Tuesday, July 03, 2018

Interpublic Group is Buying Acxiom Marketing Services for $2.3 Billion. Here's Why.

Yesterday brought news that Acxiom had agreed to sell its marketing services business to Interpublic Group, a major ad holding company, for $2.3 billion. Acxiom will retain LiveRamp and do business under that name. Acxiom had restructured itself in March into the Market Services and LiveRamp groups and announced it was looking at strategic options, so the deal wasn’t especially surprising. But it’s still a milestone in the on-going evolution of the marketing industry.

For historical perspective (and assuming Wikipedia is correct), Acxiom got its start in 1969 compiling mailing lists from public sources such as telephone directories. The company grew to do all sorts of list processing, to manage custom marketing databases, to do identity resolution and to provide data enhancements for marketing lists. Although technology was always central to Acxiom's business, it was ultimately a services organization whose chief resource was a large team of experts in databases and direct marketing. It was also a favorite target of privacy advocates in those quaint days before online data gave them something much scarier to worry about.

Acxiom bought LiveRamp in 2014 for $310 million, as a logical extension of its identity data business. Since then, LiveRamp has grown much more quickly than the rest of Acxiom, currently accounting for about one-quarter of total revenue. Interesting financial note: Acxiom stock closed today at 39.45, giving it a market cap of $2.66 billion. Extracting the $2.3 billion that Interpublic is paying for everything else, this leaves LiveRamp with an implicit value of $360 million – not much more than Acxiom paid, and even less if you add the $140 million LiveRamp paid in 2016 for identity matching firms Arbor and Circulate. That’s shockingly low and suggests either an error in my calculations (let me know if you spot one) or that the market has serious doubts about something.

But we’ll worry about LiveRamp another day. What’s interesting at the moment is Interpublic as Acxiom’s buyer. At first it seems to buck the trend of private equity firms buying martech companies: see Marketo, Integral Ad Science, Aprimo, and Pitney Bowes. But this report from Hampleton Partners gives a more comprehensive perspective: yes, private equity’s share of marketing deals doubled in 2017, but the main buyers are still big agencies and consultancies. Indeed, Interpublic competitors Denstu and JWT are among the top three acquirers in the past 30 months, along with Accenture. And bear in mind that Acxiom is really more of a services company than technology developer.  It will be right at home with an agency parent.

So, what will Interpublic do with Acxiom? Some comments I saw said their main interest is Acxiom’s data business, which compiles and sells information about individuals (remember those phone books that started it all?)  However, I disagree.  It's not that I fear privacy regulations will kill that business: I expect third party data sharing will continue.  In fact, new rules should work in Acxiom’s favor.  As a company that privacy watchdogs have barked at for decades, Acxiom is likely to thrive after less responsible providers are driven from the business and as data buyers seek sources they can trust.  Indeed, Interpublic’s own discussion of the deal (click here to download) makes several references to data sales as an incremental revenue stream.

But it seems pretty clear that Interpublic’s main interest lies elsewhere. One of the nice things about ad agencies as buyers is they’re really clear in their explanations of their purchases. Interpublic’s deck lists their strategic rationale for buying Acxiom Marketing Services as acquiring “data solutions that enable omnichannel, closed-loop marketing capabilities and power exceptional marketing experiences.” A bit further on, they define the strategic fit as gaining “world class data governance and management capabilities [which] allow us to fully support clients’ first-party data”.  They also say “data assets have intrinsic value that will grow over time”, but I read this to mean they're most interested in managing each client’s own (first party) data.

This makes total sense. When Acxiom was founded in 1969, customer data was only used by a handful of direct mail marketers who were considered something between irrelevant and sleazy by the “real” marketers at big agencies and advertisers. Today, customer data management is considered the key to success in a future where every buyer expects a personalized experience. Ad buying itself, once an art form based on obscure (and often imaginary) distinctions among audience demographics, has become a mechanical process run by programmatic bidding algorithms. Indeed, the fraud-infested, brand-unsafe online ad market is now the shadiest corner of the industry.

The change is perfectly symbolized by the Association of National Advertisers (ANA) purchasing the DMA (originally Direct Mail Marketing Association): data-driven marketing is now main stream, even though the data-driven marketers are still not in charge. (If the data marketers had really taken over, DMA would have bought ANA, not the other way around.)

This is the world where Acxiom's expertise at managing customer data is needed for Interpublic to remain at the center of its clients’ marketing programs. If Interpublic doesn’t have that expertise, other agencies and digital consultancies like Accenture and IBM will provide it and displace Interpublic as a result. It’s not a new trend but it’s one that will continue. Don’t be surprised to see other data-driven marketing services firms find similar new homes.

Wednesday, June 20, 2018

Not the CDP Daily News

The World Health Organization has just declared that video addiction is a real disease but they've missed something even more insidious: the dangers of newsletter publishing. The CDP Institute Web site has been down for two days now (hopefully it will be back up by the time you read this and test that link), which means I haven't been able to publish the Institute's daily newsletter. (Yikes -- was my authorship a secret?)  This turns out to be very stressful for me, especially since I feel obligated to write the newsletter anyway so I'm ready whenever the site reappears. Gives a whole new meaning to the term "news junkie".

But, like the gun in a Chekov play, any copy that's created is begging to be used. So I'll post yesterday and today's items here for your enjoyment and my relief.  If you don't already subscribe and like what you see, visit the Institute site (once it's running) and join.

June 19, 2018


Google Invests $550 Million in Chinese E-Commerce Merchant JD.com
Source: GlobalNewswire
Just in case you had doubts that Google is serious about competing with Amazon in retail, consider this: Google just invested $550 million in Chinese e-commerce merchant JD.com. Google doesn’t do much business in China so this is about expanding in other markets and listing JD.com as a seller in Google Shopping. Google also announced several enhancements last week that help retailers display their inventory on-line and drive traffic to local stores. See this from The Street for more thoughts on the JD.com deal.

Adobe Expands Attribution Features
Source: Adobe
Adobe has expanded its attribution capabilities with Attribution IQ, an enhancement to Adobe Analytics that estimates the impact of campaigns in all channels on purchases. The offering includes ten different attribution models and lets users drill into results by customer segments, campaigns, and keywords.


IBM Computer Competes Effectively with Human Debaters
Source: CNET
I could tell you about Tru Optik’s Cross-Screen Audience Validation (CAV) service,
which draws on Tru Optik’s 75 million household database of smart TV viewers to give advertisers detailed information on audience demographics, reach and frequency by audience segment. But I doubt you care. So instead, ponder this: an IBM computer is now competing effectively with human debaters, showcasing skills like marshalling facts and choosing the most effective arguments. In other words: you’ll soon be able to argue with Alexa and lose.

June 20, 2018


RichRelevance Launches Next-Generation AI-Based Experience Personalization
Personalization vendor RichRelevance has launched its next generation of AI-based personalization tools. Key features include dynamic assembly of individual experiences, real-time performance tracking and continuous optimization. A helpful “Experience Browser” overlays the client’s Web site to display data, rules, and results for each decision in context. Marketers can set business rules to constrain the AI decisions and data scientists can draw on system data to define custom personalization strategies.


Automated Data Management: Immuta Raises $20 Million and Crate.io Raises $11 Million
Compared with AI-based personalization, automated data management gets relatively little attention, at least in martech circles. But its potential for solving the data unification problem is huge. Immuta, which marshals sensitive data for machine learning projects, just raised a $20 million Series B.
And Crate.io, an open source SQL database to manage feeds from machines and IoT devices, raised an $11 million Series A.  Now you know.

Mobile Phone Operators Take Baby Steps to Protect Location Data
I have a slew of other items about AI being used for cool things including seeing around corners, rendering 3D objects from photos, and delivering packages via two-legged robots (creepy!).  But let’s get back to reality with a report that several mobile operators were recently caught selling location data with little control over how it was used. The good news is that Verizon, AT&T and Sprint have shut off access to the two companies that were identified as misusing it. The bad news is, they’re still selling it to pretty much anyone else. Apple also recently changed App Store rules to limit apps publishers' access to people’s iPhone contact lists.  So maybe this is progress.

Saturday, June 02, 2018

Is the Bloom off the Blockchain Tulip?

Blockchain is the sort of cool technology that should excite me, but for some reason it does not. Part of my resistance is the whiff of humbug that accompanies so many blockchain-based ventures, whose founders often seem more excited about their Initial Coin Offering than building the actual business. But even ignoring that, I fail to see how the advantages of blockchain will create the revolution its proponents expect.

I’m not the only skeptic. Gartner recently found that just 1% of CIOs have any blockchain adoption and 77% have no plans. GlobalData predicted that blockchain will lose its gloss as projects are shelved or evolve in non-blockchain directions.  Like the Dutch tulip mania in 1637, the blockchain bubble is bound to burst.

Let’s start at the beginning. Blockchain is a “distributed public ledger”, which means it provides a provides a public stream of transactions that are stored in multiple places and can only be updated by verified agents. How the verification happens is a little vague in the discussions I’ve seen, but for now let’s assume that it’s fast, cheap, and perfectly secure. You might want to be a bit more cautious in real life.

The twin advantages of blockchain are that the data can’t be changed once it’s accepted (because it’s stored in multiple places) and the data is public (so anyone can easily see it). To be clear, data can still be encrypted, so blockchain contents can be kept private if the owners wish.

That’s cool in its own nerdy little way, I guess. But in practical terms, the benefit is much lower transaction costs because there’s no need for intermediaries to verify identities or register transactions.  This in turn makes possible things like micro-payments, which aren’t feasible if the cost of processing each transaction is too high, and public inspection of data, which again isn’t feasible if you need to control access for security reasons.  Here we’ll accept another dubious assumption, that the blockchain processing is essentially free. In real life somebody has to pay to verify identities and move, process, and store all that data.

So, what wonderful new things is blockchain supposed to make possible?

• Direct sale of personal data. At least half the discussions of blockchain in marketing propose some form of paying people for their personal data. The usual plan is to get direct payment from advertisers who want to send messages based on your information.  Sometimes the payment would be in return for viewing ads, completing surveys, or taking other actions. I’m hugely skeptical of this idea.  The practical roadblocks have nothing to do with blockchain: they're signing people up, getting them to update their data, and ensuring their data is accurate. Overcoming these depends on paying consumers enough money to make the effort worthwhile. I suspect most consumers won't be bothered, and that advertisers will really be interested in relatively few, high-value individuals.  (These are also the least likely to want to participate.  That some consumers are more valuable than others is never mentioned when these programs are discussed.). Transaction costs are not the problem, so blockchain isn't the solution.

• Loyalty systems and coupons. These also depend on consumers being willing to participate. But they’re familiar programs with proven consumer appeal.  Blockchain makes sense here because transaction costs, verification, and fraud are significant expenses for program operators.  Most blockchain-based loyalty and coupon schemes also propose payment in a cryptocurrency.  But this is probably more important to the promoters than consumers.

• Media buying. The premise for blockchain in media buying is that adtech vendors currently gobble up more than half of every media dollar , and, as Jeff Bezos says, “your margin is my opportunity”. If blockchain let advertisers and publishers connect directly, it could reduce the “adtech toll” significantly. But it's not that simple: each vendor in the adtech space is providing some useful service in exchange for its fees. So any blockchain solution would need to replicate those services or make them unnecessary. That takes more than just accepting blockchain payments.

• Ad fraud and brand safety. Blockchain is often proposed as a way to eliminate ad fraud by ensuring buyers only pay for ads that are seen by real people. It could also ensure that ads are only placed on brand-safe Web sites. These are highly feasible applications: they involve a relatively small number of parties (advertisers and publishers); the parties have existing commercial relationships;  and they all want to cut out the middlemen. One concern is that verifying that ads are seen by real people may require managing billions of individual identities.

There’s also a major scalability issue, since current blockchain networks handle just a few transactions per second.  Ternio claims to have solved this  but their product isn’t released yet…and as I write this, their Web site is disconcertingly focused on promoting their coin sale.

• Content rights. This is paying for commercial use of photographs, music, articles, and other copyrighted materials. Blockchain could easily reduce costs by replacing existing payment mechanisms. It could also streamline other parts of the process, such as recognizing content as it’s used, identifying the user, and connecting the user to the owner.

• Payment processing. This has applications well beyond marketing, although marketers can certainly benefit. Blockchain has good potential to reduce costs and cut out some middle men. As with media buying, blockchain must climb some steep scalability mountains before it can replace processes like clearing stock trades or processing credit card transactions.

• Supply chain. Yes, blockchain can be used to track products from producer to consumer. But it’s not clear that it removes significant bottlenecks. If you’re going to trace a head of lettuce from farm to grocer, the real challenge is having sensors in place to record each step in its journey.  Conventional databases can store the resulting data quite nicely. Similarly, if you want to detect counterfeits by verifying an item’s origin, the biggest hurdle is creating an unalterable physical identifier like an engraved serial number.  Blockchain doesn’t help with that. You might use blockchain to store an unalterable registry of the identifiers, but conventional security methods already do a pretty good job of keeping such data secure.

• And so on.  Here's a nice graphic from Jeremiah Owyang that includes additional blockchain applications.  (Read the original article here.)  Each is intriguing and highly threatening if you're a middleman in that industry.  But in every case, the process can already be done with existing technology or faces problems that blockchain doesn't solve.



My conclusion is that blockchain applications will be more evolutionary than revolutionary. They’ll make existing processes more efficient but not introduce entirely new business models.  The biggest exception is direct sale of personal data, but I don’t think that will happen.

True believers will argue that it’s too early to understand how blockchain will play out. I’ll grant it's impossible to foresee the long-term impact of any major technology. But one way to think about new technology is to imagine a world where that technology is fully deployed: say, where all devices were sentient or communication was free and instantaneous. Your vision won’t get the details right but you will get a sense that things would be radically different.

Try that with blockchain: take a few moments to imagine a world where financial transactions are free and data security is absolute. I'll wait.

How’d it go? Personally, I didn’t see much of a change. Truth be told, financial transaction costs are already pretty low and security is already pretty good. Existing trust mechanisms aren’t perfect but lack of trust doesn’t get in the way very often. It might be nice in some highly abstract sense to be free from central identity authorities but they don’t interfere much with day-to-day living. In any event, most authorities would remain in place in a blockchain world.  Even identity and financial authorities would still exist, even if they were not under central control.

In short, blockchain is interesting and has its advantages. But if you think it will be the biggest change since the Internet, I have some tulip bulbs you might want to buy.

Tuesday, May 29, 2018

Announcing the Talking Stack Podcast on Martech News

Over the past several months, I’ve been conspiring with MarTech Advisor’s Chitra Iyer and Amit Varshneya and industry expert Anand Thaker to produce a podcast devoted to martech news of the week. I’m happy to announce that the first two episodes of Talking Stack were released yesterday, available here.

Why this podcast? Well, there’s an awful lot of martech news every week. It’s covered quite comprehensively by MarTech Advisor, MarketingLand, CMS Wire and other industry publications. I even offer my own thoughts in the CDP Institute Daily Newsletter.

But reporting the news is different from talking about it. So far, Chitra, Amit, Anand and I have had different views on the items we’ve discussed, creating a richer perspective than you’d get from any one of us alone. The round table format also forces us to be brief, creating a higher ideas-to-words ratio than you’d get in a written article, interview or panel discussion. Hopefully that translates into greater value per minute for the listeners as well.

Plus, I won’t hide the fact that doing the podcast is fun. It’s a treat to talk about the industry with others who follow it as closely as I do and who share – or at least tolerate – my sense of humor. Whether we’ll repeat the silliness of the Episode 2 lead-in remains to be seen.

I suppose it also depends on what feedback we get. So do let us know what you think about that and the podcast in general. We look forward to hearing from you and hope you’ll make listening to Talking Stack a regular habit.

Tuesday, May 22, 2018

Adobe's Magento Deal Makes Great Sense

Adobe yesterday announced its purchase of the Magento Commerce platform, a widely used ecommerce system, for a cool $1.68 billion.

That Adobe would purchase an ecommerce system was the least surprising thing about the deal: it fills an obvious gap in the Adobe product line compared with Oracle, Salesforce, IBM, and SAP, which all have their own ecommerce systems. Owler estimates that Magento had $125 million revenue, which would mean that Adobe paid 13x revenue. That seems crazy but Salesforce paid $2.8 billion for Demandware in 2016 on $240 million revenue, giving a similar ratio of I2x. It’s just what these things cost these days.

More surprising was the mismatch between the two business’s client bases. Magento sells primarily to small and mid-size firms, while Adobe’s Experience Cloud products are sold mostly to enterprises. The obvious question is whether Adobe will try to use Magento as an entry point to sell Experience Cloud products to smaller firms, or use Experience Cloud as an entry point for selling Magento to big enterprises. The easy answer is “both”, and that’s more or less what the company said when asked that question on an analyst conference call about the deal. But my impression was they were more focused on adding Experience Cloud capabilities like Sensei AI to Magento. References during the call to cloud-based micro-services also suggested they saw the main opportunity as enhancing the product Magento offers in the mid-market, not selling Magento to big enterprises.

This could be very clever. Selling enterprise software packages to mid-market firms doesn’t work very well, but embedding enterprise-class micro-services would let Adobe add advanced features without asking mid-market IT managers or business users to do more than they can handle. It would also nicely skirt the pricing problems that come from trying to make enterprise software affordable to smaller firms without cutting prices to large enterprises.

The approach is also consistent with the Adobe Experience Cloud Profile announced last month, which uses an open source customer data model co-developed with Microsoft and is hosted on Microsoft Azure. This is also at least potentially suitable for mid-size firms, a market where Microsoft’s CRM products are already very strong. So we now see two recent moves by Adobe that could be interpreted as aimed at penetrating the mid-market with its Experience Cloud systems. Given the crowded, competitive, and ultimately limited nature of the enterprise market, moving downstream makes a lot of sense. Historically, it’s been very hard to do that with enterprise software but it looks like Adobe has found a viable path.

(As an aside: it would make total sense for Microsoft to buy Adobe, a possibility that has been mentioned for years. There’s no reason to think Adobe wants to be bought and the stock already sells at over 16x revenue compared with 8x revenue for Microsoft. So it would be hard to make the numbers work. But still.)

Perhaps the most intriguing aspect of the deal is that Magento is based on open source.. This isn’t something that most enterprise software vendors like to buy, since an open source option keeps prices down. Like other open-source-based commercial products, Magento includes proprietary enhancements to justify paying for something that would otherwise be free. Apparently Adobe feels these offer enough protection, especially among mid-size and larger clients, for Magento to be a viable business. And, Adobe’s comments show it’s very impressed at the size of the open source community supporting Magento, which it pegs at more than 300,000 developers. That does seem like a large work force to get for more-or-less free. Again, there’s a parallel with the open source data model underlying Experience Cloud Profile. So Adobe seems to have embraced open source much more than its main competitors.

Finally, I was struck by Adobe’s comments in a couple of places that it sees Magento as the key to making “every experience shoppable”, an extension of its promise to make every experience personal. The notion is that commerce will be embedded everywhere, not just isolated in retail stores or Web sites. I’m not sure I really want to live in a world where everything I see is for sale, but that does seem to be where we’re headed. So, at least from a business viewpoint, let’s give Adobe credit for leading the way.




Tuesday, May 08, 2018

Will GDPR Burst the Martech Bubble?

Some people have feared (or hoped) that the European Unions’ General Data Protection Regulation would force major change in the the marketing and advertising ecosystems by shutting off vital data flows. I’ve generally been more sanguine, suspecting that some practices would change and some marginal players would vanish but most businesses would continue pretty much as they are. The most experienced people I’ve spoken with in recent days have had a similar view, pointing to previous EU privacy regulations that turned out to be mostly toothless.

But even though I respect those experienced opinions, I’m beginning to wonder GDPR might have a much greater than most of us think. The reason isn’t that GDPR requires major changes in how data is collected or used: by and large, consumers can be expected to grant consent without giving it much thought and most accepted industry practices actually fall within the new rules. Nor will the limited geographic reach of GDPR blunt its impact: it looks like most U.S. firms are planning to apply GDPR standards worldwide, if only because that’s so much easier than applying different rules to EU vs non-EU persons.

What GDPR does seem to doing is create a shake-out in the data supply chain as big companies reduce their risks by limiting the number of partners they’ll work with. The best example is Google’s proposed consent tool for publishers, which limits consent to no more than twelve data partners. This would inevitably lead to smaller firms being excluded from data acquisition.  Some see this as a ploy by Google to hobble its competitors, and maybe they're right. But the real point is that asking people to consent to even a dozen data sharing options is probably not going to work. So even though publishers are free to use other consent tools, there’s a practical limit on the number of data partners who can succeed under the new rules.

A similar example of market-imposed discipline is contract terms proposed by media buying giant GroupM , which requires publishers to grant rights they might prefer to keep. GroupM may have the market power to force agreement to its terms, but many smaller businesses will not. With less legal protection, those smaller firms will need to be more careful about the publishers they work with. Conversely, advertisers need to worry about using data that wasn’t acquired properly or has been mistreated somewhere along the supply chain before it reached them. Since they can’t verify every vendor, many are considering cutting off smaller suppliers.  Again, the result is many fewer viable firms as a handful of big companies survive and everyone else is shut out of the ecosystem.  (Addendum: see this Marketing Week article about data supplies being reduced, published the day after I wrote this post.)

There’s nothing surprising about this: regulation often results in industry consolidation as compliance costs make it impossible for small firms to survive. The question I find more intriguing is slightly different: will a GDPR-triggered reduction in data processing will ramify through the entire adtech and martech ecosystem, causing the long-expected collapse of industry growth?

So far, as uber-guru Scott Brinker recently pointed out, every prediction of consolidation has been wrong.  Brinker argues that fundamental structural features – including low barriers to entry, low operating costs of SaaS, ever-changing needs, micro-services architectures, and many more – favor continued growth (but carefully avoids making any prediction).  My simplistic counter-argument is that nothing grows forever and sometimes one small jolt can cause a complex system to collapse. So something as seemingly trivial as a reluctance of core platforms to share data with other vendors could not only hurt those vendors, but vendors that connect with them in turn. The resulting domino effect could be devastating to the current crop of small firms while the need to prove compliance could impose a major barrier to entry for new companies.

I can’t say how likely this is. There’s a case to be made that GDPR will have a more direct impact on adtech than martech and adtech is particularly ripe for simplification.  You could even note that all my examples were from the adtech world. But it’s always dangerous to assume trends will continue indefinitely and it’s surely worth remembering that every bubble is accompanied by claims that “this time is different”. So maybe GDPR won’t have much of an impact. But I suspect its chances of triggering a slow-motion martech consolidation are greater than most people think.



Monday, May 07, 2018

The Black Mirror Episode You'll Never

I’m no fan of the TV show Black Mirror – the plots are obvious and the pace is excruciatingly slow. But nevertheless, here’s a story for consideration.

Our tale begins in a world where all data is stored in the cloud. This means people don’t have their own computers but can instead log into whatever machine is handy wherever they go.

All is lovely until our hero one day notices a slight error in some data. This is supposed to be impossible because the system breaks every file into pieces that are replicated millions of times and stored separately, blockchain-style. Any corruption is noted and outvoted until it’s repaired.

As he investigates, our hero finds that changes are in fact happening constantly. The system is infected with worms – we’ll call them snakes, which has nice Biblical overtones about corruption and knowledge – that move from node to node, selectively changing particular items until a new version becomes dominant. Of course, no one believes him and he is increasingly ignored because the system uses a reputation score to depreciate people who post information that varies from the accepted truth. Another security mechanism hides “disputed” items when they have conflicting values, making it harder to notice any changes.

I’m not sure how this all ends. Maybe the snakes are controlled by a master authority that is altering reality for its own purposes, which might be benevolent or not. The most likely result for our hero is that he’s increasingly shunned and ultimately institutionalized as a madman. Intuitively, I feel the better ending is that he ends up in a dreary-but-reality-based society of people who live outside the cloud-data bubble. Or perhaps he himself has been sharded and small bits begin to change as the snakes revise his own history. I can see a sequence of split-second images that illustrate alternate versions of his story co-existing. Perhaps the best ending is one that implies the controllers have decided the episode itself reveals a truth they want to keep hidden, so they cut it off in mid