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Turning COGS
Thursday, 9th June 2011
Anthony Rhind
Business   environment ischallenging
       ... heightened by economic crisis

                  Ultra Competition
                       In a world of cheap interaction, entry
                        barriers are few & firms must compete
                        with a larger set of global rivals

                  Uncertainty
                       Difficult to predict market change;
                        where tomorrow’s consumer,
                        competitor or category innovation will
                        come from

                  Complexity
                       When interaction with everyone in
                        real-time is possible, decision-making
                        becomes significantly more complex

                  Fragility
                       Interaction shifts the balance of power
                        away from firms, to consumers,
                        governments & other stakeholders
Crisis has created a challenging
       advertising environment
... but a   digital opportunity
Certainly consumer                  „connection‟
                                                                  is extending very         rapidly
                                                                     Smartphones WW
2 billion internet               4.6 billion active                Symbian 36.6 (44.6)         500+ million
users worldwide                   mobile „phones                    Android 25.5 (3.5)       active Facebook
   (Internet World Stats)           worldwide                       iPhone 16.7 (17.1)       users worldwide
                               (UN Telecommunications Agency)
                                                                                                 (Facebook)
                                                                  Blackberry 14.8 (20.7)
                                                                       (Gartner Q3 2010)




                                  1 million Kinect units
517 million digital
                                   sold first 10 days. 5                7.5 million iPads
 TV households
 (Informa Telecoms & Media)        million expected by                  sold in 6 months
                                        Christmas                                 (Apple)
                                             (Microsoft)




 4 million Foursquare                      190 million Twitter
   registered users                         registered users
                                                      (Twitter)
             (Twitter)




 72% of teens have                     62% of European
become a brand "fan"                    shoppers consult
or "friend“ on a social               online forums before
        network                              buying
... &   capital stakeholders are confident




                                                    $9 billion cap
             $8.5 billion                          Trading $95 vs.
            10.5x revenue                           $45 IPO price




                 $575 million                  €750 million reported
                 2.6x revenue                    acquisition fund



6/16/2011 :: 7
So digital inherits the
           (advertising) earth ... ?



6/16/2011 :: 8
Something isn‟t working ...
Supply & demand            market disconnect




        Source: Cisco Visual Networking Index: 2009–
        2014
Audience is        over supplied
                            & growth areas under valued
        ...




Fixed cost entertainment




                                             Driven by social




 Growth in low cost
advertising markets                   Impactful, innovative, mobile ...
                                          hard to measure ROI
Familiar trading paradigm?
„Price‟ & „value‟ not the same ...
           but price is an optimisation lever




Auditing is a fact of life ...
               it‟s scope will increase
Digital content value
                                                       destruction ...
                                                        „publisher‟ &
                                                      „media agency‟
                                                     business model
Source: Cisco Visual Networking Index: 2009–2014
                                                           stress


                6/16/2011 :: 14
Digital   „tonnage‟ ...
                   advertising   commoditisation


  Cluttered consumer experience
Advertising poor, generic, annoying
Digital   „tonnage‟ ...
                     advertising   commoditisation

      Cluttered consumer experience
    Advertising poor, generic, annoying

  Low publisher sell-through / yield
  Stressed content business model
Agency margin stressed by commission
model, complexity & operational scale
Digital   „tonnage‟ ...
                     advertising   commoditisation

       Cluttered consumer experience
     Advertising poor, generic, annoying

     Low publisher sell-through / yield
      Stressed content business model
Agency margin stressed by commission model,
       complexity & operational scale

   Advertisers perceive digital as low
                       value
...must ad(d) value




6/16/2011 :: 18
Less inventory is a requirement ...
                         scarcity & certainty drive value




            Better consumer experience ...
                    Better advertiser experience …
6/16/2011 :: 19          Better publisher margin
“The next phase of media will be after the
         page & after the site. Media can‟t expect
         us to go to it all the time. Media must
           insinuate itself into our steams.”
                                      Jeff Jarvis




6/16/2011 :: 20
“1 billion impressions, 0.5% CTR”
                        ...   mustn‟t forget they are   PEOPLE !!!


  1963
  The consumer isn't a moron;
  she is your wife.
  You insult her intelligence if
  you assume that a mere slogan
  & a few vapid adjectives will
  persuade her to buy anything.
  She wants all the information
  you can give her.



6/16/2011 :: 21
Reflect person‟s  many selves ...
             reflect person‟s inter-related devices




            CUSTOMER
                                  USER



                                             CONSUMER




PRODUCER                 PERSON




           PARTICIPANT                   COMMUNITY



Content & advertising ...
     authorised, user generated ...
                  peer to peer conversations
Touchpoints   paid, owned, earned
                     & outcomes talk, think, trust


    I talk           WE talk           THEY talk




  TALK             THINK              TRUST



               What the consumer      What others
  What the
                 experiences         say about the
company says       (interactions &
                   conversations)      company


                 thebrand.com                        23
Execution
                  must better exploit:
                       technology,
                          data,
                       automation,
        programmatic - segmentation,
                       trading,
                      & „experience‟

6/16/2011 :: 24
Hype, hype, hype, hype,   hype,   hype




                                    Believe it!
6/16/2011 :: 25
Today is only the dawn ...



                        Adoption
                       inevitable,
                      opportunity
                       significant
                     ... move first!




6/16/2011 :: 26
Privacy no longer a “social norm”*




                          User level real-time data must enrich
                          digital planning & buying & creative


    6/16/2011 :: 27
* Crunchie Awards: January 2010
Live „listening‟ to design
            contact strategies is critical
New planning tools to balance
                         all touchpoints locally ... globally




6/16/2011 :: 29
Real-time                    execution based on
                                                                             integrated     consumer data-sets
                   Planning                                                    User-based                Tailored Data
                   Guidance                                                    Optimization              Management

Display Campaign Benchmarks by Client Industry, CTR (Left) and CPC (Right)
Timeframe: January-December 2007




• Pricing benchmarks                                                         • Cross-channel digital   • Integration of sales &
• Reach & frequency                                                            reach & frequency         engagement activity
  estimates                                                                  • Display influence on    • Tailored KPIs
• Daypart synergy with                                                         search activity         • Customized dashboard
  offline                                                                    • Keyword attribution        reporting
                                                                               and learning model
Impression level „audience‟ & „domain‟
                        optimised programmatic buying




6/16/2011 :: 31
Clashing cultures:
                  Creativity & intuition vs. technology & mathematics




       “Philosophy is dead.                 “Dangerous primacy of
      Philosophers have not                   mathematics over
       kept up with modern                      psychology ...
         developments in                    in business thinking &
             science.”                         decision making”

6/16/2011 :: 32
Digital marketing must balance
                               „art‟ & „science‟

            ... whilst also enforcing RESPONSIBLY




6/16/2011 :: 33
“Re-tooling talent”




All levels & disciplines, especially management

6/16/2011 :: 34
Radical reinvention
                           doesn‟t happen overnight




6/16/2011 :: 35    130 years ... unfinished
Thank you!
                  Obrigado!
                  Gracias!
                  Merci!
                  Grazie!
                  Arigatô!
                  Vielen Dank!
                  Terima Kasih!
                  谢谢您!




6/16/2011 :: 36

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Day2 1715 turning_cogs_havas_digital

  • 1. Turning COGS Thursday, 9th June 2011 Anthony Rhind
  • 2. Business environment ischallenging ... heightened by economic crisis  Ultra Competition  In a world of cheap interaction, entry barriers are few & firms must compete with a larger set of global rivals  Uncertainty  Difficult to predict market change; where tomorrow’s consumer, competitor or category innovation will come from  Complexity  When interaction with everyone in real-time is possible, decision-making becomes significantly more complex  Fragility  Interaction shifts the balance of power away from firms, to consumers, governments & other stakeholders
  • 3. Crisis has created a challenging advertising environment
  • 4. ... but a digital opportunity
  • 5. Certainly consumer „connection‟ is extending very rapidly Smartphones WW 2 billion internet 4.6 billion active Symbian 36.6 (44.6) 500+ million users worldwide mobile „phones Android 25.5 (3.5) active Facebook (Internet World Stats) worldwide iPhone 16.7 (17.1) users worldwide (UN Telecommunications Agency) (Facebook) Blackberry 14.8 (20.7) (Gartner Q3 2010) 1 million Kinect units 517 million digital sold first 10 days. 5 7.5 million iPads TV households (Informa Telecoms & Media) million expected by sold in 6 months Christmas (Apple) (Microsoft) 4 million Foursquare 190 million Twitter registered users registered users (Twitter) (Twitter) 72% of teens have 62% of European become a brand "fan" shoppers consult or "friend“ on a social online forums before network buying
  • 6. ... & capital stakeholders are confident $9 billion cap $8.5 billion Trading $95 vs. 10.5x revenue $45 IPO price $575 million €750 million reported 2.6x revenue acquisition fund 6/16/2011 :: 7
  • 7. So digital inherits the (advertising) earth ... ? 6/16/2011 :: 8
  • 9. Supply & demand market disconnect Source: Cisco Visual Networking Index: 2009– 2014
  • 10. Audience is over supplied & growth areas under valued ... Fixed cost entertainment Driven by social Growth in low cost advertising markets Impactful, innovative, mobile ... hard to measure ROI
  • 12. „Price‟ & „value‟ not the same ... but price is an optimisation lever Auditing is a fact of life ... it‟s scope will increase
  • 13. Digital content value destruction ... „publisher‟ & „media agency‟ business model Source: Cisco Visual Networking Index: 2009–2014 stress 6/16/2011 :: 14
  • 14. Digital „tonnage‟ ... advertising commoditisation Cluttered consumer experience Advertising poor, generic, annoying
  • 15. Digital „tonnage‟ ... advertising commoditisation Cluttered consumer experience Advertising poor, generic, annoying Low publisher sell-through / yield Stressed content business model Agency margin stressed by commission model, complexity & operational scale
  • 16. Digital „tonnage‟ ... advertising commoditisation Cluttered consumer experience Advertising poor, generic, annoying Low publisher sell-through / yield Stressed content business model Agency margin stressed by commission model, complexity & operational scale Advertisers perceive digital as low value
  • 18. Less inventory is a requirement ... scarcity & certainty drive value Better consumer experience ... Better advertiser experience … 6/16/2011 :: 19 Better publisher margin
  • 19. “The next phase of media will be after the page & after the site. Media can‟t expect us to go to it all the time. Media must insinuate itself into our steams.” Jeff Jarvis 6/16/2011 :: 20
  • 20. “1 billion impressions, 0.5% CTR” ... mustn‟t forget they are PEOPLE !!! 1963 The consumer isn't a moron; she is your wife. You insult her intelligence if you assume that a mere slogan & a few vapid adjectives will persuade her to buy anything. She wants all the information you can give her. 6/16/2011 :: 21
  • 21. Reflect person‟s many selves ... reflect person‟s inter-related devices CUSTOMER USER CONSUMER PRODUCER PERSON PARTICIPANT COMMUNITY Content & advertising ... authorised, user generated ... peer to peer conversations
  • 22. Touchpoints paid, owned, earned & outcomes talk, think, trust I talk WE talk THEY talk TALK THINK TRUST What the consumer What others What the experiences say about the company says (interactions & conversations) company thebrand.com 23
  • 23. Execution must better exploit: technology, data, automation, programmatic - segmentation, trading, & „experience‟ 6/16/2011 :: 24
  • 24. Hype, hype, hype, hype, hype, hype Believe it! 6/16/2011 :: 25
  • 25. Today is only the dawn ... Adoption inevitable, opportunity significant ... move first! 6/16/2011 :: 26
  • 26. Privacy no longer a “social norm”* User level real-time data must enrich digital planning & buying & creative 6/16/2011 :: 27 * Crunchie Awards: January 2010
  • 27. Live „listening‟ to design contact strategies is critical
  • 28. New planning tools to balance all touchpoints locally ... globally 6/16/2011 :: 29
  • 29. Real-time execution based on integrated consumer data-sets Planning User-based Tailored Data Guidance Optimization Management Display Campaign Benchmarks by Client Industry, CTR (Left) and CPC (Right) Timeframe: January-December 2007 • Pricing benchmarks • Cross-channel digital • Integration of sales & • Reach & frequency reach & frequency engagement activity estimates • Display influence on • Tailored KPIs • Daypart synergy with search activity • Customized dashboard offline • Keyword attribution reporting and learning model
  • 30. Impression level „audience‟ & „domain‟ optimised programmatic buying 6/16/2011 :: 31
  • 31. Clashing cultures: Creativity & intuition vs. technology & mathematics “Philosophy is dead. “Dangerous primacy of Philosophers have not mathematics over kept up with modern psychology ... developments in in business thinking & science.” decision making” 6/16/2011 :: 32
  • 32. Digital marketing must balance „art‟ & „science‟ ... whilst also enforcing RESPONSIBLY 6/16/2011 :: 33
  • 33. “Re-tooling talent” All levels & disciplines, especially management 6/16/2011 :: 34
  • 34. Radical reinvention doesn‟t happen overnight 6/16/2011 :: 35 130 years ... unfinished
  • 35. Thank you! Obrigado! Gracias! Merci! Grazie! Arigatô! Vielen Dank! Terima Kasih! 谢谢您! 6/16/2011 :: 36