Omnicom, one of the really big companies that owns a bunch of advertising agencies, had its first quarter earnings call the other day. Omnicom is a public company, traded on the New York Stock Exchange, and you can follow it under the ticker symbol OMC. Now is as good a time as any to point out that I do not own any Omnicom stock (although I do still have a 401(k) lying around from when I worked at an Omnicom agency, which may or may not have some OMC in it. I honestly don't know). I want to discuss one of the finer points inside this earnings call, though, as I think it specifically points to the future of advertising - something this column is generally concerned with.
Omnicom did very well last quarter, which is good news for all of us. The results of public companies inside our sector definitely help us get a handle on how well we all are doing. Omnicom made more money than expected and seems to be operating very well. It is, naturally, optimistic about the future of advertising and its particular place in it.
Here's the thing I want to explore: in the earnings call, CEO John Wren specifically called out one element that he believes will help to contribute to the company's ongoing success:
"As many of you know, in March, we announced that we have made significant progress in digital through new strategic partnerships with Microsoft, Yahoo! and AOL. This comes on the heels of our Google partnership announced in 2010. Each of these partnerships is designed to leverage our skills in areas of brand building, storytelling and creative, with our partner's technological skills, platforms and reach. Our goal with each of these partnerships is to continue to build the strongest competencies for our agencies and deliver innovative and effective tools and ideas to our clients worldwide." (Note: emphasis mine)
Jonathan Nelson heads up digital for Omnicom (as well he should: Jonathan is one of the true pioneers of interactive advertising, having started the agency Organic a long ways back). Talking about those partnerships, Nelson is quoted explaining that Microsoft, Yahoo, and AOL are providing Omnicom with data about users, allowing the agencies under the company's umbrella to create and traffic extremely targeted ads. The data may also be available to the data mining and analysis firm, Analect, as well as to The Modellers, a predictive analytics company that Omnicom also bought.
Essentially, a big group of agencies now has access to quite a powerful pool of data. Although this small bit of news wasn't widely reported, I think it is a hint of how agencies are transforming.
In the old days, agencies used to compete with one another based almost entirely on the strength of a creative idea, as judged subjectively by the client (or, in many cases, the client's spouse or golf partner). While ideas still will always rule in advertising, we all seem to recognize that that just isn't enough. Manufacturers are in tough-and-getting-tougher situations. Margins are increasingly squeezed by a small band of retailers who control access to the consumer, and cheap manufacturing processes are inviting competition by the scores into nearly every category. When your soap flakes needed to only compete with two other soap flakes, and a decade might slip by before you had to come out with a new version, advertising based solely on the mass distribution of a great idea may have been enough.
But today, we need not only a subjectively-judged great idea, but the confidence in its content and placement that can only come from a well-analyzed wellspring of data. If an agency - or a group of agencies - has special access to that data, they are in an amazing position to underpin great creative ideas with the type of knowledge that can help drive them toward success. It's a bit of a hard truth, actually. Many of us ended up in the agency/advertising business because we love ideas. Hearing new ideas brings us a special kind of rush. But it is becoming clear that ideas are no longer enough in this business. They remain the most exciting part, but for us to make sure we're doing good business, ideas need insight, and increasingly that insight is coming from live data, direct from consumer actions.
The Big Prizes Are Still Out There: Facebook and Mobile
Take a look at the list of companies that Omnicom has struck a deal with: AOL, Yahoo, Google, and Microsoft. Notice anyone not there? Clearly, Facebook is sitting on the mother lode of all consumer data. The degree to which it can tell you about people - both in aggregate and specifically - is mind boggling, massively enticing, and even a bit frightening. That data remains very unavailable right now, at least at the low level that would be really effective.
It's possible that the data Facebook is privy to is part of a grand scheme that will be revealed some time in the future. It's also possible that Facebook is such a young company that it is almost too much to expect it to know for sure what to do with this valuable asset. I'm sure it's had plenty of offers from plenty of companies to get a hold of the data.
Then, there are the companies that have massive access to mobile usage data - not only the carriers like AT&T Mobile and Verizon but also companies like Apple or even Amazon, who has recently launched an app store for Android.
But these sources of data are like veins of gold in the California hills right now: massively valuable, but difficult to locate and hard to extract. That's why a move like Omnicom's is so powerful. It not only has the power to pull that data out, it has the ability to spread it out among its many agencies to make it worthwhile. Increasingly, as agencies seek to find edges over their competition, we should expect to see more action around data capture and use. If you are anywhere near any of these companies - either the suppliers or the users of data - make sure that you have some level of participation in this revolution, today.
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Gary Stein is SVP, strategy and planning in iCrossing's San Francisco office. He has been working in marketing for more than a decade. Gary lives in San Francisco with his family. Follow him on Twitter: @garyst3in. The opinions expressed in Gary's columns are his alone.
March 19, 2014