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  • Advertising as a media supply chain: three critical areas of improvement

    Ramsey McGrory
    14 May 2020
    Ramsey McGrory
    14 May 2020
    Supply chain transparency requires connecting key data points to measure investment at scale.
Man on phone

No one thinks about supply chains until they stop working. Read Amazon’s CFO Brian Olsavsky’s opening statement in their recent earnings call, or think about what happens when your electricity, water or internet stops. In more complex supply chains, like pharmaceuticals, if they stop working it can mean the difference between having access to life-saving medicine, and not. Have you thought about advertising as a media supply chain? It is.

While not life and death, the media supply chain has been upended by coronavirus, impacting the health of businesses and our economy as a whole. The oxygen that feeds the global $691B advertising industry is money small and large advertisers spend to drive sales, brand awareness, retention and ultimately their enterprise value. In the absence of a highly functioning, fully transparent media supply chain - when marketing investment is managed in silos across dispersed teams with different processes, data sets and metrics - marketers can’t understand marketing investment cause and effect clearly. These challenges are exacerbated by massive COVID-19 related changes to consumer behavior, media consumption and ad spend.

For more than a decade, the entire ad industry has faced these supply chain issues, especially in digital advertising.

Only half of advertiser spend ultimately reaches publishers

 

Media agencies have been on the front lines of dealing with media supply chain fragmentation with varying degrees of success, but the velocity, variety and volume of data demands software driven solutions across multiple parties in the supply chain, including marketers, agencies, traditional and digital media sellers, and technology and data providers. 

A poorly managed or understood media supply chain creates three ‘transparency’ problems, each of which has been exacerbated in recent weeks by the pandemic:

Capital management – the treasury team of a global marketer spends billions on advertising, and must properly manage capital against payment obligations. If a marketing group isn’t providing detailed transparency into plans, orders and payment obligations, the treasury team is not managing cash on hand as tightly as they could. This is basis points (bps) of investment yield.

Agency invoice forecast

Supplier invoice forecast

 

 

Embedded operating costs – intermediation and arbitrage in media is a persistent and material problem for marketers and publishers, especially in digital advertising. Ad tags, fragmented measurement services and a lack of centralized detailed data obfuscates the net drain of advertising dollars that should reach the publisher/consumer. Supply chain transparency isn’t achieved by simply removing unnecessary intermediation. It also requires connecting key data points to measure investment at scale: PO <-> Authorizations <-> Orders <-> Changes <-> Delivery & Measurement <-> Invoices <-> Payment across brands, initiatives, media channel, geographies, in house and outsourced teams. This cannot be managed by emails and Excel. It requires professional-grade solutions. (Note the recent PWC report noting overall inefficiencies)

Causality and Efficacy – all war plans are good until the first shot is fired.  It’s the same with media plans. Plans are built on historical data, available inventory and prices and projected performance. As campaigns are executed, in-flight data allows for re-allocating campaigns across traditional and digital sellers. To effect this change across thousands of active orders, POs, authorizations, orders, invoices and payments must be connected in an automated way. 

Programmatic supply path example

The last two months have complicated existing transparency issues. Faced with uncertain economic conditions, marketers reduce total marketing investment and the mindset has shifted quickly to ‘doing more with less.’ Planning and buying teams react and move to reallocate media investments in order to minimize spend (as measured by cost per point, CPM, eCPV) and maximize the outcomes (as measured by brand awareness, intent to purchase, registration, purchase or lifetime value).

By breaking down data silos to create a more unified marketing decision flow, marketers can mitigate issues caused by the pandemic and strengthen their ability to make important decisions at all points in the marketing supply chain.