Madison and Wall: From The Archives

A review of past reports on SVOD services (2019), why ad tech matters to media (2014), agency rebates (2014) and Facebook's SMB opportunity (2013).

I've written thousands of reports and articles for publication in my various roles over the years at Interpublic's Magna Global, Simulmedia, Pivotal Research and GroupM.  As someone who once replaced an individual who started his career in advertising in 1948, I have tremendous appreciation for how a review of historical matters can provide insights on the present and the future.  Consequently, I thought it would be of interest to regularly review some of my own historical documents to potentially find new insights and also to remind myself about how the industry evolved as it did.

So long as there is interest, I’ll rotate some of these documents every month or so on my website’s archive URL https://madisonandwall.com/archive or will link back to another location where that article is hosted, so check back occasionally to see these pieces.

November 2019: “SVOD Services: The Fifth Billion is The Hardest.” In this report from 2019 I looked at the scale of spending on professional video content, estimating around $30 billion on domestic streaming video programming in 2024, which is probably not far from where the various SVOD services are poised to be.   A more important point I emphasized related to the question of whether or not margin erosion would be tolerated.  It turned out it was tolerated until it wasn’t last year, although I think trends will inevitably continue in the prior direction of travel given the competitive nature of the companies involved.  One of the points I raised was also somewhat obvious at the time, I thought, but is also becoming increasingly important.  “For advertisers, some elements of television will worsen because ad inventory is likely scarcer and reach is likely harder to come by. On the other hand, where advertising does exist in this new world – and many streaming services will embrace it – it will likely reach more engaged consumers, in potentially more valuable environments than those which have come before.”

August 2014: “Why Ad Tech Matters to Media.” This was written during a period where there were relatively few publicly listed ad tech companies, so most investors and most large brands weren’t particularly focused on the topic, although many in the agency and publishing worlds were.   I made a number of observations that caught my eye upon recent review, such as the following:

“Marketers who can bring programmatic trading in-house, who can work with a minimum of “premium” content, who can perform regular testing to identify where disproportionately low cost / high value inventory exists AND whose assets (people and data) negate any technology vendor’s advantage over any other technology company may be able to capture more value from their media buying transactions with ad technologies.”  

While I never subscribed to the idea that in-housing would become widespread for all marketers, it was clear that some had ambitions to pursue related initiatives.  I thought that there were some important criteria that would help explain why some were more likely to do so over others, which I think I captured here.  To the extent it would be possible to survey which larger brand-focused marketers perform some or all programmatic advertising in-house, it would be useful to map what the unique characteristics of these advertiser-inventory pairs are now.

“Data drives much of the (buying) decisioning because of this audience-based focus (rather than context), and so the publisher with the most inventory to sell (against which greater volumes of narrowly defined audiences may be found for a given price) and/or the most useful data should win market share. Plus, with so much fragmentation and the absence of scale associated with any one piece of digital media content, it becomes easier to be increasingly indifferent towards which premium content an advertiser or agency might buy even if they still want to buy audience-based content. Overall, given these circumstances, marketers and agencies possess an improved ability to walk away from a negotiation, shifting pricing power (and value extraction) from sellers to buyer. At least this should be true for digital inventory sold on a stand-alone basis and the digital publishers who produce it.” While in traditional media (i.e. television) “So long as most advertisers continue to buy most of the inventory the traditional owners produce on the basis of an adjacency model (the notion that ads are more valuable when they are associated with a media brand, which still holds for most of the traditional media world), media owners can call the shots.”  

Here I was trying to point out that ostensibly premium digital publishers would have a hard time growing on the backs of their content vs. the likes of Facebook and Google, while at the same time noting that it was unlikely traditional TV network owners would go down the same path any time soon.  So long as audiences didn’t erode too much I thought this should be true, although what’s potentially different in the years ahead is that with TV audiences getting smaller and smaller at the individual program level, advertisers are increasingly indifferent regarding which premium TV inventory they buy.   This is what will cause (or is causing more advertisers to focus on audience-based buying on TV, and what will cause more indifference between supply, which in turn drives up the value of data and ad tech in TV buying.  TV network owners can maintain some control (and thus premium pricing) and capture the bulk of value in any transaction so long as there are relatively few sellers of the bulk of inventory.  But if advertisers eventually collectively redefine how they budget for “TV” to include others, such as YouTube and other suppliers of digital video inventory, we could eventually see a value transfer from publishers to platforms and other intermediaries.

July 2014: “Time to Talk Rebates.” This piece was written following a relatively legendary discussion on a stage in Cannes hosted by an executive from The Rubicon Project (now Magnite) with panelists who oversaw agency trading desks or similar units at each of WPP, Publicis, Omnicom and Interpublic and where the topic of agency rebates was raised.   Thanks to AdExchanger, the discussion was all captured here and highlights many of the active debates of the time, which are still instructive today.  Back in 2014 I would argue that most marketers were failing to invest enough effort in understanding how their agencies operated in order to manage highly labor-intensive digital campaigns.  At the same time they were asking for more from them relative to what they were getting paid in many countries around the world. This was not a good place for either marketers or agencies to be in.   While my subsequent work on the topic found that there was relatively little in the way of truly “sketchy” behavior by agencies within the industry, I also pointed out that “the discussion that presumably occurs when an agency-owned entity is transparent about not being transparent sets a better starting point for improving trust in the industry – and minimizing the disintermediation threat – than would otherwise be the case” which I think is what generally happened in following years.    

September 2013: Facebook: More Small Business Optimism.  On many occasions not long after its IPO, I wrote about the small business opportunity in front of Facebook.  At the time, Facebook was both introducing new ad products targeted to small businesses and establishing automated onboarding process for sales, while concurrently having more potential inventory with broader reach than any publisher or platform other than Google.  This seemed like a sure-fire opportunity for growth, which indeed it was over the course of the rest of the decade.  I contrasted this with opportunities from video and mobile advertising, which struck me not as sources of new revenue (TV-based budgets were never likely to flow to Facebook directly unless they invested in TV-like content, while mobile advertising was primarily a shift of where inventory was to be consumed more than a driver of, say, app-install-based advertising budgets).