Interview with: Matt Spiegel
By: Giselle Abramovich
Appeared in DM News
As the big three search engines — Google, MSN and Yahoo — each scoop up digital assets to boost their advertising arsenals, smaller players have followed suit to broaden their market value. And, naturally, everyone speculates on the way it may change online ad transactions.
“These types of mergers and acquisitions are not only reducing the number of vendors necessary for marketers to be effective in their jobs, but they are also validating the need and benefit of vendor expertise across channels,” says Yuchun Lee, co-founder/CEO of marketing management software provider Unica Corp., Waltham, MA. “They are creating a more efficient marketplace. I believe they signal that marketing organizations are now ready to take a truly cross-channel approach to marketing and the customer experience.”
As publishers move across the value chain, interactive agencies will adjust their strategies. Midsize agencies may be impacted and large agencies will be pushed up-market, says Amit Rahav, vice president of marketing at Eyeblaster. He expects small marketers to increase direct publisher spend and midsize and large clients to bring media buying and selling in-house.
The big three bid for dominance
Google announced in April its intent to purchase ad network DoubleClick. Its goal is to add the ability to serve, track and auction online display ads to its already formidable advertising options, creating a massive online marketing service. Yahoo’s Right Media purchase also indicates support for the auction model. The company entered into an agreement May 11 to acquire the remaining 80 percent equity interest in Right Media for $680 million. This purchase will build on its dominance in the graphical ad marketplace.
But, according to Lee, Yahoo seems to be floundering right now. It is behind in such basic areas such as search and media reach. Although it is a strong leader in e-mail, some speculate the company is more likely to be acquired than to acquire.
In fact, in May there was buzz that Microsoft was bidding to purchase Yahoo. Microsoft reportedly requested that Yahoo enter into formal negotiations for an acquisition estimated at $50 billion.
Instead, Microsoft announced its purchase of aQuantive, an Internet-marketing firm whose properties include the Atlas Media Console toolset and interactive ad agency Avenue A/Razorfish. None of the companies concerned returned calls for comment by press time.
Each company is armed with technology platforms designed to automate purchases and placements, removing the human element to a large extent. This automation allows for visibility of the value of ad property available in the marketplace. And with this comes transparency.
“With transparency comes a kind of media democracy,” says Matt Spiegel, managing director at Omnicom’s search firm Resolution Media.
“The rise of auction-based media has made scarce the notion of the volume discounts or preferred pricing, removing concepts like trust from these equations,” he says. “Click rates and performance are blind.”
Sellers make money when buyers’ campaigns perform well. However, as engines and publishers buy agencies, the buyers and sellers are the same.
Now it all comes down to trust, Spiegel points out.
“Some marketers will trust that the publishers will utilize the algorithms to maintain democracy and transparency, while others will fear that human intervention is inevitable — and will proactively pull their business,” he says.
The Google problem
Many industry people are frightened that the Google-DoubleClick deal makes the Internet giant an even more formidable force to reckon with. But is Google too powerful?
Seven days after the Google-DoubleClick agreement was signed, a joint complaint was filed with the Federal Trade Commission questioning the deal’s potential threat to consumer privacy. The Electronic Privacy Information Center, the Center for Digital Democracy and the US Public Interest Research Groups are asking the FTC to stop the merger in order to investigate Google’s data collection and storage practices.
The filing requests DoubleClick to sweep out its data storehouse and requires the search giant to offer a public plan for safeguarding consumer privacy.
A consortium of European consumer-advocacy organizations have also written a letter to the European commission (see story on DMNews.com).
Spiegel says as long as Google stays true to its mission statement and continues to create win-win opportunities for end users, marketers and publishers, there is no cause for alarm.
“[It won’t be too powerful] if it lets the algorithms continue to define its business and there is no preferential treatment for, say, [DoubleClick subsidiary] Performics clients’ campaigns,” Spiegel says.
Google has said in statements that this will remain its model.
Other industry experts also expect Google to remain up front.
“Google is by and large focused on solutions for online marketing and media,” Lee says. “With online spend equaling only a small fraction of the total marketing spend, I would have to say that Google is not too powerful in the realm of cross-channel marketing. In fact, retail spend is twice that of online spend for marketers.”
In answer to whether Google is becoming too powerful, Rahav says: “There’s a chance that Google may commoditize — and thus endanger — the media-planning profession.”
It is no surprise that others in the industry are buying to align themselves as equal players to the giant.
“Almost certainly, there has to have been some ‘keeping up with the street’ in these more recent transactions,” Spiegel says. “We’re pretty excited about them though, especially in terms of what they mean for the growth of our industry. This will be an interesting summer, as all eyes turn to Washington and the hearings that the US Department of Justice has announced they’ll be holding on the GoogleClick acquisition.”
The agency agenda
Search marketing is seeing a flood of ad agencies offering integrated search and display with adequate coverage. But unlike Google, Microsoft and Yahoo, agencies are not technology houses. They rely on technology that is focused on the agency agenda, says Rahav.
Now that DoubleClick and Atlas ad products are owned by content providers, quite a few search marketers are confused and concerned.
“Let’s just say that these new platforms will be agnostic, since the lines between buyer and seller have been increasingly getting blurred in the world of interactive, where both buyers and sellers know a lot and demand to know even more,” Spiegel says. “Now that the owners of these technology platforms have literally billions of dollars to invest in their development, we’re hoping to see continued improvement of these platforms and more attention paid to research and development, whether these companies remain independent or become integrated into the larger entities.”
There are still elements of search that are not understood by providers, Lee says.
Search is broken into two parts: paid and organic. The missing element is the estimation of these methods to generate a lead and how much a keyword should cost.
“For example, if a company can afford to pay $10 for a keyword, while another can only pay $2, the first is bound to be more successful in its search position because of the structure of the search industry and the varying costs per word,” Mr. Lee says. “I’m simplifying the model, of course, since in reality there’s room for, say, five companies to occupy the right-hand panel of search engines for bid keywords, but the general principle I am trying to illustrate is the fact that the first order decision a marketer needs to make is, how much can I afford to pay for a keyword?”
This, however, is not going to be solved by the M&A activity.
While mergers and acquisitions are making the industry more efficient, says Lee, the industry is in the early stages of marketing and it may become more fragmented over the long term.
“Marketers now have to define how they see the market evolving, how they can be indispensable to their clients and how their decisions lead them in that direction,” Rahav says. “As an industry, we’ll see more search and display integration, more media options and ultimately, more business across the board.
“There are two sets of dynamics,” he continues. “On one level, it’s publisher versus publisher, locked in a digital arms race. On a greater, more significant scale, it is about the media seller getting a bigger piece of the pie compared to media buyers — they’re trying to buy the value chain.”
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