Despite change being the industry’s watchword for years now, marketers are still lagging behind consumers and the time has come to address this divide. “People have outstripped marketers capabilities to stay current, topical and most importantly, to keep their brands relevant in today's world of 'connected consumerism' that changes hourly,” says Rafe Ring, co-founder of the Global Insights Group.
A factor holding back wholehearted marketer investment in digital and social despite the hopes pinned on these two specialisations continues to be a lack of agreement on best measurement revenue models, says Greg Paull, principal of R3. “The jury is still out.”
Marketers face similar challenges with their application of big data and analytics. Last year’s Marketers Outlook revealing that nearly four in ten marketers across the region expected their use of big data analytics to increase. But it also highlighted major obstacles in its applications, with progress marred by a lack of data and insufficient internal expertise.
To compound these challenges, marketers are still struggling to find agencies to help them navigate the new landscape. “The top challenge … is to find agency partners that truly get it — and don't just pay lip service to this or that particular online consumer gateway,” says Ring. “They need agencies that are genuinely 'road ready', adaptable, and as literate online as today's cynical consumers; agencies with fresh young connected minds and world views that can guide the old heads and wake them up.”
In fact, a report by the CMO Council showed only 12 per cent of marketers in Asia-Pacific described their agency partners as “extremely effective” in digital marketing, from strategy and execution to measurement.
The worry for the agencies, of course, is that marketers will simply start to evolve the functions they find lacking in agency partners. In the US, there has already been a concerted shift towards in-house agencies finds a report by the Association of National Advertiser’s. According to the study, 58 per cent of marketers were already turning to in-house agencies in 2013, a 16 percentage point increase on 2008 levels.
On the back of this trend, Oliver Asia, an organisation that helps establish creative teams within marketing companies, launched in Singapore, with planned hubs in Hong Kong, Shanghai, Korea, Japan and Malaysia. Its director in Asia, Nick George, says in the United States and UK, the seed has already been planted in terms of the concept of full service in-house agencies. But he says this hasn’t yet happened in Asia, and most clients continue to work with a roster of external agencies. However, he says he expects this to change, owing to the cost effectiveness of the in-house model.
While Asia has not replicated levels in the United States yet, there are signs of moving in that direction. According to an article by Blair Currie on Campaign Asia-Pacific, Toyota announced that from 2010 it would set up a “new domestic marketing company” in Japan, replacing its previous relationship with external advertising agencies. Meanwhile, Nike, Unilever and Nestlé, and Philips are also among those that have set up internal hubs to handle social media workload.
The structure of marketing today, and tomorrow
The marketing department, not just the agencies, are also under pressure to substantially change the way it functions. A recent report, Marketing 2020, revealed that marketing teams globally need to move away from hierarchical structures, with clear unidirectional, vertical reporting lines. Under this traditional model, the CMO acts as the lynchpin, collecting inputs from a wide-ranging team below comprising the product manager, a marketing strategies manager, an advertising director and PR manager, as well as the market research director and promotions director. However, the report noted that effective marketing structures of tomorrow would need to be underpinned by a more collaborative approach, with each of these team members reporting to each other, as well as to the central CMO.
Some organisations have already begun to do away with the CMO title altogether. Gap and Banana Republic both announced earlier in the year that the post in their organisations would be taken over by the more all-encompassing title of chief experience officer. This speaks to the convergence of roles which is also taking place in Asia, says Sam Ahmed, SVP head of marketing at MasterCard Asia-Pacific.
“The merging of advertising communications and digital is beginning to happen quickly, as well as the convergence of the insights, product development and product communications functions,” he says. “They used to be separate quite a lot, but now you see a lot more integration between those two things.”
It’s now commonplace in the industry for marketing and communication responsibilities to be integrated, even at global levels. According to his LinkedIn profile, Arent Jan Hesselink took on the role of ‘global transformation leader; brand, communications and digital marketing’ at Philips in 2014, tasked with leading “a comprehensive transformation program of Philips' global integrated marketing function, including global corporate communications, digital marketing, brand management, markets marketing management, performance measurement and strategy integration.”
Mondelez’ Bonin Bough too is another marketer with more than one hat. Bough recently took on the role of global head of media and e-commerce at Mondelez. According to the Marketing 2020 report, Visa has also created a “CMO and head of human resources”, while Motorola has a “SVP marketing and IT” position. In Asia, similar trends can be found; although it is not clear to what extent it mirrors the activity at the global level. In 2013, for example, insurance firm AIG appointed Damian Coory to the newly created role of “vice president for corporate marketing and communications for Asia-Pacific”. Based in Hong Kong, his responsibilities include corporate communications, media relations, corporate brand, CSR and sponsorship initiatives.
The agency bid for digital & programmatic
As the marcoms industry becomes ever more complex, holding companies are keen to ensure they are positioned to weather the changes. Many are looking to increase their specialist digital offer, either organically or through mergers and acquisitions, such as Publicis Groupe’s recent acquisition of Sapient Nitro indicates.
One of WPP’s strategy priorities, for example, seeks to ensure the holding company maintains its “share of more measurable marketing services, such as Data Investment Management and direct, digital and interactive”. Currently, these services account for 50 per cent of revenues, up from 32 per cent in 2006. The company says new media and “data investment management”, which includes the application of new technology and big data, was a focus for acquisitions in 2013. Looking forward, the company said it would allocate around $438 to $585 million annually for firm takeovers in line with its strategy.
The theme is evident across other holding companies. Digital currently accounts for nearly 40 per cent of Publicis’ revenues — up from 33 per cent in 2012. But the holding company is looking to make continued investment in the sector. The “evolution and expansion of the digital domain” is also a focus for Dentsu. It says that while acquisitions represent a “powerful tool for reinforcing capabilities”, the group is also looking to promote knowledge-sharing and the integration of R&D functions in a bid to “enrich the content of digital services on a global basis”.
Jarek Ziebinski, chairman and CEO of Leo Burnett Asia-Pacific says a key change that needs to take place quickly is a “successful evolution from Mad Man-like traditional advertising agency model to integrated communications companies with data-driven creativity at its core that are enabled by digital technology for speed, efficiencies and effectiveness”. “This model pushes our thinking above and beyond the agency network level to the holding company network level allowing us increased access to the multiple assets available that could be put into a new type of operational structure. Such an operational innovation will help us better leverage all our assets and deliver against the complex needs of our clients. That is what big brands and marketers need today and that is where we need to be.”
In recent years, WPP has also coined the term “horizontality” which aims to “developing client relationships between activities nationally, internationally and by function”. Since 2006 it has steadily increased the number of clients served by four of more disciplines from 370 to 489. Horizontality is providing clear gains for the holding company, with WPP estimating that over a third of new assignments in 2013 were generated through joint development opportunities by two or more Group companies. “The Group continues to lead the industry in coordination geographically and functionally through parent company initiatives and winning Group pitches,” it adds.
Programmatic is another edge agencies hold over the in-house marketing agency, and likely to hold for quite awhile. As Matt Harty, SVP of The Trade Desk put it in a recent interview with Campaign, “Search has been around for nearly 20 years. Very few clients have taken it in-house, and they usually wind up passing it back to the agencies. If it didn’t work for search it’s an even bigger challenge for programmatic.”
So while programmatic buying is still a nascent industry in Asia-Pacific, with interest and investment lagging far behind that of North America, the sector is poised for strong growth. Research by Magna Global showed Asia-Pacific is the second largest programmatic market globally, accounting for 18 per cent of the market, compared to North America’s 57 per cent. However, Magna Global expects developing Asia to log the highest growth in programmatic spend in 2014 to total over $500 million.
According to Magna Global, the main players in these developing Asian markets are the international companies that are also found in more developed regions. “Because no individual market is substantial individually, few national players have developed to compete with the standard DSP/Exchange/Trading desk options,” it explains. “While in many of the largest APAC markets the ecosystem has developed from local companies (with big Western players moving in after the market was established), in the smaller and newer markets the ecosystem was built by global programmatic companies from the outset.”
Holding companies have been installing programmatic arms in recent years, including WPP’s Xaxis, OMG’s Accuen, and Publicis’ VivaKi. However, the industry also includes a host of independent specialists across the programmatic spectrum. Demand Side Platform companies operating in Asia-Pacific include Turn, Media Math, and The Trade Desk. Ad Exchanges are also part of the programmatic spectrum, and include Google’s DoubleClick and Yahoo’s Right Media.
However agencies, it would seem, are now less interested in turning themselves into adtech firms. Data, analytics and the human-insight portion of the equation is the direction many of the holding groups are striking out towards. A recent by the World Federation of Advertisers found that the use of agency trading desks had declined by 15 per cent year-on-year, while the use of independent trading desks had more than tripled. WPP for one, after acquiring 24/7 wound up divesting itself of keeping the DSP up to date after folding it into Xaxis. The group kept the data management platform (DMP) and wound up selling its ad-serving technology on to AppNexus.
Publicis Groupe too is also reportedly in the midst of changes to its programmatic operational structure. According to AdAge, 120 of Vivaki’s staff in the United States have been dispersed across other agencies within the holding company. According to Ad Age, Vivaki will “now focus on training, research and development, data management and analytics”. Laura Desmond, CEO of Starcom MediaVest Group, told AgeAge: “If you're a marketer, do you want your programmatic decisions siloed and Balkanized from everything else that you're doing? No. You want it integrated."
It is not yet clear if similar steps will be taken in Vivaki’s Asia operations. But Grace Liau, general manager at VivaKi APAC, says in Asia the company is in conversations about how to accelerate the programmatic capacity of agencies in the region. “We are still mapping out the tactical steps but the goal is clear – to expand Publicis Groupe’s programmatic dexterity by moving the programmatic service expertise upstream into the agencies and closer to the strategic planning process and closer to clients,” she says.
Liau says in terms of the availability of technology platforms, Asia, Europe and the US are on a par. “However the actual adoption and usage of essential foundational technology such as ad-serving and tag management in Asia is still a little behind Europe and the US where adoption of these technologies are second nature and a source of independent (third party) data for clients,” she says. “This has resulted in nascent campaign measurement techniques such as the use of click through rates as a primary metric of success. Until the industry starts to fully and accurately track what actually works, programmatic adoption will be somewhat hampered in Asia.”
Education is seen as a key factor in ensuring continued adoption of programmatic. However, a lack of accessible information has caused tech companies themselves to manoeuvre to plug the gap. For example, MediaMath partnered with the Direction Marketing Association in 2012 to launch the New Marketing Institute in an effort to improve education about the programmatic landscape. “While attending industry events and reading relevant publications, we noticed that a vast amount of programmatic literature available to marketers is highly complex and designed to confuse,” Rahul Vasudev, MediaMath’s managing director APAC, says. “The NMI’s mission is to educate, empower, and engage a new generation of digital marketing professionals, providing a neutral educational platform and certification body.”
Ultimately though Asia’s growth hinges on finding the requisite talent. Compared with other markets globally, advertising companies operating in Asia face a particularly challenging “talent crunch”. A global report by recruitment firm Manpower shows 45 per cent of employers in APAC found it difficult to fill jobs, compared to just 27 per cent in EMEA, and 4 per cent the USA. Within APAC (excluding India and New Zealand) talent problems were greatest in Japan, Hong Kong and Taiwan.
As Chris Thomas, chairman and CEO of BBDO Asia, Middle East and Africa, explains: “[A key challenge is] retaining and acquiring an unfair share of limited talent in a fiercely competitive market. Advertising and marketing has a job to do to make the industry attractive versus finance, property, and so on."
This article is part of the Campaign Innovate series, a collection of articles that examine the way innovation, startups and technology are affecting the advertising and marketing industry.
Campaign Asia-Pacific has also launched the Campaign Innovate competition, an event that aims to provide a platform for Asia-Pacific's startups to pitch to some of the world's biggest brands.