Why The SaaS Business Model Has Been Bad for Marketing
Marketers' trust in the ad-tech world is on the decline for lots of reasons: complexity, lack of transparency or standards. Gartner's Hype Cycle research puts ad tech deep in the "trough of disillusionment."
One can cast blame in many directions, but one of the biggest corrosive factors eroding trust between advertisers and ad tech is the relative newcomer to marketing -- the SaaS (software as a service) ventures that dominates marketing today.
SaaS business ventures are the darlings of Silicon Valley, with seductive investment qualities. First, SaaS ventures have reliable recurring monthly revenue -- sell once and done. Second, SaaS business can scale with relatively lower infrastructure costs compared to people. Third, and possibly most important, the very nature of subscription business is its narrow focus, which means SaaS platforms are rarely directly accountable for marketing program results. They tend to be, for example, a data link in the marketing program supply chain. No accountability -- less risk -- potential nice returns. This also explains why, by contrast, DSPs are not welcome in Silicon Valley. High accountability -- high risk -- low returns.
My cynical streak believes that detaching from the messy execution side of marketing was a deliberate strategy on the part of SaaS ventures to shield themselves from the messy business of demonstrating real results. "We power the data that runs the campaign" or "We map the social network so you can engage with influencers" they carefully explain, to ensure marketers realize the venture can't be blamed if the program goes south.
The more generous side of me wants to believe that the ROI accountability gap was an unintentional outcome of an ad-tech innovation engine that spit out a lot of ventures in a short amount of time.
Either way, we can't underestimate the impact of SaaS ventures on marketing. Their platform efficiencies are marvelous, but they come at a high price, dissecting the human process of marketing into itsy bitsy pieces, making platform accountability so tough that most advertisers give up in defeat. In a study by Venture Beat, "45% percent of marketers aren't validating their marketing analytics for quality and accuracy," because of data platform integration challenges.
Whether by design or default, platforms don't help advertisers knit together the pieces so that a campaign can be measured with reasonable attribution for all the platforms. Even the large automation systems are no better at integrating their "platform pieces" despite all the glossy case studies that promise accountability. Nor do these ventures bother much about practical operational ROI questions like: How will the specific data be used? What other data systems will the platforms have to interact with? How much labor will be required to "knit" the platforms together?
The marketing ecosystem was shattered as in the Humpty Dumpty tale because too many ventures were built to serve investor interests first and marketers second. Investors were eager to place their bets on the "disruptive" science of marketing, dismissing the role of trust that is essential for any venture to thrive. This is the harsh lesson of Yahoo. It failed because it was too busy trying to be a tech venture instead of a marketing company that advertisers could trust through real accountability.
And herein lies the ultimate irony in our story. Investors created the current accountability-challenged ecosystem that relies on the science of ad tech which will, in the end, be undone by the human element of marketing.
The happy ending here though is that a more realistic investment view is taking hold and the new darlings of investors will be those ventures willing to stand up and be truly accountable. As these ventures reunite the science and human elements of marketing, we will realize a happy end to the Humpty Dumpty story at last.