NEW YORK (AdAge.com) -- For 40 years, Donovan Data Systems has held a near monopoly on the business of media billing and tracking. But now, in the first defection of a major player, Publicis' Starcom MediaVest Group has moved its spending power to MediaBank, a Chicago-based software company that acquired Donovan competitor DataTech last year.
Donovan Loses Its First Major Media Agency
SMG Ditches Billing, Tracking Service That Has Industry Near-Monopoly
SMG has made no secret of its frustrations with DDS, which, by its own estimate, handles media billing and tracking for 10 of the top 12 media agencies in the U.S. market. The impetus for the switch was to find a tool that could simplify the task of buying and billing in an increasingly diverse and thorny media landscape (which now includes interactive platforms that didn't exist when DDS was engineered). The breakup between the two companies was bitter, ending where so many long-term relationships gone bad do -- in court.
Founded in 1967 by Michael Donovan, Donovan Data Systems manages more than $60 billion in media investments in the U.S. market alone. It counts heavyweights such as MindShare, OMD and Universal McCann as clients. There is really no direct competitor to DDS -- save for maybe DataTech. Some smaller media buying shops use systems such as MediaPlex or Encoda Systems, but no other company comes close to handling the amount of billings DDS does.
But despite its grip on the industry, losing a network the size of SMG, which handles about $17 billion in billings in the U.S., is a big blow to the software provider -- especially since it could spur other agencies to switch.
The media industry has long recognized that DDS is "not where it needs to be," according to one executive at another top media agency. If SMG is able to adapt to a new system that will offer cross-channel analytics with relative ease, others may follow suit.
Donovan has reacted quickly, however. The company plans to unveil an upgrade to its software for digital-media buys at the 4A's Media Conference in Orlando this March. Is this the beginning of the end for DDS? It all depends on how its new product is received next month. But it isn't a good sign for the company that media execs from many different agencies are said to be considering other options.
It wasn't the easiest of transitions for SMG. The media company filed a breach-of-agreement suit against DDS in December, claiming that the company tried to prematurely end its contract when it discovered SMG was moving to MediaBank.
In court papers, SMG said it made the switch to MediaBank because DDS was ill-equipped to handle web-based advertising and digital media advertising channels such as video on demand and mobile. SMG also complains that DDS's fee structure is based on total advertising spent by the agency's clients, even though the agency largely has moved away from commission-based compensation to a fee-based structure.
Laura Desmond, the CEO of Starcom MediaVest Group, declined to talk specifically about Donovan, but said SMG decided to move into a new media billing and tracking system after plotting out SMG's data for the next three years and seeing digital spend more than doubling year after year.
"Our decision to focus on the digital explosion really led us to a new exploration of system," she said. "It's based on data and facts and where the consumer marketplace is going. ... We work with clients who are leaders in their own marketplaces. They expect us to take leadership positions."
The issue with DDS from a buyers' standpoint is as follows: DDS works with three disparate systems -- one for local broadcast, one for national syndication and one of newspapers and outdoor and hasn't really effectively come up with a solution for adding digital platforms.
Digital investments cannot be tracked by the system, so they are instead tracked by ad-servers like DoubleClick or Atlas, and then they must be entered into the system for bill paying by hand. Given the volume, the system is prone to human error.
In June of 2007, Starcom starting working with MediaBank to implement a platform called MediaBank O/X that would be an open system for analog and digital. MediaBank is a database platform where planners and buyers are able to track all media buys across channels.
DDS has acknowledged that improvements need to be made and hopes the upgrade will satisfy media buyers' digital demands.
"We feel right out of the box it is going to relieve many of the major pain points that our clients have with regards to the planning and stewardship of interactive media," said Ken Breen, director of marketing for DDS.
The web-based application will integrate first- and third-party ad servers and the DDS bill-pay system, so it will allow media agencies to manage digital investments on the front and back ends. According to Mr. Breen, several media agencies under WPP Group, Omnicom and Interpublic already are working with the system, which is in beta and slated for general release by the end of the first quarter of 2008.
Meanwhile, arbitration proceedings between the two companies are continuing. A lawsuit filed by SMG claims that in February of 2007, knowing that SMG was going to switch to another provider, DDS threatened to discontinue servicing SMG's business unless SMG entered into a new, long-term agreement with DDS that imposed "coercive and commercially unreasonable terms on SMG."
According to the suit, DDS threatened not to complete all aspects of processing for media buys as of Dec. 31, which would have been a problem for the company if it didn't have its new software up and running on time. As it turned out, SMG did get the new system in place on time.