounding messages so far has been the fact that interactive marketing will grow next year.  2010 is about new services, products, and transparency- it is all about growth.  As an update, the Terms and Conditions 3.0 will take effect today and was based upon feedback from over 100 companies.

In one of the opening sessions, Jory Des Jardins from Blogher introduced Frank Cooper  from Pepsi.   Jory praised Pepsi’s innovative approach to interactivity.   She mentioned an example about  a consumer tweeting that they are thirsty, and suddenly a butler appears on the screen to offer a Diet Pepsi.  Companies like Pepsi are taking big risks which means they are taking a leadership position. 

Frank Cooper, Senior Vice President, Chief Consumer Engagement Officer, Pepsi Co Americas Beverages:

“We have a chance to make brands more appropriate to everyone’s lives.”  He believes the marketing that has been built for the last 75 years is now not relevant.  Brands need to add value to our lives.  The truth is that right now we are in the middle of a brand marketing crisis.  Less loyalty, lower prices, dysfunctional messages across the board, these are all problems with marketing today.  The truth is that brand marketing has NOT really changed in quite some time. 

As an industry of digital marketers, we need to rethink, redesign and rebuild brand marketing.  Brands provide consistent value and consistent price.  But identity value has become even more important to consumers.  How can brands bring new value to the audience?

Brand behavior must change from ‘only sponsorships’ to ‘opportunities based on experience’.   We must also build our brands around social networks. The consumer has to be able to sell for us and leverage outlets that are ‘connected’.  The digital space has technology that allows us to relate to consumers in a deeper way.  Social media allows brands to highlight people and elevate their experiences with a brand or product. 

Ultimately, advertising has to add more transactions, better value or higher prices to be successful.

What IS Operative.One?

Operative.One is the NEW brand for our solutions philosophy- the concept that media companies need to utilize multiple pieces of the value system in order to sell, execute and bill digital advertising (CRM, Ad Servers, Finance/Billing, Audience Targeting, Pricing/Rate Card, etc), and that all of these fragmented solutions need to feel as “one”.  It is Operative’s job to make it feel like one…To help our clients become easier to do business with.  Therefore, the “Operative.One” brand will be the umbrella for all future business solutions.

For the last session of the day, Operative CEO and President, Mike Leo, lead a discussion with Rob Deichert, Senior Vice President, Global Sales Development and Operations, AOL Advertising and Mark Ellis, Executive Vice President, Sales, AOL Advertising.  The panel explored how Sales and Ad Operations  work together to drive revenue, increase customer satisfaction, and continually optimize the consumer’s experience. 

We are in an industry of mass customization.  Everyone and every web site needs something unique and specific and customizeable - but are we there yet?  How do we deliver a custom product but on a mass standpoint?

Question: How does Sales work with Ad Ops? 

Answer: First and foremost, the work starts when the sale happens.  Ad Ops is a major partner, not an obstacle to winning and closing deals.  It’s common that the Sales person always wants to push the envelope with an agency buyer.  This is where Ad Ops has problems- a new custom environment for every agency client. 

Question: Is there one part of customization that would dramatically help? 

Answer: Optimization and billing would have a major impact on making the sales cycle better. 

Question: Does Sales appreciate Ad Ops? 

Answer: Yes (smile).  “All custom = no profit.  And all mass = no innovation.”   The key for any publisher is to find the happy medium because that is how a publisher can advance to the next level. 

Question:  Lets look at an example- AOL’s largest spending customers get the best and brightest opportunities because they have real dollars to spend.  Can we spill less blood than we did 2 years ago, if so, how do you do it? 

Answer:  The major change is that there are definitions for all products (Project Management), like an Operations role.  But in 2009, Ad Operations emerged as a major part of all implementations once a sale happened.  The majority of time though, even today, Ad Ops and Sales are not on the same calls.

Question: How do you manage inventory? 

Answer: The forecasting is more accurate when you add in multiple areas.  There is a balance between very specific sections and the ability to sell the entire site.  Managing inventory is entirely based on the market conditions.  The order of magnitude of creative in online versus TV is so different.  Online averages one piece of creative to 70k users versus a broadcast campaign which over 1 million.

Question: If the agency knew it was easier to do business with a publisher and that made business a lot easier, would the agency move more of the budget to them?  

Answer: Yes, the ability to provide fully baked programs at a strong value creates a much better relationship. 

Question: Is it part of your sales pitch, that “We are better at Ad Ops”? 

Answer: Yes, but it is subtle.  When you don’t have the best product, cheapest price, or largest site, customer service drives a large part of sales. 

Question: What improvements in the sales process have helped the most?  

Answer: One sales person, one person to talk to, one insertion order = huge win.  The online offline combination has a long way to go.  Video and TV will be the first to converge.  Others will follow.

Question: What will be the Big Wins in the next 3 years?  

Answer: The system between agency and publisher with regards to creative and discrepancies. 

“Looks like its cocktail time…”  Mike Leo

Does this sound familiar?

Lack of data integration

Too much manual data entry

Mistakes and discrepancies are constant

Invoices do not match

Every RFP is different 

IAB is trying to create a standard RFP –> Proposal –>IO –>Invoice process.  In conjunction with the IAB, Operative is participating in the beta project .  Geoff Petkus,  Senior Director of Product for Operative, takes the stand to showcase the ‘standard’ communication process between Agencies and Publishers.

Step one, RFP receipt.  We will validate the incoming RFP for any errors and codes. The next step includes client-specific rules for what to do next. Each publisher will have the ability to define rules for any agency or account. 

Next we go to RFP management.  When an RFP comes in from an Agency, it will be assigned from a queue so that everyone is working on the most recent business.  After that, it will be organized into a RFP detail page. 

The last step is sending the proposal. 

Question of the day-  How does the new Ebusiness RFP platform play in a world that could be eliminating a major part of the RFP process?  

The whole process is meant to return RFP’s faster because they are in an agreed upon template to start with.  Operative can play a big role in the workflow- ask us how…email Sales@operative.com to hear about our work with Donovan Data Systems iDesk and innovations in streamlining agency/publisher communications.

Geoff Petkus

Right this moment, Operative’s Senior Director of Product, Geoff Petkus, is presenting at the IAB Ad Operations Summit on the IAB working group’s advancements in automating agency and publisher communications. 

Check out the session: The Power of Automation, E-Business Solutions!

Follow Operative Founder and VP Sales, Lorne Brown on Twitter- http://twitter.com/LorneBrown

Follow the IAB on Twitter- http://twitter.com/IAB