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Why innovation in digital marketing needs its checks and balances

By Andras Vigh, managing director at FirmDecisions UK

Marketing communications is in a state of constant change, continually evolving to become ever-more digital. According to media agency Zenith’s Advertising Expenditure Forecast for December 2020, advertisers will invest $600bn (£4.3bn) in 2021 – of which more than half will be digital.

The digital market is dominated by three players: Alphabet (Google/YouTube), Facebook and Amazon. Between them they cover two-thirds of the global market except China, each serving millions of customers and enjoying continuous double-digit annual growth. The Big Three operate walled gardens, sharing only limited data on consumer behaviour for targeting. It is hard for brands to combine this with other data and so extract whole-campaign insights. Opaque data management and so much power concentrated into so few hands may lead to regulation in the near future.

Nevertheless, there is still more than $100bn (£71.m) invested in digital advertising outside the Big Three, media that is often innovative, is traded programmatically, and enables brands to address specific audience groups directly. In the excitement of the digital goldrush, new ways of reaching consumers bring untested, unverified solutions that should be vetted, monitored and – importantly – audited.

‘Paid, Earned, and Owned’

It is helpful to think of the media available today as Paid, Earned and Owned – properties where brands can advertise their products and services, social media channels, and their own digital media outlets respectively. Each brings with it its own set of challenges, degrees of transparency, and areas of concern that demand assessment and verification.

Paid media

Outside of the leading global platforms, the largest part of digital media investment is made programmatically using an automated, machine-based chain of technologies for media trading. This approach uses data insights and algorithms to serve ads to the right users at the right time and at the right price – but without direct human intervention.

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Many forms of programmatic exist, from Real-Time Bidding (RTB) to Private Market Places (PMPs). Programmatic can be bought in different ways – through agencies, consultancies, direct sellers or managed in-house. A complex ecosystem –  bringing together media from many publishers, sites and inventories – joins together many different tools and technologies, including demand- and supply-side platforms (DMPs and SSPs).

Programmatic often brings with transparency and accountability challenges. There are so many layers and players across the value chain, each taking their slice of the advertiser’s investment. Auditing programmatic media spend requires opening the black box in which programmatic often operates. To get a true sense of where and why money is being spent demands a comprehensive understanding and verification of all technology contracts, fees for agencies and technology partners, and the charges made by all related parties.

Inventory media

Another innovative approach in paid media, one being driven by leading media agencies and holding companies, is inventory media. This is where agencies buy media inventory upfront, in bulk, at their own risk and without a prior order, package it up and sell it on to advertisers. In inventory media deals, agencies operate as both agent and principal, and it is almost always sold with strict non-audit clauses; by agreeing to invest in inventory media, brands forfeit the right to know the price at which the agencies bought it.

While inventory media can appear to represent great value for brands – better value than if they attempted to buy the same media themselves – the lack of transparency means that it can also deliver spectacular margins for the agencies. Often, for instance, inventory media can include media space given by publishers to agencies as part of a bulk deal, or as a last-minute fire-sale. But because it operates as a black box transaction, advertisers can never know whether inventory media does indeed represent fair value.

A growing share of all media sold today is inventory media and agencies are keen to increase the proportion of media traded in this way. Because it can represent great value, brands should certainly test if inventory media is able to deliver return on investment. They should also ensure that their media agency contracts put a cap on the proportion of media on their plans which is inventory media.

Earned media

Advertising deals undertaken in the social media space – using so-called earned media – is one of the most innovative, yet complicated, areas of modern marketing – the most complex of which is influencer marketing. With the rise of social channels, influencer marketing has morphed from celebrities and high-profile bloggers to a much wider pool of potential brand endorsers. Through their social media following, they can provide recommendations, awareness, and social proof to consumers – and tremendous sales traffic to brands.

Influencer marketing is not dissimilar to TV sponsorship. TV programmes can appear on any channel. Brands sponsor them because of the loyal audience they can bring, not because of the channel on which they appear; it is Coronation Street or the X-Factor that bring the audience, not ITV. In the same way, whether influencers are on YouTube or Instagram is irrelevant; it’s because they are Zoella or PewDiePie with their tens of millions of followers that brands seek to buy their endorsement. The transition of Top Gear and its presenters from the BBC to Amazon, reincarnated as The Grand Tour, blurs the line between influencers and TV, accidental as the motivation of the move was.

Influencers have spawned more complexity and layers for brands to cut through and audit. It is vital that they secure full transparency, clear contracts, and full oversight of what they’re buying, what influencers are delivering, and who is taking a slice of the investment along the way.

Balancing innovation with prudence

The modern digital media marketplace offer brands enormous opportunities, but it is complex and frequently lacking in transparency, with the true commercial partnerships hidden by black boxes. We encourage those brands we work with to explore and innovate, and to do so with their eyes wide open.

They should understand and test these new opportunities, establish limits on how far and how fast they innovate by setting budget caps – and most importantly they should always ‘trust but verify’. Verification should focus on both the extent to which all links in the transactional chain have delivered against their contractual obligations and also what returns their investments deliver.

In terms of auditing performance, brands should focus on three areas: 

  1. Frequency of auditing: marketing investment should be audited at least annually, allowing brands to incorporate learnings from last year’s innovative campaigns into next year’s investment.
  2. Better and regularly updated contracts: to audit all areas of innovation and create the right approval processes. Better contracts and better audits deliver better outcomes. Brands shouldn’t wait to update contracts when changing agency. Contracts should be regularly updated with the right amendments that cover every innovative activity and new link in the chain.
  3. Audit other areas of activities beyond media and creative: as they often command more budget and so warrant more attention. Include social influencers, data solutions and other non-media activities. Follow the money with the audit to where budgets are migrating.

Summing up

Engaging in new forms of media and new ways of reaching and influencing consumers is exciting and necessary if brands are to take advantage of the opportunities offered by digital marketing. But in the excitement to innovate, advertisers should always strive to balance innovation with prudence.

Byline by Andras Vigh, managing director at FirmDecisions UK

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