Criteria for Advertising Business Management. Powering the Digital Value Chain of Today and Tomorrow

Transcription

1 Criteria for Advertising Business Management Powering the Digital Value Chain of Today and Tomorrow White paper February 2011

2 TABLE OF CONTENTS EXECUTIVE SUMMARY 3 THE CHALLENGE 4 THE ROLE OF ADVERTISING BUSINESS MANAGEMENT 8 INTRODUCING OPERATIVE.ONE 11 CUSTOMER SPOTLIGHT 12 CRITERIA FOR ADVERTISING BUSINESS MANAGEMENT 13 CONCLUSION 15 REFERENCES 16 2

3 EXECUTIVE SUMMARY Remember when marketers contracted with agencies to create their campaigns and agencies worked with publishers on their behalf? When display banner ads reigned, targeting was limited, success was measured by impressions and click-throughs, and one ad server was all that was needed to run a profitable ad business? Since then, a renaissance of innovation across the digital value chain has transformed the way consumers experience advertising and reshaped the traditional relationship between advertisers, agencies and media companies. Advertisers are negotiating directly with publishers, agencies are expanding their services portfolios by acquiring boutique shops, and publishers are trending towards network-like models by signing deals with affiliate partners. For media companies, innovation has provided unique opportunities to understand audiences at a more granular level, offer premium custom solutions and explore new revenue opportunities with emerging partners. But there is another side to the innovation coin which to date, has hindered this industry s ability to prove its true potential as an effective advertising medium. That is, fragmentation. Frequently described as the wild west, the fragmented ecosystem has spawned major operational complexities decentralized data, disconnected processes, lack of business transparency and workflow inefficiencies. In today s rapidly evolving industry, media companies cannot survive if they cannot bring it all together. Fortunately, more mature industries had experienced these same challenges during their evolution and identified that what they were facing represented classic supply chain management problems. 1 To move forward, they quickly learned that in order to effectively scale, an end-to-end business platform was needed to connect all the disparate data, processes and systems. Our industry is at the evolutionary threshold where the old ways of doing business are no longer sustainable for profitable growth. Media companies will not succeed if they cannot bring it all together and reduce the complexities of doing business. This paper examines the challenges faced by media companies in today s environment, the role Advertising Business Management plays in today and tomorrow s digital value chain, and requirements for ensuring success. 3

4 THE CHALLENGE Innovation + Fragmentation = Complexity Because of the Internet s low barriers to entry, technology solutions have quickly proliferated across the digital advertising value chain over the last fifteen years. On top of the internal business systems used to run a digital advertising operation, such as CRM, analytics tools and financial applications, today s landscape exposes a rich, dynamic ecosystem of demand-side and supply-side solutions. 2 On the demand side, agencies, ad networks, exchanges, demand-side platforms (DSPs) and data brokers are just a few examples of solutions aiming to maximize each interactive marketing dollar. On the supply side, ad servers (display, mobile, and video), thirdparty data providers and targeted audience solutions enable media companies to exploit the benefits of crossplatform campaigns. Figure 1. Digital advertising solutions have proliferated into a fragmented, complex marketplace, challenging a media company s ability to fully capitalize on interactive opportunities. 4

5 CRITERIA FOR ADVERTISING BUSINESS MANAGEMENT THE CHALLENGE Undoubtedly, the interplay of these demand and supply side solutions across the digital value chain, present advertising opportunities that are unique to the digital space. The current reality, however, falls short of this potential. Why? Innovation has driven a fragmented marketplace of non-standardized data, disconnected systems and non-integrated processes. According to Steve Sullivan, the Interactive Advertising Bureau s (IAB) VP of Digital Supply Chain Solutions, digital innovation is not slowing down any time soon What we re experiencing is an increase in speed and an increase in complexity, where things are going faster, faster, and faster. 3 For many media companies, this uncontrolled fragmentation has significantly impeded their ability to fully capitalize on online advertising s potential. Offering mass customization represents just one area publishers struggle with as a result of the industry s increasing complexities. Providing Mass Customization in a Fragmented Ecosystem As Booz & Company Partner Christopher Vollmer points out in his Digital Darwinism report, digital media companies have numerous points of contact with their readers, which enable them to slice and dice their audiences, better match ads to consumer segments, thereby increasing the marketer s efficiency and effectiveness. 4 This ability to provide audiences on a more granular level uniquely differentiates digital from traditional media; however, fragmentation has created a challenging environment for media companies to deliver targeted audiences and for advertisers to harness optimal marketing effectiveness. Unlike traditional media, digital advertising products are dynamic in nature. This stems from the fact that their components are a constantly changing mix of technologies which media companies adopt in Figure 2. As media companies struggle with the complexities of the new ecosystem, many are looking towards updating their supply chain capabilities to address the relatively high costs of executing digital campaigns. Booz & Company, Digital Darwinism

6 CRITERIA FOR ADVERTISING BUSINESS MANAGEMENT THE CHALLENGE order to provide targeted advertising solutions. One day, a banner can represent a consumer segment sourced from a data provider; the next day, it can represent an audience that was aggregated from an ad network. In a rapidly evolving marketplace where fragmentation only continues to accelerate, it is easy to see how mass customization becomes extremely difficult for media companies to achieve. Questions such as: How do I accurately forecast what I have to sell by audience segment?, How do I give reliable access to this information? and How do I effectively operationalize mass customization across all the systems we use?, raise critical business issues. Media Company Combines Multiple Ad Divisions to Streamline Operations: Condé Nast Without the right business infrastructure to integrate processes, centralize data and connect critical functions across the demand and supply sides of the ecosystem, running a digital advertising business suddenly becomes costly. As reflected in Figure 2, media companies view transaction costs as relatively high in comparison to traditional advertising mediums resources spend extensive manual effort supporting campaigns in multiple systems, operating in silos and pulling relevant performance metrics. As a result, media companies have begun to rethink their supply chain capabilities as a solution for managing high transaction costs. Scaling to Meet the Needs of the Future Cross-Platform and Cross-Media Convergence A recent survey by DM2PRO.com revealed that greater than half of all campaigns for the top ten percent of publishers are crossplatform (include mobile, video, and display components in a single order), and 60 percent of publishers plan to sell cross-platform campaigns in the next 6-12 months.5 In the near future, a sales proposal will also begin to include more traditional channels such as print, radio and TV. Today, many digital publishers are re-thinking how to organize their multiple advertising divisions to facilitate a smoother, integrated buying experience. Recently, Condé Nast reorganized its overall digital operation, fusing Condé Nast Digital sales and marketing team with the Condé Nast Media group, forming one multi-platform and multibrand unit.(3) According to Drew Schutte, Condé Nast Digital s Senior Vice President and Chief Revenue Officer, the new structure not only allows seamless coordination with print sellers to meet the increased demand for cross selling, it ultimately improves the company s speed to market. 6 Condé Nast is just one example of how media companies are fundamentally changing their business models to meet increasing brand demands for an integrated experience. For companies like Condé Nast, separating the business from the production layer will be a critical driver to operational success. The convergence of platforms and media channels will require an 6

7 CRITERIA FOR ADVERTISING BUSINESS MANAGEMENT THE CHALLENGE enormous amount of operational harmonization for media companies to effectively scale. Without the right infrastructure to manage this convergence, systems will continue to operate in a fragmented manner, causing disconnected people, data and processes. The Extending Enterprise In addition to marketplace convergence, media companies are exploring new types of partnerships with premium content providers to meet advertiser demand. Extending the enterprise to affiliate partners presents a new set of operational considerations managing partners, providing partners transparency into performance and managing revenue payouts. Without the infrastructure to manage all of the data and processes required to support these new partnerships, media companies will not be able to profitably scale. Put simply, a company s opportunity to create, sell and use advertising effectively and profitably will depend on its ability to deliver it seamlessly. 9 - Randall Rothenberg, Former President and CEO of the Interactive Advertising Bureau Separating the Business from the Production Layer To execute a buy today, our industry operates within the production layer, where all the different technologies used to execute a buy, such as ad servers and third-party data providers, function. This way of operating inevitably presents serious challenges for any media company focused on adapting their business to accommodate innovation, and cross-platform and cross-media convergence. In countless other industries, such as automobile, airline and retail, companies initially struggled with similar challenges, unearthing the need to operate at a level above the production layer the business layer. Enterprise systems provided the infrastructure needed to connect and streamline all processes and systems, creating significant efficiencies and shifting focus back to the customer. 7, 8 Digital advertising similarly needs to learn how to move out of the production layer and focus on integrating 7

8 THE ROLE OF ADVERTISING BUSINESS MANAGEMENT all the components of the value chain into a streamlined business layer. By doing so, media companies can continue to innovate without disrupting the business. The marketplace of digital technologies has become a thick, seemingly impossible-to-navigate jungle of advertising solutions. As fragmented growth will continue to accelerate, media companies need to prepare themselves for future realities. They can no longer adopt new technologies at the pace of innovation, scale their organizations or sustain maximum performance if they are ill-equipped to deliver a seamless customer of Advertising Business Management provides the business layer media companies need to constantly innovate without experience. The good news these challenges represent classic supply chain management problems which have been solved before in more mature industries. In the next section, learn how an end-to-end platform can help alleviate media companies operational complexities so that they can run scalable and profitable digital advertising businesses. Providing a Business Layer That Brings it All Together Uncontrolled adoption of new technologies and fragmented business processes are no longer sustainable. The complexity the ever-evolving digital landscape demands a new model for media companies and their partners to manage the business of advertising. This model should not only enable open integration across any partner of choice without disrupting every day business, but also bring together all data and processes and provide end-to-end business transparency. Built upon classic supply chain management principles, Advertising Business Management addresses the new set of requirements needed for media companies to attract a bigger share of marketers budgets. By bringing together demand and supply-side processes and systems into a single business layer for selling, trafficking, managing, optimizing and billing ads, Advertising Business Management provides the platform upon which companies can continue to innovate and scale effectively. The following provides a summary of the widespread impact an Advertising Business Management solution can 8

9 CRITERIA FOR ADVERTISING BUSINESS MANAGEMENT THE ROLE OF ADVERTISING BUSINESS MANAGMENT have throughout a digital media company s organization. Master Inventory While Effectively Reducing Transaction Costs Fragmentation presents serious challenges to understanding the nature and quantity of a media company s inventory across its various audience segments. By hooking into all relevant systems and integrating critical pieces of targeting data, an Advertising Business Management solution effectively solves the challenges companies face accessing accurate, real-time, multidimensional inventory. By providing an interface that makes the exchange between buyers and sellers easier, utilizing Advertising Business Management has the added benefit of reducing transaction costs. Capturing Revenue Opportunities at the Speed of Digital As the market for digital advertising solutions grows and cross-media and cross-platform convergence becomes a reality, media companies more than ever need better visibility into their product offerings and an easier way to do business with clients. Today, however, media companies struggle with inefficient sales processes as people continue to operate in silos and the systems they use remain disconnected. For Sales, this leads to an increase in time spent gathering information for proposals, validating information and manually re-entering data across multiple systems. As a result, Sales executives spend more time in front of their computers than with clients. Advertising Business Management provides Sales with the increased transparency and efficiencies to close deals faster and focus more on prospecting and building deeper client relationships. Execute Campaigns More Effectively At the heart of operationalizing revenue opportunities, Ad Operations can play a vital role driving transactional costs down through automation and maximizing revenue collected through proactive campaign management. With many media companies, however, Ad Operations is not set up to successfully deliver their full potential. A disconnect resides between people, processes and systems, perpetuating a lack of transparency across the organization, manual data re-entry in multiple systems and often times, reactive campaign management. As a result, the cost to run a digital campaign appears relatively high in comparison to more traditional advertising channels more time is spent gathering and validating data than delivering quality customer service. Advertising Business Management addresses these inefficiencies by significantly streamlining the majority of trafficking and data reconciliation activities. As a result, Ad Operations can focus more on proactively managing 9

10 CRITERIA FOR ADVERTISING BUSINESS MANAGEMENT THE ROLE OF ADVERTISING BUSINESS MANAGMENT campaigns and serving clients business needs. Improving Cash Flow With Streamlined Billing Processes Media companies continually aim to improve the speed and accuracy at which they close the books. The faster Finance can get accurate invoices out the door, the quicker the organization can move towards healthier cash flow. In today s environment, however, media companies struggle with long, arduous billing processes. The seemingly unlimited number of advertising solutions in a company s product catalog and variety of invoicing requirements presents many billing challenges. Furthermore, non-standardized delivery data may reside in multiple systems. This lack of standardization frequently causes discrepancies, so make goods have become the rising star for resolving these billing issues. Ultimately, the disparate and discrepant data hamper Finance s ability to effectively close the books, as manual, time-consuming processes are required to gather, validate and reconcile delivery data. Advertising Business Management accelerates financial close by connecting all the necessary people, processes and data needed to support billing. 10

11 INTRODUCING OPERATIVE.ONE Operative.One Key Benefits The Advertising Management Solution That Brings it All Together Built upon more than 10 years of experience serving the online advertising industry, Operative.One is the first end-to-end Advertising Business Management solution that frees media companies from the operational complexities of running a digital advertising business. Operative.One provides the business layer media companies need to operate effectively, connecting all demand and supply-side processes and systems required to package, sell, traffic, manage, optimize and bill advertising solutions. By integrating data, streamlining processes and providing end-to-end transparency, the platform fuels performance and the agility to adapt to marketers increasingly custom needs. More critically, as digital innovation accelerates, and cross-media and cross-platform solutions converge, Operative.One empowers media companies to continue innovating without disrupting the business. For Product Marketers Reduce unsold inventory by 5+% Boost CPMs by 7-10% For Ad Sales Reduce RFP response time by two-thirds More time to prospect and handle greater RFP volumes For Ad Operations Reduce campaign execution costs by 30% Minimize over and under delivery, reducing revenue losses by half For Finance Collect 100% of contracted revenue in less time Reduce campaign billing costs by half Figure 3. Operative.One brings together media companies demand and supply-side processes and systems necessary to package, sell, traffic, manage, optimize and collect revenue on advertising products. As a SaaS-based application, it is a fully customizable platform that provides enterprise-level security and flexible integration through open APIs. 11

12 CUSTOMER SPOTLIGHT Leading Digital Radio Provider In 2010, this eleven-year-old internet radio company became focused on delivering advertising beyond the personal computer to cars, mobile phones, TVs and other devices. In order to effectively execute new channel strategies, the company (again) turned to Operative to manage its expanding digital supply chain. Already experiencing significant operational efficiencies with Operative Dashboard, they saw even greater benefits in Operative.One s ability to flexibly integrate with any emerging partner. Upon upgrading to Operative.One, the company has the freedom to explore cross-platform innovation without disrupting the business. By providing the ability to respond to multi-channel proposals, execute integrated campaigns, and bill orders sourced in several platforms, the solution enables the company to continue running a scalable, profitable business. Leading Provider of Targeted Media Programs In order to scale its publisher network business, this company looked to Operative.One to improve cost control and maximize investment in several disparate systems. Sellers had been using a combination of different platforms one for revenue, another for inventory, and then spreadsheets for forecasting. The lack of visibility into the critical information needed to target non-traditional audiences made it difficult to introduce new partners into the selling process and continue to grow their network. Operative.One was selected to ensure efficiencies were built, while controlling costs. The solution has proven to streamline workflows while dramatically decreasing the margin of error and eliminating the need for multiple touch points. Leading Celebrity Journalism and Health & Fitness Magazines Publisher This leading publisher of celebrity journalism, and health and fitness magazines in the U.S. wanted to become more strategic and proactive in their product and sales approach. Digital innovation has created many new opportunities for publishers to package and sell inventory, cross-platform, e.g., mobile, video, display, on the same IO. However, this particular publisher knew that without the proper foundational layer in place that would give them the ability to access data, in real-time and through one central repository, they would be unable to capitalize on these new revenue opportunities. They also needed a solution that would allow them to streamline inefficient systems and processes, so their sales team could move just as fast as the digital era. Operative.One was selected as the ideal solution to help the company gain the visibility and transparency necessary to maximize new business opportunities. Operative.One is also enabling them to obtain significant cost savings by streamlining operational processes and systems across the organization. 12

13 CRITERIA FOR ADVERTISING BUSINESS MANAGEMENT Below is a starting point for digital advertising executives to ask of any provider of Advertising Business Management Solutions under consideration. The goal is to ensure the vendor is capable of meeting critical Advertising Business Management criteria, and thereby deliver on its true value proposition: Freedom from complexity. Measurable ROI How does the vendor report and measure on savings and revenue contribution? In our view, this cannot clearly be identified without measuring: Key Criteria for Advertising Business Management 1. Measurable ROI 2. End-to-End Visibility 3. Empowering Innovation 4. Flexible, Open Platform 5. Deep Domain Expertise Sales efficiency: What capabilities drive measurable reductions in RFP response time and increased RFP volume? Impact on effective CPM: What capabilities drive revenue contribution through increased ecpm? Unsold and remnant inventory: How does the system minimize unsold and remnant inventory? Advertising Operations efficiency: What capabilities drive measurable reductions in campaign errors and execution time? Impact on over and under campaign delivery: What capabilities minimize revenue cannibalization? Finance efficiency: What capabilities drive measurable reductions in time and cost to close the billing cycle? How does the system drive measurable reductions in time to cash and enable 100 percent collection of contracted revenue? Overall transaction cost reduction: By what percent are costs lowered across inventory? End-to-End Visibility Is the vendor able to connect critical functions, processes and systems into a single platform? Does the vendor provide closed-loop controls, preserving data integrity throughout the digital lifecycle, i.e., from proposal through the billing? 13

14 CRITERIA FOR ADVERTISING BUSINESS MANAGEMENT CRITERIA FOR ADVERTISING BUSINESS MANAGMENT Empowering Innovation Is the platform future-proof in that it will empower scale for tomorrow s cross-media leaders? Can innovation be operationalized in real-time without disruption to the business? How are new partners added? Does the vendor support one view of primary and third-party data? Flexible, Open Enterprise-Level Platform Does the vendor provide its software as a service (SaaS), offering lowest possible deployment, maintenance and overall ownership costs? Is the platform fully and easily extensible through a rich set of APIs? Does the platform support enterprise-level security? Is the platform configurable to your particular business needs? How are new systems integrated? Domain Expertise Does the vendor have deep domain expertise in digital advertising operations? Does the vendor have experience streamlining the science of advertising business management through technology automation, enabling media companies to focus on the art of innovation, relationships, retention and customer satisfaction? Does the vendor offer value-added services to maximize success and ensure flawless campaign execution? 14

15 CONCLUSION The shift in advertising dollars into the online arena presents significant opportunities and has spurred a renaissance of digital innovation. However, fragmentation and complexity have prevented the movement from flourishing. The digital media industry cannot truly thrive until it becomes easier to do business with. How can publishers embrace innovation while operating effectively and profitably? Even more importantly, how can media companies enable clients to focus on what is truly important, marketing effectiveness? During the 1980s, a constantly changing business environment was marked by democratization of intellectual property, as mainframes became displaced by personal computers. In addition, the enterprise was extending due to mergers and acquisitions, globalization and outsourcing. Business was becoming fragmented and extended. In the same decade, large companies figured out how to strike the balance between profitable growth and innovation through adoption of enterprise business software. Business management systems enabled innovation by centralizing and streamlining all primary work processes, integrating all of the necessary internal and external systems and providing greater transparency to the business. Since the enterprise software evolution, you will not find a leader in any industry that has not figured out how to bring together all of their value chain processes and systems. Digital media today is no different and can certainly learn from history. Let s face it it is rare today to find any media business delivering customer value with only the people and products sitting inside its walls. An ad product sold today is the result of the coordination of multiple ad servers, third-party data, targeting systems and creative tools. Add print and mobile, and you ve got yourself a true supply chain problem. In order for media companies to grow profitably, they need an Advertising Business Management system that operationalizes innovation as it happens, without disruption to everyday business. Additionally, by connecting disparate production systems, companies can focus on customers, products and the business of advertising. Operative.One is the first Advertising Business Management solution to respond to today s dynamic needs, by joining the demand and supply sides of the advertising ecosystem. The platform provides freedom from the complexities of the digital value chain by integrating all processes and systems necessary to package, sell, traffic, manage, optimize and bill ads. With Operative.One, media companies and their partners enjoy end-toend business transparency, resulting in a boost in operational efficiencies and reduction in overall transaction costs. 15

16 REFERENCES 1. Simchi-Levi, D, Kaminsky, P, & Simchi-Levi, E. (2008). Designing and managing the supply chain. McGraw-Hill College. 2. Digital Advertising Technology Landscape. (2010). Luma Partners. 3. Sullivan, S. at Interactive Advertising Bureau. (2010). Ad Operations Summit Speech. 4. Vollmer, C. at Booz & Company. (2010). Digital Darwinism. DarwinismMME2010FinalReport.pdf 5. DM2Pro. (2010). Digital Ad Ops State of the Industry Survey. download 6. Fell, J. (2010). Condé Nast Reorgs Digital Sales and Marketing United States General Accounting Office. (1996). Best Management Practices: Reengingeering the Air Force s Logistics System Can Yield Substantial Savings Matsubara, K, Pourmohammadi, H. (2009). The Automotive Industry Supply Chain: The Evolution Of Quality And Supplier Relationships Rothenberg, R. at Interactive Advertising Bureau. (2010). The ipad s Threat to Advertising. net/iablog/randall-rothenberg/2010/01/ 16

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