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Tens of millions and you’re buying off the peg???

By 11 October, 2012
  • Thinking

What gives? The online advertising industry is a worrisome thing in a lot of ways. There are billions of pounds spent in this industry, the top advertisers are spending in the tens of millions every year. Funnily enough though, it’s actually a level playing field. Everyone uses pretty much the same technology, in spite of the money pumped in.

Doesn’t that seem a little strange to you?

While this might sound contrite, but budgets of this size should buy you an unfair advantage surely? Well not really. You might get some tech a little earlier, but that’s about it. If you’re spending big with the big publishers, media agencies and the big technology providers, well you probably get a potential advantage exclusive for a period, but the reality is it doesn’t take long before everyone else is doing it.

To be fair, that’s supply-side capitalism really. Find an advantage, sell that advantage to the highest bidder, then scale as quickly as you can to maximise return. If you don’t, people will copy you and sell it just as fast. It’s the only way to get those R&D budgets to payback. It’s certainly not as scalable than if you were to spend that on the client side yourself. So you can’t blame the process.

If you are a high spending client who feels they should have more of an advantage attached to your spend, then you probably have a case.

What can you do?

The short answer is invest in R&D. Now the initial retort to this would surely be – “We are in marketing, we drive demand. R&D sits in the product team”. Not so any more. Digital Marketing is a technology driven numbers game now. Relying on suppliers may not be the route to take as by definition, you may get an advantage – but it will not be maintained.

So if you have read this far, you might be in agreement that some R&D might be a good idea. Here’s how you can get started.

Let’s talk objectives:

  • In acquisition marketing – your goal may well be to get more efficient sales, or more incremental sales
  • In retention marketing – your goal might be higher ARPU, lower churn or lower cost of servicing customers

What about budget?

How much can you afford in a media or marketing budget? – it’s a big ask a lot of the time to carve money off for stuff that doesn’t drive incremental sales, but lets examine some numbers:

Lets say you are spending £10m per year

5% is £500,000 – good sized budget. You probably wouldn’t want to spend this on your first R&D project

1% is £100,000 – looks reasonable, you could get lots done here

0.5% is £50,000 – still you could achieve a lot here too

Same scenario with a lower budget of £5m per year

5% is £250,000 – good sized budget. You probably wouldn’t want to spend this on your first R&D project

1% is £50,000 – looks reasonable, you could get lots done here

0.5% is £25,000 – still you could achieve a lot here too

In all of these scenarios, you could get something good achieved, that will make a sizable difference to your digital marketing activity.

Where would you spend that money?

The first thing to say is that R&D is not necessarily boffins sat in a room in white lab coats coming up with wild ideas that may or may not be useful in the future. They can be grounded in practical objectives stated above to help you do what you do normally much better.  Here are some examples of what that might be:

1. Rollout stuff better than anyone else

Most roll outs are a mess – in most instances, brands are using no more than 10% of the capabilities of the technologies they are buying. The reason for this is that they are not integrated well into your existing systems.  The best example is an email service provider that isn’t taking live data feeds, or  RTB systems that aren’t integrating live data for better targeting. Getting this right is an R&D project. Most people don’t integrate well, so it requires highly skilled resource to make it work. What you are doing here is integrating multiple technologies together – to allow you to do process better than anyone else.

2. Employ marginal gains theory.

We wrote a full blog post on employing marginal gains theory. But to sum it up in a sentence or two: if you break down everything you could think of that goes into effective digital marketing, and then improved it by 1%, you will get a significant increase when you put them all together. This is then an exercise of listing everything you do as a team, writing down what the ideal is and then setting up a project to improve every element to push toward the ideal. The stuff you never have time doing. This is R&D.

3. Be the best you can be when it comes to data and insight

How frustrated are you with the numbers that you are seeing? Are you getting data at the frequency you want? Do they give you good insight? Why is this? I bet its because of one of these things: data isn’t unified, data isn’t feeding into one spot that is effectively used for dashboard reporting or insight, or the numbers you have simply aren’t being analysed because you are too busy. This is what big data is all about solving – and very much an R&D project. You too can have your own big data project to get your numbers in a row.

These examples are examples of small R&D projects – that make a big difference. In themselves they are innovation – as you are not benefiting from the technologies you are already using. If you get any of the above right (and you can achieve this in the budgets we suggest above) – you will see a difference in your day to day. Only you can get this right on the client side – kick off that project and see the impact. We have seen it work many times over.

Written by Serge Milbank, Stream:20 Co-Founder