Brian Lesser, who runs Group M in North America, is a great resource to talk about how the agency business is going to change. He arrived at Group M five years ago when it acquired his firm 24/7 Media, and then got promoted to run Xaxis, the Group M Trading Desk. After he built that to a billion dollar business, he moved on to run all of Group M, which although it has tremendous power, is only thirteen years old itself — a symbol of how quickly the ad industry has already changed with the advent of online advertising.
No wonder traditional industry executives are still pulling their hair out. You can imagine how they must feel when someone like Brian comes in and changes the game, the rules, and the compensation schemes. It’s Lesser’s view that although agencies used to gain leverage from the size of their ad spends, they now will only gain it from the quality of their customer data. That’s why GroupM is changing itself from a holding company that sits on top of a group of agencies to a platform that sits underneath all of them and provides the new infrastructure for leverage — better consumer data.
One of the reasons for this is what we’ve been talking about — the changing definitions of reach and frequency. Nielsen, which measures both digital and TV advertising has discovered that younger people will not accept the same ad load that their elders sat through. Although that’s not surprising, having the data allows both brands and networks to see the magnitude of the change. Younger people been brought up on ad skipping technologies in the TV world, and as they shift to OTT, they do not want to see many ads. Of course many would rather see no ads at all.
Nielsen is trying to develop basic metrics for the OTT industry the way it has for TV. Digital sites have been slow to come on board Nielsen’s measurement system, preferring to claim differentiation based on their internal customer data, but they’ve been forced to allow in third party measurement by advertisers and agencies.
The big question is about how sales outcomes get linked back to advertising spend: to media impressions or any other proxy. Nielsen is trying to find a way to link media buys to sales ROI. Part of that effort involves an investment in Nielsen Catalina, which provides ROI measurement against retail store purchases. An agency that doesn’t have the technology, either internal or through partnerships, to measure real ROI (sales) will quickly lose its ability to get and keep accounts that are becoming more and more sophisticated about how to measure their online advertising efforts.
–For much of the information discussed in this post we are indebted to AdExchanger’s new podcast series AdExchanger Talks, which is excellent. You should be listening to it if you aren’t already.