It's on aaaa.org, the website of the American Association of Advertising Agencies. Look, listen and read about the record-breaking attendance at its recently concluded Media Conference, the first devoted to digital, where the TV lions who have shepherded the industry for decades palpably passed the leadership torch to the next generation of interactive-agency savants.
It's on ana.net, where the Association of National Advertisers is distributing reports in which a score of chief marketing officers declare that the role of the marketing organization has been altered forever. "The world is in the middle of an ongoing conversation," American Express CMO John D. Hayes says in his segment. "A marketer's challenge and job is to enter that conversation. And when you do join in, you had better be prepared to add value. If your attitude is, 'We're going to pound away with this many [gross rating points] talking about our new product,' all you're doing is interrupting the conversation. People don't like that."
And it's on iab.net, where the trade association I lead, the Interactive Advertising Bureau, just disclosed that interactive-advertising revenue reached $21 billion in 2007, surpassing the radio industry and growing at a rate that many observers say will take us past $62 billion by 2011 -- at which point interactive will be the largest advertising segment in the U.S.
Uh-oh. Better stop marveling at all the creative destruction going on around us. It's time to write the constitution that will help us live in peaceful and profitable coexistence.
If 2007 was the year the CMO of every Fortune 1000 company stood up and said, "It finally happened," 2008 needs to be the year that marketers, agencies and media companies come together to surmount the obstacles and realize the prospects that now face us. Although growth is occurring, it will be costly growth unless we collaborate to reduce complexity and target our opportunities.
But the industry hasn't been known for collaboration. Since the recovery from the dot-com collapse, it's been roiled by tensions. Publishers have been battling research suppliers over the transparency of their audience-measurement methodologies. Agencies, publishers and third-party ad-serving companies have been contesting whose impressions-delivery numbers should count as currency. The large online-ad networks are locked in an argument with content providers about whether the aggregators are driving the value of branded media down to commodity levels.
The tensions were perfectly framed by a debate that took place at IAB's recent annual meeting between Wenda Harris Millard and Michael Rubenstein. In a widely blogged comment in her opening address, Ms. Millard, president-media of Martha Stewart Living Omnimedia, told the packed house, "We must not trade our advertising inventory like pork bellies." Noting that the trading mechanism and the value of the traded product are distinct from each other, as they are in the gem exchanges of Antwerp, Mr. Rubenstein, the head of DoubleClick's online-advertising exchange, responded: "We like to think of our publisher impressions as diamonds, not pork bellies."
From 'portals' to 'platforms'
Midway through 2007, I became aware of tonal and contextual changes in the way many corporate leaders in the interactive industry were speaking. Chief executives of several "portals" were rebranding their companies as "platforms." A portal, according to Wikipedia, is "a site that functions as a point of access to information on the worldwide web ... [and] offer[s] other services such as e-mail, news, stock prices, infotainment and various other features."
In other words, portals portrayed themselves to consumers as the only interactive resource they would ever need -- hence their attractiveness to financiers and advertisers in the late 1990s and the fear they struck in the hearts of branded-media incumbents. The widespread belief was that one or two portals would establish themselves as the web's operating systems -- closed structures with enormous influence over consumer and business behaviors.
Platforms appeared to be something different altogether, and in conversations over the course of last year with Yahoo co-founder Jerry Yang and AOL CEO Randy Falco, I heard the language of control being replaced by the language of participation. At the Right Media Open last October, Mr. Yang defined a platform for me as "a business that has a set of standards that allows a set of companies to participate and find benefit from it." He added: "Yahoo will have to embrace openness."
At roughly the same time, Mr. Falco, less than a year into his tenure as chairman-CEO, unveiled what seemed a similar strategy for AOL. "With the increasing fragmentation of online audiences, the best way to serve advertisers is to enable them to harness massive advertising networks that reach across the entire internet, not just our AOL websites," he said. The aggregation of third-party sites and tools and services for advertisers and publishers would become its own business inside AOL, called Platform A.
Netscape founder Marc Andreessen, now running a social-network-facilitation service called Ning, confirmed that the shift from control to openness was more than linguistic. "A 'platform,'" he wrote in a widely circulated blog posting, "is a system that can be programmed and therefore customized by outside developers -- users -- and in that way adapted to countless needs and niches that the platform's original developers could not have possibly contemplated, much less had time to accommodate."
"The key term in the definition of platform is 'programmed,'" he added. "If you can program it, then it's a platform. If you can't, then it's not."
But a lot of the intended beneficiaries simply do not believe the behemoths. In most of my conversations with branded-media providers in our membership, the old fears of portal control are still extant and, if anything, more raw in the dawning era of platforms. Everywhere they turn, media incumbents are seeing threats to their ability to hold audiences or price ads appropriately. Online-ad exchanges are driving their advertising prices down. Widgets on social networks are de-contextualizing their expensively built content. Online networks are delivering ads to tiny sites, many that are built on links to the major media sites whose lunch they're eating. Behavioral-targeting technologies are divorcing ads from context entirely.
Publishers have a legitimate concern about commoditization at the hands of providers of noncontextual-advertising services. Reviewing the expansion of online networks and exchanges -- two major components of the platforms being built by several interactive giants -- Forbes CEO Jim Spanfeller has charged that "the fully executed concept of networks and exchanges is to disassociate content from the advertising.
No sales force
"That's not good for the end user or for the advertiser," he said. Bill Wise, general manager of Yahoo's advertising exchange, responded that exchanges like his provide media like Mr. Spanfeller's an opportunity to sell advertising more efficiently. "There's a lot of inventory that doesn't need a sales force," he said.
I find some of these arguments a-historical. For decades, TV advertising has disassociated advertising from content. Once the quiz-show scandals killed sponsored programming, TV advertising was dominated by spots created to air across all forms of programming on all the networks, with only the barest demographic differences entering calculations of where to place the ads. That's why the TV industry has been able to use an exchange -- albeit an opaque and nonmechanical one -- to sell so much of its inventory. It's called the annual upfront marketplace.
But as industry consolidation continues, branded-content providers can't be blamed if they don't take solace from the platforms. Even The New York Times, in a recent front-page piece about behavioral targeting, noted the wide disparities in data collection between the aggregators and the publishers. They "aren't even in the same league," ComScore executive Linda Abrahamson told the Times.
It's not only the publishers that are afraid. Ever since WPP Group CEO Martin Sorrell made his now-famous declaration that Google is a "frenemy," the agency business has been haunted by the specter of disintermediation by technologically adept media companies. The "Marketing-Media Ecosystem 2010" study by Booz Allen Hamilton for the IAB, 4A's and ANA inflamed the concerns.
Of the media companies surveyed, 91% said they provide agency-like services. Eighty-eight percent said they provide campaign-development and strategic services directly to marketers. Some 82% of marketers said their No. 1 priority is consumer insights -- and two-thirds of publishers said they are providing such insights, once deemed the province of agency research departments, directly to marketers.
What goes around comes around, though. WPP is now a media company; its acquisition of the 24/7 Real Media ad network makes it both a buyer and a seller of inventory. Microsoft, the world's wealthiest technology company, owns one of the most prominent interactive ad agencies, Avenue A/ Razorfish, and in bidding for Yahoo hopes to take in the largest interactive-advertising-distribution network and content provider in the world.
Put another way, Microsoft and WPP both have units in the IAB and the 4A's. Since Meredith Corp.'s interactive expansion, it is both a distributor of Kraft advertising and the company's customer-relationship-management agency of record. Johnson & Johnson owns BabyCenter, the largest web destination for new and expectant mothers and a carrier of advertising -- which is to say, J&J is now a member of both the IAB and the ANA.
Such cross-dressing alone would make creative cohabitation nice to have. But there are two other participants that make it a necessity: the marketer and the consumer.
Consumers have made it clear that they expect the web to be a rich environment. Their participation in interactive media has no precedent in human history. By tearing down barriers to entry in both content creation and distribution, interactive technologies make it possible for an individual to publish a national "magazine," make a documentary, record an original symphony, even program a TV network. Thirty-two million American adults have used online classified ads for selling or buying, and 35 million American adults have participated in an online auction.
As important as interactive advertising is to their lives, though, consumers cast a jaundiced eye at it. A Berkeley study cited by the Times indicated that 85% of them object to behavioral tracking by websites. Publishers, agencies and marketers have little choice but to work together and agree on ways to respect consumers' rights and expectations.
Marketers want equivalent respect. They want us to respect their need to reach new consumers, as well as their need to build relationships across their existing and potential consumer bases. So they are even more adamant in saying the dichotomy between branded-content sites and platforms, or the contest between behavioral targeting and contextual targeting, is a false one. Both have their place, each serves different marketer needs and neither is likely to be able to exist without the other.
To create brand advocates, marketers require the relationships engaging content creates. They are looking for more than cheap impressions. They need the trust forged by The New York Times, the comfort purveyed by Martha Stewart, the style identified with Condé Nast, the wonder associated with Disney. Marketers also will need to go deeper into those attachments, which is why they and their agencies will use online networks to find the smaller sites, many of them without direct sales forces, that inflame the passions of consumers everywhere.
Already, we are seeing the merger between the seemingly opposing forces of context and commodity. Many branded-media sites are launching their own vertical networks. Indeed, the clean segmentation that used to characterize the media is breaking down. The Booz Allen research shows that 84% of media companies offer contextual-targeting services; 70% offer behavioral targeting; and about half provide clients performance-marketing services, e-mail marketing or both.
For such reasons, I expect many branded media will start using exchanges to help lower their average cost of sales, freeing capital to invest in the enhanced services, insight generation, consultative services and audience gathering marketers and agencies need.
There also will be increasingly intimate and intricate relationships among agencies, media and marketers. Creating engaging content -- and engaging advertising -- requires a level of mutual understanding among technology providers, publishers and agencies quite different from the days when media were merely dumb channels for an agency's spots and dots.
Disintermediation, in other words, is probably a myth. Media don't want to do the agencies' work. By margins of 3-to-1, publishers say services such as creative development, production, communications planning and media planning -- services media companies are getting called on to provide -- should remain the province of agencies.
Marketers think the same thing. "We don't need media companies to be our agencies," said Johnson & Johnson Chief Media Officer Kim Kadlec. "We need media companies to do what they do best: Create great content and draw audiences to it."
The fact is, we have little choice but to work with each other to capture the value that's being unleashed into the marketplace by interactive technologies.
When economic information -- about the availability of parts, for example, or their quality or their fair price -- was hard to come by, firms had an impetus to vertically integrate. Owning knowledge would lower transaction costs, keeping the firm competitive. The internet has made information of all sorts more available than ever.
As Keith Pardy, senior VP-strategic marketing at Nokia Corp., put it in one of the ANA white papers: "The ones that learn to collaborate with all the ecosystem partners are the ones that will survive."
Well, guess what: That collaboration is occurring. Together we're showing that interactive media have the ability, beyond all incumbent media, to deliver the right messages in the right context to the right people and thus induce the right behaviors.
Consider the improvement of audience measurement. For much of the past decade, digital-media companies were locked in an anxious struggle with major research firms over discrepancies between their panel-based methods for tallying audiences and the server-side counts done by the publishers. With strong support from the ANA and the 4A's, as well as our cousins at the Online Publishers Association, the Magazine Publishers of America and the Newspaper Association of America, IAB was able to encourage web measurement pioneers ComScore and Nielsen to undergo audits of their processes and technology by the Media Ratings Council -- audits that are under way. We agreed that we're seeking "convergent validity" -- multiple measurement techniques that will get us ever closer to understanding who is doing what when and why.
Let's tell the truth: Advertising and the media that convey it are just another commodity, and they do have transcendent value for marketers and consumers. On both sides of the equation, there is enormous opportunity. But we will get there only if we break down the barriers that have divided industry from industry and even segment from segment within our industries.
Benjamin Franklin argued a variation of this challenge when he urged the 13 fractious colonies to come together and declare independence from Britain. "We must, indeed, all hang together," the colonial pop philosopher said, "or most assuredly we shall all hang separately."
But I like the way the IAB's Ms. Millard put it in opening our recent Annual Meeting: "My space," she said, "is your space."
Randall Rothenberg, a former Ad Age columnist and consultant with Booz Allen Hamilton, is President-CEO of the Interactive Advertising Bureau.