As the saying goes, “follow the money” and 2013 was no doubt the year of marketing technology investments in both the public and private markets. Investors made huge bets in social media like Facebook and Twitter, marketing automation plays such as Pardot’s acquisition by Exact Target and Exact Target’s follow-on acquisition by Salesforce.com, Eloqua’s acquisition by Oracle, and Marketo’s IPO. Last but not least, on-line ad software and exchanges were represented in the marketing technology IPO frenzy by Rocket Fuel, Tremor, YuMe and Marin.
Furthermore, many of these newbie IPOs leveraged supersized valuations to acquire businesses such as Instagram by Facebook with its 13 employees for $ 1 billion, and Tumblr, boasting $14 million in revenue, by Yahoo for $1.1 billion. Recent reports are that Snapchat has spurned a $3 billion offer from Facebook; this after a paper valuation increase from $70 million to $500 million in the past six months based on a hedge fund investment. Snapchat has more daily photos than Instagram but no demonstrable revenue.
So what does all of this mean for marketers in general and agencies in particular? First, there is a whole lot of marketing technology out there desperately seeking brand and agency buyers to justify the enormous valuations and related go forward revenue projections. However, the demand-side of the equation, namely consumers, presents certain challenges, which do not necessarily align with all of the new functionality as it has been traditionally deployed by marketers.
Consumer Hurdles to Success
There is the current economic environment restraining consumer spending, which is expected to continue through 2014 and beyond. This economic necessity to be selective in purchasing, combined with the huge increase in push messaging experienced daily by the average consumer (the product of the explosion in marketing technology), has caused a seismic shift in the brand/consumer relationship.
No longer will brands be able to create enough demand solely with messaging and creative derived from even the most sophisticated research and analytics technology and pushed to segmented consumer groups. Consumers are individuals, not segmented groups, and will increasingly decide what, how and where they will receive messages. They are doing this now by shunning general television programming for selective programming offered by Hulu and Netflix. Shopping habits are experiencing a sea change with so much research done through search and social media interaction. Finally, consumers are becoming so technologically savvy that they are as adept at manipulating technology to limit their exposure to messaging of no interest as marketers are at pushing the message.
If we accept the premise that the velocity of marketing technology advancement is being matched by the individual consumer’s ability to leverage same to “limit the noise,” then how can marketers and agencies best leverage all of this technology to achieve required ROI? Perhaps the answer can be found in marketers reassessing the purpose and functional use of the ad tech itself.
Finding ROI in Marketing Technology Promises
Recent advances in ad tech are focused on leveraging cookies, IP addresses, overlays of multiple databases, all blended with many variations of “secret sauce” algorithms to push marketers’ messaging to micro targeted audiences. However, the essential learning driving the current content marketing trend is that consumers respond in much more pro-active and ultimately, profitable ways when the message is primarily viewed as being tangibly helpful. Then, and only then, is it associated with a brand, shared and passed around.
Yes, the explosion of marketing technology to target and deliver the message has almost singularly fascinated the media and investment worlds in 2013. However, engaging and interacting with the individual through content of meaning and relevance, not just disguised advertising, will determine the whether the enormous investment has been worth it.
Here is the opportunity for independent direct marketing and advertising agencies in 2014: Those that best approach leveraging technology as a tactical enabler of communicating meaningful content to individuals, not as Al Gadbut, CEO of Acquireweb puts it “spends a lot of money on a technical toy that is bolted on in the hopes that the client will see them as current and relevant,” will be successful.
This is the conundrum for marketers and agencies. Technology has brought the brand close to the individual consumer and the individual consumer close to the brand. The most successful marketers and agencies have always been excellent in communicating one-way with segments of consumers. The challenge now, driven by technology, is how marketers and agencies can evolve their communication skills to engage consumers in a one-to-one relationship. No matter the marketing technology advances or mega-mergers in the ad space like Publicis/Omnicom, communication skills will always be paramount in effective marketing and it is here where the technology promise must pay off no matter the size of investments or resources.
Christian H. Gomez is managing principal with Mtech Advisors.