Ad Age sat down to discuss the concept with Mark Kvamme following his talk at the 4A's Digital Conference. After heading up ad firm CKS in the 1990s, Mr. Kvamme has spent most of the past decade as a venture capitalist at Sequoia Capital, underwriter of such web giants as Google and YouTube.
Advertising Age: It seems like there are an awful lot of companies that aim to make money off advertising but get funded without a clear understanding of what their ad models are going to be. Why?
Mark Kvamme: Our basic philosophy is build a great product. If you have a product that consumers want to use ... you'll figure out a way to get advertisers interested. ... Google started out as just a search engine and wasn't quite sure how they were going to monetize anything.
Ad Age: You talk about advertisers needing to think beyond the current buying mindset of reach and frequency and connect with people through engaging experiences. This new breed of funded companies offers those experiences. Do marketers need to adopt a new online "ad model" in order for these companies to make money?
Mr. Kvamme: I think they do. They have to look at it as reaching the attention-deficit generation. ... The thing I don't quite understand about agencies and brands is why they don't go back to the 1950s and create their own content. At the early age of this new technology called television, they created "General Hospital," they created the soap-opera phenomenon, game shows. Why aren't they doing that on the net?
Part of [the reason] is the marketing guy is risk-averse. They're not venture capitalists. ... To me, they are the fuel that makes this stuff happen and they should be participating at a bigger level.
Ad Age: You talk about how agencies need to become more a part of sales or cost of goods sold. Google has done this remarkably well. What is the model for agencies?
Mr. Kvamme: I heard these agency people on the panel talking about how you can get these services anywhere and how offices in Kansas City are cheaper, and I'm thinking, you guys, what do you do for your clients? Create a unique selling proposition. What's yours? Is it a technology? Is it a social graph? Is it understanding a specific audience?
Ad Age: What would you do differently if you owned an agency now?
Mr. Kvamme: I'm an investor in an agency that's doing part of what I would do now. It's PopularMedia, and they're working with multiple clients to build the social graph and figure out who are the influencers. ... Some of the intellectual property of internet companies lies in knowing who the key Diggers are. If this guy Diggs a piece of content, then we know 2,000 more people will Digg it, and if that happens, it'll have a Digg page, and you'll get people to watch your video or your piece of content.
Ad Age: So are agencies in the best position to locate those influencers or is an internet company such as Digg in the best position to understand that?
Mr. Kvamme: Digg is an aggregator; it has no creative. ... What happens in an interactive agency ... is they place the ads, figure out how many clicks they have and then direct those people. They're doing it for multiple clients. Why aren't they aggregating that data in a data warehouse and then using that to say, "OK, Mr. Client, I just did 27 of these campaigns, and I know who these influencers are and I can get to your customer much more quickly than my competitor"? It's not that hard to do, but you have to think about it differently. ... If I'm going to be compensated solely for coming up with the big idea every time, then I'm going to lose. Sometimes I will come up with the "Got Milk" campaign, and it'll be huge. But that is really hard to do, and some of that is even luck -- and with the fragmentation of media, it's even harder to do.