How Data Science Is Upending the Ad Profession

Summary

So, what exactly is today’s “Mad Man” (or “Mad Woman”)? Data-driven marketing communications and customer management have permanently changed the ad profession. But in the future, who’s going to do the actual work of marketing, and which institutions will dominate? For most of the 20^th century, ad agencies played a number of roles addressing the communication problems of brand marketers, and as information technology (IT) evolved, professionals in that field took care of the IT area in client firms. But now, as Harvard’s John Deighton observed in the Journal of Advertising Research’s Speaker’s Box column: “The two kinds of problems are converging, because marketing problems increasingly are addressed by IT solutions.” Deighton asks, “What is the effect of this convergence? Which professional values get to dominate?” And, “in more practical terms, because values live in institutions, which institutions will dominate?” Deighton listed the contenders:

• Advertising holding companies (WPP—the world’s largest ad agency— he notes, has invested more than $1 billion in response to the competitive data technology environment; less than half (about 40 percent) of its revenues come from advertising);
• The present and future “walled gardens” that pursue integration from different directions, g. Google, Facebook, and Amazon;
• IT consultants and software vendors
• What is left of the open web—a community of independent ad agencies, newer IT ventures, and brokers of third-party data.

Deighton cited studies he co-authored showing the “remarkable growth of the commercial Internet in the U.S” and that in the U.S. as of 2016, “about $260 billion, or about one-third of all marketing spending, is spent on services that could not be performed without personal consumer data. “The transformation of marketing, in the sense of customer acquisition and retention, from reliance on broadcast methods to addressable, interactive methods, is well underway,” he wrote. These studies identified four layers of the personal-data supply chain:

• hard infrastructure concerned with data transmission (e.g. Sprint), connectivity (cable providers and mobile carriers), hardware manufacturers, and data centers (e.g. Rackspace);
• soft infrastructure, or service firms (e.g. IBM, Accenture, and Deloitte), and software vendors (Oracle) in which category customer-relationship management software is important;
• consumer services support which includes ad agencies
• consumer services, i.e. content publishers, e-tailers and retailers, and social networks.

“In our 2016 study,” Deighton wrote, “we tracked eight U.S. companies that did not fit tidily into the four layers of the data-supply chain. Each pursued a leviathan-scale vision that …. would make advertising agencies historical relics….  These eight companies pursued integration from three directions:

• Google and Facebook were content marketers integrating back into data transmission
• AT&T, Verizon, Comcast and Cox Enterprises were data-transmission companies bent on integrating forward into content.
• Microsoft and Amazon sought to move from the middle of the supply chain in both directions.”

Apple was absent from the list because unlike these “walled-garden integrators” Apple seemed to be uninterested in personal data. “The rest of the Internet, the so-called open Internet, depended on the flow of data among firms in the ecosystem…. These eight companies either are setting or have the potential to set the dominant design for all of Internet marketing and to be the platforms on which all marketing runs” (See Table 1).