Originally Published on LinkedIn:
The convergence of Ad & Marketing Tech is a really hot topic right now. There is absolutely no question that the two formerly distinct and separate technologies are now being merged and the trend is accelerating, quickly. There are two key drivers fueling this merger:
1. Addressable Media Platforms
2. CRM Re-Targeting
What I don’t believe most see is how this transformation is set to literally upend advertising & marketing as we know it. The combination of Ad & Marketing Tech will be the foundation for the largest technological shift in media buying the world has ever seen. Almost certainly larger than the dramatic rise of programmatic media because the Ad/Marketing Tech combination represents the true promise of programmatic; which is to provide both advertisers and marketers the ability to leverage data to target a known audience, evaluate the value of every single impression in real time across any channel or device and then close the attribution loop by measuring the effectiveness of exposure.
In the not too distant past, a company named LiveRamp started doing something that few had ever done before. Help brands leverage their email data to target known customers in display media. And while it has never been a secret that a brands email database is its most valuable digital asset, the challenge of course is that no one gets a 100% open rate. Which means a large portion of your most valuable customers are not exposed to your messaging…kind of a bummer when email delivers the highest ROI of any marketing channel. Then along comes LiveRamp, who provided a way for brands to reach more of their email database without sending any email, a dream come true! This was just the beginning…Facebook created Custom Audience, Twitter launched Tailored Audiences,LiveIntent rolled out LiveAudience and the Ad Tech world suddenly had scaled, addressable media platforms allowing brands to reach more of their most valuable customers. These new platforms set off a chain off events that is currently transforming the entire media landscape.
If you look close enough, the writing is on the wall…Facebook re-launching Atlas was a huge step towards an addressable future. However Atlas by Facebook is just a reporting solution today… The true power of addressable audience buying will be unleashed if Facebook releases its rumored DSP. With Verizon buying AOL and it’s entire programmatic tech stack, they will no doubt couple that with Verizon’s addressable audience of over 100MM customers and last but certainly not least,Google has ambitions of using the email address to better target search ads. Of all the technology developments, Google potentially using email data for targeting is by far and away the most interesting. Why? Because the rise of addressable media platforms and CRM Re-Targeting represent a real threat to Google’s core search business. Allow me to explain…
With a market cap of nearly $370B, Google represents the most effective advertising platform the world has ever seen. From an effectiveness standpoint there are two core digital marketing pillars that have remained untouched for at least the past decade – Search & Email. Both are effective because they leverage intent, search intent is fairly straightforward as people typically ask Google for what they want and email intent data is based on what you actually did, such as that bag of rubber hammers you purchased. The challenge for most brands today is their ability to rank for non-branded keywords that are impactful to their business. Let’s use travel as a benchmark, here I searched “NYC to Hawaii Flight”:
A few things to notice right off the bat…there are Paid Listings of course. Hawaiian Airlines & Virgin America take the top 2 ad positions and then there are Organic Results as well showing (in order) KAYAK, Hawaiian Airlines, Expedia, CheapFlights, TripAdvisor. 4 out of the top 5 results are distribution platforms that get paid for selling a ticket or a lead to an airline brand. See where this is going…? Google shows me that there are about 6MM monthly search for this phrase and suggests a bid of $1.70. So if you are United and one of your existing customers decides to use Google to search flights, you may end up having to pay Google or some other distribution platform for your own customer or at least a customer you may have previously transacted with. Also worth noting that Google has paid results on the page as well:
In a world where scaled platforms dominate, Google is the ultimate example of using their massive scale to monetize traffic. The recently announced “Buy Button” is another great example of how a platform can use its influence and scale to collect more data and potentially disintermediate the relationship between brands and their customers. While everyone is familiar with the so called Ad Tech Tax, where the majority of digital media dollars are spent on technology, not many focus on the “platform tax” that companies like Google, Amazon etc…are able to extract due to their incredible scale and financial resources.
Branded keywords are a perfect example of how brands pay Google a platform tax. Let’s use Nike for example:
Now whoever is running Nike’s search program is obviously smart because search is similar to real estate, it’s all about location and the 1st page is Malibu beachfront property, the more you own the better off you are. According to Google, there are 30MM+ searches/month done with Nike in the query and at an estimated $.5-.10 CPC, buying “Nike” could potentially cost $500,000+ annually (assuming a 2% CTR) for just branded keywords! These are more than likely people who are already familiar with Nike and potentially even existing customers.
This is not just a Nike or United problem; this is an everyone problem. Which is why more and more brands are trying to own a direct connection to their customer base. With the core focus being on collecting a customers email address. The key challenge that brands struggle with in terms of email marketing, are open rates:
According to the Silverpop study posted above, the average email open rate is somewhere between 15-20%. Which means that on average 80% of your best customers are NOT seeing your message. This is a huge problem that Google and others have capitalized on for a very long time whereby brands are using SEM and other lead gen platforms to re-acquire their own customers. This cycle of course leads to increased costs, lower margins and less brand loyalty. Basically, it’s a huge issue.
The Verizon/AOL deal was all the confirmation that I needed that this vision of the future of Ad & Marketing Tech is becoming reality. This trend should be concerning to Google because if more brands have access to more of their own customers, they can in theory bypass Google & other distribution platforms by connecting with their customers directly. Platforms like Google still represent an extremely valuable way to target and generate new customers. But the ability to increase reach & frequency with existing customers provides brands a way to avoid paying to re-acquire their own customers.