Digital advertising spend this year is expected to reach $223 billion, according to eMarketer. That the digital ad market is growing will come as no surprise to anyone working in the sector. Less well understood however is that spending on the technology managing digital advertising and on the wider discipline of digital marketing also shows robust growth.
Gartner’s prediction that CMOs would spend more on technology than CIOs almost came to fruition this year. CMO spending on technology in 2016 was 3.24 per cent of revenue, compared to the CIO’s tech budget of 3.4 per cent of revenue. The 2017 figures are due out soon.
However, while that trend has been well publicised, the shift in relative spend between campaigns and technology is more opaque.
When Chiefmartech released its marketing tech lumascapes earlier this year most of the focus was on the headline number of companies in the ecosystem, which exceeded 5000 for the first time.
But even more interesting (and sadly less discussed) was Scott Brinker’s accompanying commentary.
The ChiefMartech blog revealed that a full third of marketing budgets are now channeled into technology, and of that third 28 per cent is spent on infrastructure.
A key point, Chief Martech Scott Brinker was making is this; “Marketing technology budgets are now surpassing advertising.” That’s right, marketers are moving into a world where they will spend more on technology than they do on campaigns.
But there’s a problem – while many marketers are familiar with the nomenclature of marketing technology – typically built around things like email marketing or website publishing, they are more removed from the technology that manages their advertising.
In a world where consumers and customers expect personalized messaging and offers, and a seamless end to end experience, leaving control of advertising, or worse ownership of the data generated by the advertising with a third party simply won’t wash.
That does not mean brands will cull their agencies, but it does mean that it is beholden upon brands – and CMOs – to understand and own the decision making around advertising technology, even if ultimately they engage an agency to manage the process.
It is these pressures that are now driving the worlds of adtech and marketing technology together.
First a word of caution. In some ways, even the idea of a merger needs to be nuanced. In Which-50’s view (and its a view shared by many in the sector) adtech is actually just a subset of the wider martech discipline and always has been. However, for two decades it developed, you might almost say, inside its own cocoon collecting enough unique qualities that it seemed to emerge as a discrete discipline. Structure informs culture and this structural divide while artificial certainly informed the thinking and approaches of too many marketing departments.
There is no clearly articulated demarcation between the two, historically these were the generally agreed upon distinctions (and yes, none of these can be written in concrete).
1. Ad tech solutions are usually based on pay for performance or cost per thousand models. In other words, the cost driver is the scale or success of the campaign. Marketing technology is priced more on a traditional software model, either by seats or by monthly subscriptions or both. (And yet email, which is typically regarded as marketing tech can often have volume pricing attached).
2. Advertising technology usually uses cookie-based identification, whereas marketing technology is more likely to be based on personally identifiable information. In an integrated stack containing both marketing and advertising technology, it should be easier to link the cookie to the user. It’s the difference between what the industry describes as probabilistic versus deterministic identification. Or put more simply, Adtech knows it’s probably you, marketing technology knows t it is really is definitely you.
3. Being campaign based adtech platforms are mostly built on an assumption of one-to-many campaigning. Marketing Technology provides for one-to-one campaigning.
4. In the past agencies and partners tended to manage adtech while brands typically work directly with marketing technology vendors. Of all the rules, this is the one which is breaking down fastest as brands take more control of adtech, especially with regards to things like programmatic buying and attribution modeling. Just as importantly, the most progressive media agencies are accessing their client’s martech to provide complete customer experience strategy and execution across paid, earned and owned channels.
5. Finally, for the business wonks amongst you, a final distinction relates to how the financial markets price the stocks. It might seem far removed from the decision a marketer needs to make on a platform, but it’s important as it is one more cause of inertia, slowing the merger of the disciplines.
As Which-50 has investigated and reported on the growing merger of adtech and martech it became clear to us than many marketers are still struggling to get a handle on the full picture.
That’s also why we worked with Adobe to create “Bridging the Adtech and Martech Divide” a simple and plain language glossary that explains the key elements of each discipline.
We have also worked with marketers and agency leaders to identify where the knowledge and capabilities gaps exist.
Here’s a simple test get you started. How comfortable are you with your answers these twelve simple questions?
- 1. Do you know all the key technology providers in your marketing and advertising tech stack and the basis on which they are engaged? Do you understand the cost drivers?
- 2. Have you assessed the technology skills gaps in your organisations and do you have visibility over what skills you are likely to need this time next year that you currently do not possess?
- 3. Do you know which agencies are responsible for you adtech solutions?
- 4. Do you know who owns the data if your data is held in a third parties systems?
- 5. How confident are you that when someone arrives on your website you know who they are?
- 6. What other non-marketing systems collect personally identifiable information about your customers and are you able to marry these up to data in your marketing tech stack?
- 7. Do you run programmatic advertising campaigns and who manages the programmatic buying desk, your employees or your agencies?
- 8. How integrated are your teams when they plan campaigns? For instance does your social desk talk to your search desk, and do they know what display campaigns are running in the market at any given time?
- 9. Does your direct marketing team have visibility of search, social and display campaigns?
- 10. Thinking of search, social, display and video do you know how your agency is structured and whether they have an integrated or disjointed approach to managing your campaigns?
- 11. Is responsibility for search, social and display split across agencies?
- 12. How sophisticated is your attribution modeling? Are you still relying on first last clicks and are you able attribute across multiple formats and channels? And perhaps more importantly, how quickly can you respond to the insights derived from your models?
If you can answer yes to most of these questions positively you are doing better than many of your peers.
It is clear that in a marketing landscape where data provides the bedrock upon which customer experience is built, marketers will demand more and more control over the systems that generate, store and analyse that data.
This need will only accelerate the trend towards the merger of marketing an advertising technology.
The decision of major marketing clouds to invest in data management platforms was an important development – and a signal of intent. However, it was Adobe’s acquisition of TubeMogul in 2016 that really put advertising into the heart of one of the big four marketing clouds for the first time.
Which-50 expects we will see many more of these kinds of deals in the coming years. This is a trend that will not be reversed.
by Andrew Birmingham