Advertising Technology

The Great Ad Tech “Sutton Pivot” of 2013

In 2013, we’ll be watching a dramatic shift in the digital advertising technology landscape which may become known as The Great Ad Tech Sutton Pivot of 2013.

In his excellent new book for entrepreneurs, Lean Startups, Eric Ries defines a pivot as “structured course correction designed to test a new fundamental hypothesis about the product, strategy, and engine of growth.” In the book, Mr. Ries catalogs ten types of pivots including Zoom-in Pivot, Zoom-out Pivot, Customer Segment Pivot, Customer Need Pivot, Platform Pivot, Business Architecture Pivot, Value Capture Pivot, Engine of Growth Pivot, Channel Pivot, and Technology Pivot.

Missing from the list is an eleventh type of pivot I’ve observed that I’m calling the “Sutton Pivot.”

According to urban legend, when asked why he robbed banks Willie Sutton famously quipped “because that’s where the money is.” A “Sutton Pivot” is shifting the focus of your product or service from a small market opportunity to a bigger market opportunity.

I’ve recently been observing the Sutton Pivot being executed by the players in the digital advertising technology ecosystem. The trade press is filled with stories lately about “programmatic guaranteed” (or “programmatic premium” or “programmatic reserved” if you prefer).

Why all the recent buzz about “programmatic guaranteed?” The Display LUMAScape players have recently and collectively come to the realization that there isn’t much money in selling remnant inventory on the spot market. Only about 20% of advertising dollars are spent this way despite huge advances in technology and availability. They’ve also realized this market is crowded and over-invested. And their business owners, oftentimes venture capitalists, are pressuring the CEO and business leaders to “show me the money.”

Meanwhile, the other 80% of advertising dollars are still being spent the “old fashioned way” through guaranteed insertion orders.  Instead of buying a single impression immediately at $0.75 CPM, this market is about buying ten million impressions in the future at $7.50 CPM. The inventory is transparent, considered “premium” and you are guaranteed to get what you pay for.

The dominant incumbent technology provider in guaranteed buying, practically a monopoly with more than 80% market share, may surprise you: it’s Microsoft. Of course I’m referring to Microsoft’s Excel spreadsheet product. Excel is still the most popular tool among media planners because they’ve not yet discovered a viable alternative. Guaranteed buying is still a manual 42-step process that typically costs buyers more than $40,000 in labor per campaign to execute.

Yes, there’s a huge opportunity for advertising technology in guaranteed buying because that’s where the money is and there are big problems to be solved.

Unfortunately, this Sutton Pivot is not going to be an easy one for most of the ad tech companies. Their RTB-based products will not make the transition because guaranteed buying is not “real time” and doesn’t involve “bidding.” The solution is not a pricing algorithm that is tuned to make decisions in less than 30 milliseconds. The problem is streamlining workflow for humans – site discovery, RFPs, document management, negotiations, plans, presentations, approvals, implementation, optimization, reporting, billing, collections, and all that messy stuff that happens in the back room.  Solving this problem requires much more than setting up a “private exchange” (although that might be part of the solution). It requires an entirely different technology and information stack that has to be built from the ground up to support guaranteed buying. It takes years to build this kind of product.

The good news is nobody has yet effectively solved this problem and the market is still wide open.

Besides pivots, another key aspect of the Lean Startups methodology is “validated learning.” How will you know you’ve successfully executed the Sutton Pivot? You’ll know you’ve succeeded when media planners are using your system instead of Excel as their workflow tool.

  • Joanna Bloor

    Don’t get me started on this one. All the discussions are around getting a percentage of the percentage. RTB hasn’t solved the age old problem of making digital as easy to buy as traditional media. I’d add that there’s a general philosophy shift that needs to happen around how the current digital supply chain works starting with “what’s the product you’re selling.” I’m certainly going to watch this space.

  • Alastair Little

    Hi Joe – quick question about programmatic guaranteed. One of the exciting things about RTB for the demand side is that prospecting new customers is (in theory) more efficient due to the use of 3rd party targeting data.

    In the case of futures, it seems like the role for 3rd party data is diminished. You own the impression, so you have to serve an ad. The role for 3rd party data might be to determine which ad to show (varying calls to action, creative, etc based on who is at the other end of the impression), but not whether or not to show an ad at all.

    Is that a fair summary, or am I over-simplifying matters? Would be great to get your thoughts on how a move to programmatic guaranteed affects 3rd party data. Thanks.

    • Joe Pych

      Hi Alastair – that’s a good question. In addition to creative optimization, I think third party data still plays a big role in both site/program discovery and for selecting custom segments of the audience.

  • Raj Chauhan

    While it doesn’t have a complete monopoly on the market, I’d agree Joe that’s Excel’s popularity is a constant sign that the system is broken and innovation is long overdue. We, as an industry, need to reduce the cost of business through technology if ad spend is ever going to reach a level proportionate to the amount of consumer time spent online. To achieve this goal, a lot of ad tech companies are going to have to learn to work together.

  • Guest

    There’s a couple of challenges to overcome:
    1) Media Planners don’t have access to any of the platforms of companies in the Lunascape… unless that changes they will still rely on spreadsheets sent to a trading desk. Or you just cut out media planners entirely and give briefs straight to a trading desk (unlikely to happen soon).

    2) Addazzle & co have been in this space for a few years and developed compelling offerings that solve the problems outlined above. They will need to consolidate their position quickly if they don’t want a stampede of startups eating their lunch.

    • Joe Pych

      Good comments. It’s not just startups that are looking at this space – established companies are shifting R&D to solve this problem. For whatever it’s worth, the most common reasons I’ve heard for failed adoption of existing and past solutions are one or more of the following:

      1) Too cumbersome / hard to use
      2) Too limited in functionality (point solution)
      3) Too expensive
      4) Not integrated