Mike is an investor and he wants to buy a portfolio of stocks, but he has a certain way of doing business. He is a Marketing Director; he’s been managing advertising agencies for decades and has grown accustomed to a fixed and predictable method of buying.
Mike goes to his broker, Jason, with $50K and is willing to buy a portfolio of stocks for the right price. He’d like Apple, Google, Shell and a number of other stocks and he’s planning to buy them in a few months. He asks his broker for an average price per stock for three months from now when he plans to purchase. He only cares to know the total number and not the quantity of each individual company’s stock.
Jason insists this is not how the market operates, but Mike is persistent and insists that this is how he operates across all of his business. The broker market is competitive and Jason doesn’t want to lose this client so he does some research. He sees the highs and lows of the stocks. He consults his firm’s top experts. They come up with their best estimate/forecast for when Mike plans to buy.
Knowing the market fluctuates and there are many outside factors, the firm then hedges their position. After all, they are in the business of making money. They increase their best estimate significantly and come back to Mike to set the contract.
Now imagine for the moment that only established trading firms have access to stock prices. When the purchase is made Mike won’t have access to the final price of each stock. It’s not public knowledge.
What I have just described is a metaphor for traditional advertisers forcing dynamic media buys into a static CPM (cost per thousand impressions) pricing model. The exchanges are priced based on live bidding and are dependent on several factors including types of tactics and data on which one bids. This is akin to the mix of stocks in Mike’s portfolio.
A Catch 22; A Conflict of Interest
The Marketing Executive needs to tell his board the guaranteed number of impressions resulting from the advertising investment and deliver at that level or above. “This is the way it has always been done.”
The Agency is charged with an efficient and effective buy. Effectiveness measures can be highly subjective and/or hard to come by so efficiency rules the day. If the agency understands the situation they can act like the broker, hedge their bets and over deliver the buy but they will likely be punished for sandbagging the forecast or, worse, be perceived as incompetent in their specialty. The next year’s goals will surely reflect this perception if the business is retained at all.
The Media Vendor needs to stay in business and they are put in a position where they must forecast and hedge their bets. It is a conflict of interest because the cheaper inventory they buy the more profit they make.
If you’re going to invest in the market and win, find an agency partner that has high levels of expertise and integrity. This is akin to a good broker that can balance your portfolio based on your objectives and, like the stock market, you pay the actual cost of the stocks at the time of your purchase. The right agency can help you navigate the marketplace and make sure you are not setting KPIs that look good on paper but diminish the value of your investment.
The good news is that high accountability of the Digital medium will allow you to prove when your diligence has delivered for your company.
If you want to hear more about how programmatic media can benefit your brand, give us a call at blue onion media team. We’d be happy to have a conversation about strategies, solutions and how we might be able to assist you.