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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