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Inside the omnichannel: What's hot? What's working Who's winning?

ecommerce

Aug, 7 2017, 1:20 PM

Editor's note: Seth Ulinski is a senior analyst in TBR’s Digital Practice, covering digital advertising, advertising technology (ad tech), marketing technology and agency landscapes. Seth provides analysis of vendors including public companies such as Facebook, Google, Amazon, Oracle, Salesforce and SAP. In addition to business performance of public vendors, Seth analyzes private firms and industry trends through syndicated reports and custom engagements.

A Q&A with Ulinski about the latest trends in omnicnalle developments:

Today’s digital consumers increasingly dictate how, where and when they engage with content. Omnichannel is the new complexity, and it runs across advertising, marketing, sales and service.

Let’s double-click into the advertising industry: media companies, marketers and agencies are tasked with understanding consumer behavior across a fragmented media landscape, further complicated by an array of digital devices (e.g., PC, smartphone, IP TV). However, this omnichannel challenge creates opportunities for publishers, tech vendors and services firms.

As digital platforms have become the new mode for media delivery, broadcast and cable TV industries have experienced decreased viewership and advertising revenue. Large media conglomerates (e.g., Disney, Discovery Communications and Scripps Networks) are losing viewership to a range of digital platforms, including Google, Facebook, Netflix and Amazon, which leverage a combination of advertising and subscription-based models and offer user-generated and professionally produced content. Old guard media companies are facing competition from various angles and are in the early stages of devising omnichannel strategies in a digital, on-demand media landscape.

While multichannel video programming distributors such as Comcast, AT&T and Charter Communications have been able to offset cord cutting via high-speed internet and mobile services, their content partners are scrambling to address the new market.

On July 31 Discovery Communications announced it would acquire peer Scripps Networks for $14.8 billion. This premium content entity will be operationally more efficient; however, the new company will still need to invest in infrastructure directly or via partners to support the market, while simultaneously weighing subscription and ad-supported models.

AT&T’s pending $85 billion acquisition of Time Warner and Verizon’s acquisitions of AOL and Yahoo, totaling nearly $10 billion, are examples of telecom vendors transforming their business models to drive revenue and profit in an omnichannel world.

I think there are winners in different areas. Google and Facebook are dominating digital advertising; the two will capture 56% of a $200 billion digital ad market in 2017. In addition to legacy search, Google is capitalizing on video ad investment via its YouTube platform and will surpass $8 billion in revenue this year.

Facebook’s social platform surpassed 2 billion global subscribers this year, and it accounts for over 25% of all time spent online; however, its video business is still nascent, and TV is a separate $200 billion ad market. Each company is making moves in video, while building rich profiles as subscribers engage with content and advertising — across multiple screens, on demand.

However, although these two digital heavyweights command massive share of digital ads, omnichannel is complex and Google and Facebook do not have a stake in traditional TV.

This is where media-agnostic ad tech vendors add value. Specialists such as Adobe, The Trade Desk and DataXu support programmatic ad buying across a wide range of formats, including display, video and advanced TV. With such a massive market in flux, I think a quote from The Trade Desk CEO Jeff Green sums things up: “The TV business is a ticking time bomb. … The status quo is not sustainable.”

Marketers are insourcing the advertising function through programmatic platforms and SaaS, to drive media and operational efficiencies as well as improve speed to market and enterprise business intelligence. While it could be argued this is not yet a trend and may be a short-term fad, brands such as Procter & Gamble Co., Netflix and Kellogg’s have brought some duties previously outsourced to agency partners in-house. As more brands find success, multibillion-dollar businesses of agency holding companies such as WPP and Publicis are increasingly at risk. Brian Lesser, CEO of GroupM, WPP’s largest media-buying unit, is leaving for AT&T, further evidence a shifting of the guard is underway. As telecom vendors such as AT&T and Verizon evolve businesses to media technology status, their competitive set consists of traditional telecom peers such as Verizon and Charter as well as digital powerhouses such as Google and Facebook.

I see opportunities for increased use of hybrid models, whereby internal marketing teams and external agency partners access the same platform, sharing responsibility and risk. Given constraints on subject matter experts (SMEs) with programmatic tools and the nuances of various media formats and digital platforms, I think hybrid approaches will gain in popularity. The complexities of omnichannel create a need for SMEs from a wide variety of segments (e.g., search, video, addressable TV), so it won’t be an insource or outsource decision, rather a hybrid model that balances certain elements based on the brand or campaign.

(C) TBR





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