Scott Hagedorn – Advertising 2020

Scott Hagedorn, CEO, Annalect

VERTICAL INTEGRATION AND YOU:
A Career Survival Guide for the Future of Advertising

Do Not Track.  In June of 2012, Microsoft announced that it would ship Internet Explorer 10 with individual cookie tracking automatically blocked.  User would have to actively turn on tracking if they wanted to use cookies for convenience purposes.  Apple’s Safari browser already lets a user control what is tracked and Google plans to have DNT enabled on Chrome by the end of the year.

Turning off tracking also means turning off potential digital ad revenue as it disables advanced targeting that uses aggregated data about what content an individual is interested in and other non-personally identifiable data points.

Why would three companies that drove over $30B in 2011 advertising related revenues potentially stunt their own businesses?  Is it an attempt to stay ahead of consumer backlash and regulation? Or, is there something else in motion here?  Maybe they don’t care about the cookies at all.  Maybe the entire digital model, or all advertising models, is about to change so drastically that outdated concepts like cookies just don’t matter anymore.

The $23B Question?  Since 2010, Google, Apple and Microsoft have made over $23B in aggregated acquisitions to each create Vertically Integrated Advertising Stacks.  These stacks link consumers through operating systems and advertising platforms to smart devices.  This means that each one of the big three owns every aspect of a new content supply chain.

Some like Apple, have kept their stack closed.  Microsoft and Google have crafted operating systems that can work on their own devices or on ones from other providers like HTC or Samsung.  Why is this relevant to advertising?

  • In the next 10 years, smart devices will become the gateway to all content – including advertising:  iPad, iPhone, AppleTV, GoogleTV, Motorola, Nexus, WindowsPhone, and Xbox – you get the picture
  • The operating systems are the gateway to the smart devices.  The operating systems themselves will become the content serving mechanisms across devices: iOS, Android and Windows.  Each of the big three already has a dynamic advertising bidding and serving system (marketplace activation system) linked to the operating system
  • UserIDs and email addresses are the access points to the operating systems.  The big three are sitting on massive stores of user data that they have created from your Gmail, LiveID and AppleID accounts.  Your account login is an integrating mechanism for data across every touchpoint that the big three provide

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The Content Cloud.  In the next 10 years, content will untether from its traditional delivery channels.  The HBOGo and WatchESPN tablet applications are early indicators of how content will operate in the future.  They put the programming literally into the hands of the consumers, when they want it and how they want it.

The tablet applications have been designed to work on Android and iOS.  WatchESPN is also now available on Xbox. HBOGo and WatchESPN are currently not available to consumers that don’t have a cable or satellite subscription.  There is considerable consumer backlash to that rule and it won’t be sustainable.  The genie will be let out of the bottle.  Much like Napster gave way to Spotify, so will this model change.

Other content providers like Netflix and YouTube, again from Google, are writing new content rules entirely.  Arrested Development, the ensemble comedy that ran on Fox from 2003-06, is coming back on Netflix for a fourth season.  All 13 episodes will be released simultaneously across any Netflix streaming application.  YouTube is investing in $100M of original programming 2012-13.

All of these initiatives and investments are indicators where content is going in the future.  It will live in a cloud and be consumed on a per use basis.  The content could be paid for in an on-demand model or more likely distribute on an advertising supported model.

In the future-state advertising model, a consumer will call up a piece of content on one of their devices.  The operating system will look across the data points in a consumer’s UserID, this will trigger the marketing activation system to determine how much to bid and what advertising to serve that individual consumer.  Creative assets or experiences will be assembled for the individual and served up affixed to the content.

But I Don’t Want to Be a Robot, Daddy. Working at a future-state agency where the office Lingua Franca involves the use of terms like Content Cloud and Vertically Integrated Advertising Stack sounds dystopian to a lot of people.  Ultimately it is just an evolution of the professional and managed services that we in the agency business have always offered to clients.  The key to your future career is learning how to expand the skillset of your primary discipline around marketing technology.

Survival Guide for Account Management. The key is to become immersed into the various aspects of the tech stack.  There are thousands of marketing technology companies calling on your clients (right now).  Each one has the potential to drive disintermediation between your agency and your client.  Become the trusted and neutral advisor.

Survival Guide for Account Planning. It is probably already in your DNA to adapt.  Your opportunity is to add significant quantitative approaches to your qualitative research techniques.  Data management platforms and CRM systems are your new playground.  Learn how to code your own queries into these systems.

Survival Guide for Media Planning/Buying. Your world is changing fast.  The artificial walls between planning and buying are collapsing and the cycle that you operating on is collapsing.  Your future lies in learning how to target across the different Vertically Integrated Stacks and how to provide value in managing the stacks.  Take a rotation in your agency’s display trading desk.

Survival Guide for Creatives. Your palette is expanding.  The concept of dynamic and multi-stage creative experiences is like a flower blooming.  You are likely already experimenting with concepting and producing on one platform.  Learn how to use the full suite of Adobe creative products and explore how they interact their vertical stack.

Survival Guide for Marketing Technologists. This essay was likely a blinding flash of the obvious to you.  The key to your survival is patience.  Don’t get swallowed up in your own technological exuberance – think longer term about relationships with people not laptops!