FutureM: Advertisers and Agencies engaging with startups



“My name is Boris and I’m from Russia”.  This is how the CampusLive founder opens his pitch for the FutureM audience.  He’s one of eight startups presenting to an assorted crowd of people interested in advertising.  “When you run a startup, burn your bridges.  If you have anywhere to retreat, you will inevitably, because building a startup is just hard”.    His story is one of what he calls pivots but are actually radical tries at different models to harness campus monetization, towards what is CampusLive today.

Your Future looks like a 5-person startup

“You may not fully realize it, but the future of the ad agency is in this room, in these little startups that are reinventing the ad unit”.  In his case, the ad unit is challenges and engagement.  From a “25 year old with limited experience” (by his own admission), a simple message:  “You don’t have to be a startup entrepreneur to change the world, but you absolutely have to work with these entrepreneurs if you want to understand where the world is going, and play a part in changing it”.

The Ad World does not engage with startups enough

Boris’ message is simple, and aimed at a simple reality: brands and agencies are simply not running any form of structured programs to engage with startups and test budgets on them.  Compared to what the VC or the Tech Industry is already doing today, there is still too much desire to control client access.

Response from an Arnold (Havas) exec: “We’ve done trials with entrepreneurs and got burned.  In marketing situations, we love having entrepreneurs in the room.  But unless we’re tightly synchronized with the media buyer, we end up failing when the time comes to run the actual campaign.  In our case we might be working with our sister media buying company MPG, but if we’re not both hired by the client we end up failing” (paraphrasing).

Kudos for laying it out, and there you have it: it may be in the best interest of the client and the agency long-term to embrace ad innovation early, but the client-agency relationship is such that real experimentation (with a budget and creative attached) is hard because failure is not a tolerable outcome.  And as we know, failure is the natural companion of experimentation.

If you look at what Microsoft has done with BizSpark, or Google, or Amazon, you can see what a sustained and systematic program can do in terms of identifying disruptive technologies early (e.g. Google acquires Splurk, Microsoft acquires Massive), attracting talent and building engaged ecosystems.

I feel that the ad world knows well by now that they have become a segment that uniquely mixes tech and creative.  Whilst Chief Data Scientists are showing up all over the place and all major media buying groups have created Trading Desks, I am not sure there is a complete acceptance that commoditization is inexorable is much of the media buying world.

Just like in financial services, adertising organisations need to be extremely clear about:

  • what part of their business gets commoditized by technology and becomes a scale play
  • where sustainable high value / high margin business can sustainably be built

Investment banks went through this a long time ago.  Today they are a mix of highly effective trading platforms for commodity products, global high-value advisory business, and proprietary operations.  But at heart, they are built on tech, they choose where value is sustainably created.

Helping agencies deal with chaos

Agencies are in the process of doing the same process of sorting through what’s a tech business and what’s advisory, but if they want to avoid getting railroaded by the consolidation platforms, they should embrace early stage technology with more gusto.  The reality today is that despite their best efforts, it’s a nightmare for them.  RTB in particular gives the industry a great opportunity to finally make online media buying more efficient, but so far it has had the opposite effect.

Although algorithm based buying sounds great on paper, the reality is most agencies (and their trading desks) have not gotten there yet effectively.  They are struggling to digest the copious amounts of data and organize strategies that encompass 1st party, 2nd party and 3 party data (let alone context and placement level data) and analyze effectiveness whether through attribution or engagement related data.

Large agencies created trading desks to make their buying more efficient (and generate better margins) but it is still way too manual and complicated and the ecosystem is too fragmented.

The innovation ecosystem needs to also realize that it’s job (last time I checked) was to make its clients lives easier, and right now we’re not doing that too well.  I can see a clear role for startups and tech companies to help the advertisiers and agencies to

  1. build the algorithms
  2. provide information for the algos
  3. tie together performance data or attribution modeling for the feedback loop

Dataxu, Adsafe

Both of the companies we’ve backed in the space (a) create lasting competitive advantage and (b) work with both publishers and advertisers to help understand, wholistically, the value of brand exposure in this new environment.

In the case of Dataxu, the game is giving full visibility and enable spend decisioning across channels for large advertisers and their agency partners.  the company is helping agencies evolve to use big data & analytics to transform themselves with a focus on high value analytics.

In the case of Adsafe, we’re helping people with 2 and 3 above and in particular establishing a common language that buyers/sellers are using to ensure performance and maximum results – the objective is to ensure both sides benefit and not be a negatively disruptive force in the ad tech ecosystem.  We’re also constructively helping brands get full visibility on how well they are spending their budgets.

 

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5 Responses to FutureM: Advertisers and Agencies engaging with startups

  1. Pau Sabria says:

    The reality is that brand agencies rarely engage with startups. And they hide behind the excuse of the brand – agency relationship.

    The truth is that they don’t feel the need to. If they did, they would experiment and spend their own money trying new things and providing brands with extra opportunities for free where failure is an option.

    The fact, sadly, is that they think they are in control.

  2. Boris Revsin says:

    Fred,

    Thanks for the write-up. I did open up with the “I’m from Russia” line didn’t I… ha.

    Regarding the “agency response” – I think you and I are on the same page, but I don’t want to be unrealistic in the short term. Most of us in the ad industry have endured quite a few “lunch and learns”, where YOU buy lunch and THEY learn everything they possibly can about your value prop. Unless there is a *pressing need*, it’s unlikely you’ll hear from them in a while.

    The systematic program we’re discussing would need to be a “fast-track” team. A team that has *client* approval to make moves on start-up media buys/creative. It doesn’t mean that this group isn’t super selective – the sheer number of start-ups force it to be – but the group would need to prove its value by picking more winners than losers. Frankly, most start-ups will let you test-drive a technology or media spend for under $5,000. The response of “getting burned” doesn’t hold up over time. We’ve all been burned – by media channels, failed startups or employees. Doesn’t mean we can afford to stop distributing, investing or hiring. Not if we want to be around in 5 years, right?

    I’ve put my specific thoughts here: http://bostinnovation.com/2011/09/13/how-entrepreneurs-are-reinventing-the-advertising-industry/

    Thanks again,
    Boris

  3. Perhaps the first action item for start-ups & their VC support teams looking to partner with agencies on a local level is to lower the risk and better communicate the potential gain in agency/technology partnerships.

    Just as VC’s have an obligation to their LP’s, agencies have a responsibility to make the best decisions possible on behalf of their clients. If venture firms are allowed to say “no” to an average of 299 out of 300 pitches, agencies (especially those managing brands) should be entitled to be just as picky.

    Respect that when an agency has won a new piece of business or successfully managed to maintain an existing account, they have earned the opportunity to use their best professional opinion in the decision-making process.

    Recognize the value of a positive relationship with the agency and approach them as a potential partner with facts & figures to support your product or service, a can-do attitude, and a tailored pitch.

    Create shared value:

    Personally, I am huge fan of Michael Porter’s writings on shared value. Even if there is no monetary exchange, there is often opportunity for a savvy barter of sorts if brokered correctly. Point out what’s in the intersection of that agency/start-up Venn diagram and explain how everyone has potential to share in the success.

    Investing in incubator arms not only speaks to the “buy local” and “support entrepreneurialism” movements (the type of buzz concepts agencies & brands understand) but also creates a tremendous amount of potential shared value in the positive PR it can drum-up on the agency side and the real-time use data/experience/credibility it will provide the piece of technology and its team.

    Think MassChallenge Level II: Application in Context.

    Leverage the voices of experienced strategic partners:

    VC voices can also be a huge asset for start-ups by sharing their experiences with agency execs on the benefits of fostering new technology and how diversifying an agency’s talent portfolio with some “get rich slow” investments could be a way of the future.

    We may not all use the same jargon on a day-to-day basis but it doesn’t mean we can’t understand each other on a shared experiences level.

    Find the motivating factor and finish strong:

    At the end of the day, it’s on the start-up to motivate the agency to hire your technology (and don’t expect to always get paid in dollars and cents right away; realize the potential in a service trade if your product really has legs on the results side and bite off a project at a time); make them believe in you and give them solid reasoning, in language that speaks to them, to give you a chance.

    There’s definitely an argument to be made that an investment of time & training on the agency’s end is better spent nurturing new local technology and the minds of the entrepreneurial team behind it in lieu of an unmotivated intern who will turn over in a semester or two.

    Ps – congrats to DataXu on the European expansion; awesome to see a BOS company making such strides.

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