Close on the heels of WPP’s investor briefing, where they took a clear position of IDs with a clear shift towards AI with a focus on proprietary media, Publicis has now fired the next salvo with an announcement to acquire Lotame. In my view, this is a defining moment in the history of digital advertising across the world.
For starters, for the first time, holding companies are now taking a clear position to differentiate their product. For a good long time, all media plans or channel plans looked the same, predominantly controlled by the data sets of the walled gardens. This changes it all.
The leading advertising holding company is now firmly in the saddle claiming to own identities of more than 60 percent of world population through EPSILON and now Lotame! We earlier had another holding company, Omnicom acquiring IPG on the back of owning identities of Acxiom. And WPP sang a different tune that owning IDs is a slippery slope and a leaky bucket, advocating the shift towards AI.
As I was discussing with one of my ex agency colleague, the debate is no longer about whether agencies should run a proprietary media business or not, it is now all about commercially influencing the entire 1 Tn$ advertising business on the same terms like that of the walled gardens by controlling data, bundling the same with inventory in a manner where brands can be delivered the best outcome, that gives them a better ROI.
The jury is still out as to which strategy is right. And which strategy makes the best commercial sense for a holding company. The joker in the pack is privacy regulation in the respective markets. Bear in mind, despite being the largest advertising market, US, still do not have their data protection law enacted; and it seems to me most of these decisions are taken keeping the “privacy exposed” US market in mind. EU is doubling down on privacy and market like ours, in India, have a unique framework data protection framework, with a dominant focus on consent.
In my view, the business of identities will fall into a typical 2 x 2 matrix with the players of ad tech ecosystem on one axis and the approaches to managing identities on the other axis. Holding companies can play a key role in either facilitating this across the digital advertising supply chain or help package and manage bespoke audience marketplaces for the advertisers and publishers.
Some of the key questions that brands and publishers should really be thinking about:
1. From a regulatory perspective, one of the most critical and pertinent question is to ask whether the holding companies will behave like data fiduciaries or will always remain a data processor. As a data fiduciary the obligations for an enterprise is significantly high and the existing holding company business model just will not afford them to set aside financial provisions for the penalties and exposures as per the privacy regulations.
2. Probabilistic creation of IDs synthesizing multiple signals is a very different business model. Enforcing Consent management will significantly deplete the half-life of an ID. The bunch of profiles you think you have kept stored in your CDP; 6 months back will not be half as effective as it was then to now. As such the page views of publishers are declining due to signal loss, and this approach will constantly require more and more signals to be added to maintain the volume of IDs.
3. Enriching existing data signals of an enterprise with that of their complimentary data partners towards acquiring new customers will require confidential data clean rooms, to remain compliant. What is the role of a holding company in enabling this? How will they help brands and advertisers bridge the gap in terms of data signals? How will the holding company price their own data sets alongside complimentary partners and what is the business model for this?
4. Above all what is the cost of doing all this, when all this is already bundled into the cost of advertising in a walled garden – from enrichment to activation. Does this battle of identities address only the 250-300Bn$ Open Web, which is so fragmented across the world, filled with regulatory challenges across 15+ jurisdictions? How will the pricing of data be done now? With and without inventory cost? What is the cost of building, managing and upgrading this technology and how will this be priced?
One way or the other, the world of AdTech and MarTech has totally changed with this announcement. Credit must be given to Publicis for throwing the gauntlet. There is never a dull moment in the world digital advertising. But one this is for sure. We are going to see a spate of mergers and acquisitions in this year. The era of consolidation in advertising begins.
Gowthaman Ragothaman is a 30-year media, advertising and marketing professional and CEO of Aqilliz, a blockchain solutions company for the marketing industry.
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