(Originally published in ClickZ, May 2006) by Eric Picard
I’ve been working with emerging media my whole career, since I began working with ad agencies in grad school. I helped them learn how to shift from print to CD-ROM design in the early ’90s. As I started working on the technology side, I learned an immense amount about how to bring a new advertising technology to market — and how not to. So this column will focus on some of the standard mistakes I see when companies in emerging advertising categories try to build their businesses.
Agencies Are Not the Enemy
Advertising technology companies look at the advertising industry value chain and think the best approach to creating value is to cut advertising agencies out of the loop. At the very least, they think they’ll have more success dealing directly an advertiser’s own marketing team. At the other end of that spectrum, they believe they can create corporate value by disenfranchising ad agencies.
But agencies have proven impossible to disintermediate. Advertisers hire an agency because they provide a service that’s very complex to manage in-house. Most companies have a very strong relationship with their agency, so much so that when a CMO or marketing VP switches companies, she typically brings “her” agency along with her.
When an emerging media company approaches a marketer, it’s typically given a meeting. It’s usually sexy stuff, after all. But after the meeting, the marketer invariably tells the company the next step is to meet with his agency.
How much do you want to bet an agency account director or media director who gets a call from a zealous sales rep at an emerging media tech company is happy and excited to work with them — after they find out they’ve been gone around? Agencies feel it’s their job to present new opportunities to the advertiser. They tend to be angered about situations in which they’re not able to do this.
At the same time, agencies are notorious for their slowness to respond to emerging media. I can’t tell you how many times I’ve arrived at an agency for a three-person meeting to show off a hot new technology and 50 people show up. Despite this, you wait months for the first test, then months more before a second test is run. In cases where I’ve seen tech companies count on agencies alone to bring their product to the market, the ramp time is very, very long.
So what to do? Go around agencies and you alienate them. Rely on agencies alone and you have a long ramp time. My goodness — the answer’s so simple, I’m almost embarrassed to tell you.
If you’re an advertising technology startup and you’re debuting a hot new technology that’s supposed to be very effective, you may want to consider doing some trade marketing. Oh, and some PR, too.
Almost all ad technology startups fail to spend any money on advertising at all within their own trade journals. You may also want to do some PR work and perhaps sponsor a (professional-looking) booth at some trade shows.
And you may want to consider hiring a team of agency relations people who speak an agency’s language. Frankly, you’re in serious trouble if you don’t.
Format Differentiation Is Not a Winning Strategy
Let’s look at the rich media ad space for a moment. Every online rich media company started with its own unique ad format. Bluestreak had the expanding ad and video ads. Unicast had the Superstitial, a branded interstitial. Eyeblaster had the floating ad. The Comet Cursor had a customizable cursor.
Are any of those formats still unique to the companies they began with (if they even survived)? Nope. Every single category soon had three other companies offering the same thing. Now that rich media advertising has matured, every one of the companies still standing offers virtually identical ad formats as their competitors. All of them spent years of fruitless labor getting every publisher to accept their unique implementations of a new format.
The same will happen to any company in every new category that tries to differentiate itself by having “such a cool ad format, everyone will want to use it.” The formats may be cool, but unless an advertiser can buy a significant amount of inventory you won’t get any traction.
So it’s another chicken-and-egg problem. How do you achieve adoption across publishers (giving you inventory an agency can buy), while getting agencies to use your company’s stuff? And if you can’t differentiate on format, what should you differentiate on?
Counting Methodology Is Not a Point of Differentiation
Methods of counting impressions in emerging media aren’t a place to compete. Organizations do this work; talk to the Interactive Advertising Bureau (IAB) and the Media Rating Council (MRC). Get involved with your competitors, and don’t believe the way you count an impression is how you can buck the trends.
This will be played out very soon in video-game advertising. Every company in this space counts impressions differently. That doesn’t work, and the IAB and MRC will likely get involved to help sort it out.
Honor the Ecosystem and Honest-to-Goodness Business Sense
Stop trying to disintermediate everyone. If you must fight, pick someone you can beat. Find critical alignment by determining where your value proposition aligns with companies you must work with. If you’re going to battle a category player, learn where the rest of the ecosystem is in turmoil. Solve that problem. Be the pain reliever.
If you require your technology to be adopted across enough publishers to provide access to a critical inventory mass, the publisher has to sell your ads, or at least some of them. If agencies are the ones buying your ads, you may want to make it easy for them. PointRoll did a great job of this by making its ads available from major publishers at no additional costs. There was also a perfect market condition that allowed this to happen. Essentially, the publishers offering this deal held rate cards on their ads at a time when no agency paid anything close to the rate card.
But there are always angles to play.
Businesses succeed not because they have a gimmick or extremely cool technology that doesn’t solve a real business problem. They succeed because they offer real value. Some tips for building that value:
- Find the market’s pain points and build solutions to address them. Don’t assume the pain point is the ad format. That’s a hook, not a winning strategy.
- Look carefully at the ecosystem you work in. Map it out and determine where the power lies. If you can find a point in the value chain that’s ripe for disruption, test your theory. But be sure you can compete with the one you hope to disintermediate.
- Build a very strong client services team. If you don’t provide good customer service and technical support, you may as well forget it. Acquisitions typically have more to do with customer relationships than technology, or at least equal importance.
- Work with competitors in these emerging categories. Your real competition is the absence of your business model in the marketplace. Without one or two strong competitors to help share the burden of building a new market, you’re in more trouble than you realize. Embrace your competitors, and keep them close. They’re more with you than against you.