Data punks: Only ‘small data’ can save media owners being smashed by retailer media and new agency breed swapping relationships for numbers
Media owners are being entirely out-played by media agencies and advertisers with better data and fleets of younger grads now informing planning and buying decisions, parked mostly behind screens, crunching datasets. The historical norm of relationship-based trading is now just 25 per cent of media transactions in the US, according to media ecologist Jack Myers, five years ahead of forecasts. But there remains one great hope for media - small data is on the rise. “Every agency is looking at the same data pools. But [all are asking] what can we take to our client that's unique, that's differentiate?” says Myers.
What you need to know:
- Back in 2019, media ecologist and founder of New York-based MediaVillage Jack Myers predicted that by 2025, media transactions would be 65 per cent automated, 95 per cent AI-informed, with only 25 per cent remaining relationship-based.
- But that future has already arrived and while media agencies have adapted, media owners are scrambling.
- Senior agency staff are being replaced by early stage team members who are dominating planning and buying - around data. The new breed are far less influenced by, or even have, media owner relationships.
- Instead of trying to compete with platforms on scale, Myers thinks media owners should ditch big data for small data – using sharper niche insights to give younger, data-driven agency buyers something they can't get elsewhere.
- Otherwise, 'legacy' media should prepare for the next wave of attrition: retailers, with Amazon and others "on the cusp" of pushing into ads within its video streams.
- Meanwhile, Myers says creative – and creative agencies – must adapt to consumption habits, or risk further punishing media companies that feed them by driving away audiences.
- To survive, media owners must become far more diverse in their make-up, says Myers, while media agencies must re-integrate.
This year, for the first time...we may be seeing in media and advertising a shift in prioritisation from big data to small data. Every agency is looking at the same data pools. But [all are asking] what can we take to our client that's unique, that's differentiated?
But that was before the pandemic. Today, Myers says that world has already arrived and while media agencies are keeping up, media owners are way off the pace, with some running in the wrong direction entirely.
In short, he thinks the publishers that survive will be those that drop delusions of competing at scale – impossible in a world of global platforms – and instead concentrate on unique insights and value. In short, bail out of big data and pile into layers of small data.
Meanwhile, Myers thinks we are only seeing the tip of the retail media iceberg, and that as Amazon starts to ramp up ads within its video operations, others will follow.
Creative agencies and formats, he says, must also get with the programme – or risk dragging legacy media down entirely.
The senior agency staff are being replaced by early stage team members who are really now dominating planning and buying. The decision-makers are no longer those senior touch-points for the media sellers [for whom] relationships have historically been the currency of the industry. Today, the currency is data.
Transfer of power
Myers' prediction of an AI-informed, largely automated media world has arrived four years ahead of schedule, accelerated both by the pandemic and the shift in personnel at agencies.
Within media agencies, senior staff with their decades of experience and relationships forged with media owners are “disappearing”, says Myers. They are being replaced by "early stage team members in the business – one to five, six, seven years [experience] who are really now dominating in terms of the planning and buying decision-making," he adds.
“They're not always at the point of negotiation, but they're informing it. So the decision-makers are no longer those senior touch-points for the media sellers [for whom] relationships have historically been the currency of the industry,” he says. "Today, the currency is data and that's being driven by those younger, newer team members who are head down into the computers.”
The agencies have clear data on what media, on a client by client basis, most effectively meets their planning criteria. The media companies, in many instances, are in fact going into the negotiation blind.
Data locked in, media locked out?
While the big agency groups have bought and built data companies, most media sales operations remain in legacy mode. Myers says there is “no question” that agencies are well ahead of their publisher counterparts, and that without a swift change of tack, legacy media risks falling further behind.
While some publishers believe first party data will reinvigorate their business models, Myers thinks agencies, especially those that have access to client first party data, may need to be convinced.
“Once client first party data, the purchase data, the performance data, goes into the databases controlled and owned by the agencies, that's locked in,” says Myers.
“But the media companies as a whole have not been able to build a standardised set of toolkits, as much as they've tried.”
While some of the cable networks are trying to build an aggregated data platform, Open AP, “it’s not in a place where the agencies are yet ready to import it into their own databases,” says Myers.
“So the media companies in many instances are in fact going into the negotiation blind. The agencies have clear data on what media, on a client by client basis, most effectively meets their planning criteria.”
All the media companies have in response are Nielsen and Comscore.
Even where networks have major non-linear assets, such as NBCU, “most media sellers are in a lose-lose proposition,” says Myers.
“NBCU are owned by Comcast, which [delivers] first party data in terms of TV viewing. They have addressable capabilities and they're doing as good a job as anyone in the legacy media industry to create a competitor to Facebook and Google.”
The problem is, Facebook and Google have had their datasets plugged into agencies for a decade. And deep and wide as the biggest legacy media companies may be, “they are just a subset of the total media inventory availability pool, and therefore the agencies have no real reason to import their data”, says Myers.
“So they're not going to use NBCU, when they have their own systems and services that tell them what their opinion is of NBCU’s inventory.”
Change the message
While just about all media has been pouring huge resource into compete with Facebook and Google/Youtube, Myers thinks those efforts are misguided.
“That's a losing proposition, because those [platform] databases have been imported now for almost a decade into the agencies' systems and pools. And the clients are already often using that data themselves – because they're using those platforms for commerce.”
If both the technology and the culture is changing, Myers thinks media sellers must adapt more quickly to survive.
“[Sales] relationships are not going away, they are just changing dramatically. Yet for the most part, media companies are still trying to hold on to the legacy operational models,” says Myers.
“You've got to reinvent the way you communicate. You've got to reinvent what you communicate and how you communicate it.”
We’re looking at four to seven per cent [advertising] growth potentially this year. Almost all of that will be going to Facebook, Google – and now Amazon, Target, Kohl's, Kroger and the other retailers.
Small data trumps big data
If traditional media cannot hope to compete with the platform duopoly on big data and scale, it may yet outpoint them with sharper, more relevant insights.
Smarter publishers are taking that approach, according to Myers, whose company, MediaVillage has been conducting media industry research for 40 years.
“This year, for the first time we’re seeing what may be the beginning of a new trend,” he says. “We may be seeing in media and advertising a shift in prioritisation from big data to small data.”
He cites magazine publishers such as Hearst, as well as smaller, standalone TV companies as examples of those taking their first party data and creating “really interesting insights from it”. As a result, they are “gaining traction both at the agency level and at the client as being more relevant” per MediaVillage’s latest findings.
“When we ask them who is developing research and data and analytics that are relevant to your needs, we get a very different answer than when we ask who's developing data and analytics?” says Myers.
Therefore relevance is key.
You can't both invest heavily in expensive content and compete in that marketplace, if on the inventory sales side the only thing that you're measured by is how many eyeballs you offer – and are dependent on someone else's data to tell you who that audience is.
“When it's big data, massive databases coming together, they have that at the agency and at the client. What they don't have are unique insights that help them make small decisions,” says Myers. “And that could be a game changer.”
“Rather than multiple terabytes, if a media company can come to you with a piece of data that says ‘here is what you are missing’… the earliest signs are that those small insights that can help inform a creative media decision are more valuable to these younger, more data-centric media buyers,” he adds.
“Every agency is looking at the same data pools. But [all are asking] what can we take to our client that's unique, that's differentiated?”
So how does this emerging micro trend fit with the macro trend of scale?
“That is the key question,” says Myers. “If those specialised content, brand-focused media organisations like the print originated media – the Hearsts, the Conde Nasts, even the local newspaper companies – can't come to their to the industry with a unique proposition, they're going to get squeezed out.
“If they try to play in the commodity transactional game, they're going to have to dramatically scale back their costs and just drive numbers. It's the old story of 'we're growing exponentially, but we're losing money on every sale'.”
That reality underlines the urgency behind publishers’ push for new metrics, such as attention-based measures, as well as their sprint to catch up on data.
Says Myers: “You can't both invest heavily in expensive content and compete in that marketplace, if on the inventory sales side the only thing that you're measured by is how many eyeballs you offer – and are dependent on someone else's data to tell you who that audience is.”
Creative agencies continue to be locked into the 30-second commercial that depends on invading the home as opposed to being invited into the home.
Creative killing media?
Media owners’ efforts to resist an eclipse by the platforms may ultimately prove futile unless creative – and creative agencies – also fundamentally change, suggests Myers.
As swathes of consumers opt for advertising-free models, he thinks brands will otherwise be driven further down the path of owned- and social media over traditional channels.
Myers cites Lego as an example. A cursory search on Youtube and “hundreds if not thousands of demonstration videos” emerge.
“Probably a majority of them are not funded by Lego, but they are an incredible marketing vehicle for Lego,” says Myers.
“And yet creative agencies continue to be locked into the 30-second commercial that depends on invading the home as opposed to being invited into the home.”
Unless advertising is re-invented for an on-demand world, brands will continue to shift budget to their own channels, suggests Myers. He points to carmakers pouring resource into demonstration videos and their own websites in an attempt to capture and convert people usually researching weeks if not months before a purchase.
“We know that more and more categories are moving in that direction. The creative agencies need to understand how to be in that business. If they don't, they're continuing to do harm to the linear advertising-dependent media companies,” says Myers. “Because the media companies themselves are not in control of that [30-second spot] content – when that content comes on, they lose their audiences.”
Myers thinks creative across existing and new formats must better reflect consumption to become "advertising that consumers use and want to see – or when they see it, at least fits within the environment.”
That sounds a lot like contextual advertising. But Myers believes “the vast majority" of brands lack sufficiently distinct personality, making it difficult for advertisers to connect their message to the content.
If that is the case, then creating stronger brand personalities presents an opportunity for advertisers, creative and media agencies to work together. But Myers questions their collective awareness.
“You've got convergence of a perfect storm that is leading to increasing destruction of the advertising business,” he warns. “And we're not seeing ... a sufficient recognition of that danger to respond.”
Amazon has not done this yet, but it is on the cusp – you’re going to begin seeing advertising when you watch Amazon videos. I fully expect Netflix to find a path into that within the next five years.
Retailer media: Ain’t seen nothing yet
The rise of retailer-owned media presents an even bigger storm cloud. Myers says it is now outstripping the growth of Google and Facebook – and has barely got started.
“I would say that right now, on a scale of one to 10 in terms of where it is today versus where it's headed, maybe we're at one and a half or two.”
While the nascent Australian market is dominated by Woolworths and Coles, the US market has multiple retailers connecting up media with commerce, driving brands to invest a portion of their marketing budgets into their advertising businesses.
Alongside Amazon, “we’re seeing Walmart introduce a similar model. Target has Roundel. Kohl’s, Kroger, CVS, Walgreens and a growing number of retailers are connecting product sales or product purchases to media,” says Myers.
Those kind of practices funded newspapers for well over a century. But now it has shifted online – and Myers says video is next.
“Amazon has not done this yet, but it is on the cusp – you’re going to begin seeing advertising when you watch Amazon videos. I fully expect Netflix to find a path into that within the next five years.”
And the money will continue to flow – because advertisers, particularly consumer packaged goods firms – have little choice.
“For the last decade or so, advertising has looked like it is growing. But only Facebook and Google have been growing. Pull that out and the market is flat at best,” says Myers.
“We’re looking at four to seven per cent growth potentially this year. Almost all of that will be going to Facebook, Google – and now Amazon, Target, Kohl's, Kroger and the other retailers.”
At P&G 30 years ago, today's brand manager was called an advertising manager. They spent about 60 per cent of their time on advertising and 10 to 12 per cent of their time on media. Today, the average brand manager spends 10 per cent of their time on advertising and two per cent on media. It's just not a priority.
Media companies: Decision time
“If you're a media seller today, you're in the position of making a decision whether you're going to go into the commodity bucket, or you're going to try to build a strong core brand that gives you premium value to a select group of advertisers – and then to target them and work closely with them and partner with them,” says Myers.
He thinks media firms must also rebuild from the ground up.
“Absolute priority is to build a more diverse organisation, more multicultural, bring in different skill sets, bring in veterans and professionals from other business categories that are more data centric, more financially driven. Bring in procurement professionals to really understand the financial realities that are driving brand marketers,” says Myers.
“The fact is that 30 years ago at P&G, today's brand manager was called an advertising manager. They spent about 60 per cent of their time on advertising and 10 to 12 per cent of their time on media. Today, the average brand manager spends 10 per cent of their time on advertising and two per cent on media. It's just not a priority.”
Marketers are instead dealing with commerce and ecommerce, distribution, environmental social governance.
“So they are ceding advertising and media to their in-house agencies, to their agencies, and the media companies themselves are being increasingly dis-intermediated from the decision-making process. So number one priority, be more diverse, bring in a younger team that has more focus on being one to one with the agency,” he says.
“Number two, if you don't have strong brand equity and data that enables you to differentiate yourself and relate to a specific group of core clients for premium sales opportunities – and you don't have sufficient scale to be competitive in the commodity transactional business – then you better think long and hard about who you consolidate with, what you acquire, or what business you're in.”
Agency groups are largely rising to the challenge – but must continue to pull themselves together.
“I think agencies, by having acquired and built strong data operations, are there. But I would say the holding companies need to begin reintegrating across their capabilities and platforms,” says Myers.
“The holding companies have everything they need in-house. They just need to move away from their decision to separate and [instead] increasingly centralise and build teams that, on behalf of clients, can pull together all of their capabilities and assets.”
Back to the future then, only with data. Lots more data.
Mi3 Special Report: Australia's looming $1bn retailer media market
- Australia's retailers are gearing up to become major media channels.
- US retailers are already displacing 'legacy' publishers.
- All retailers are eyeing media, not just supermarkets and FMCG.
- Mi3 supported by Resolution Digital have produced a 28-page report with cross-industry views on what you need to know.
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