state of digital marketing 16 slideshare vfinal€¦ · 02/12/2016 · luma’s singular industry...
TRANSCRIPT
LUMApresentsourannualStateofDigitalMarketing,whichcoversourviewsonthe
market,industrytrends,andthefutureoftheecosystemwithaspecificfocuson
digitalmarketing.Wehopeyouenjoyit.
Meet the Senior LUMA Team
Founder & CEO Partner Partner Partner CMOTerry leads strategy,banking and content for LUMA.
He’s also head comedy writer and performer.
Brian is LUMA’s marketing technology guru.
He excels at coaching both little league and big clients.
Mark runs M&A strategy and execution for LUMA.
He’s never met a term sheet he couldn’t improve.
Dick leads LUMA’s mobile and gaming banking coverage.
You can find him holding court every February in Barcelona.
Gayle runs LUMA’s marketing, events, and partnerships.
She may be new, butshe’s alreadyformidable.
Terence Kawaja Brian Andersen Mark Greenbaum Dick Filippini Gayle Meyers
LUMA’ssingularindustryfocusisontheintersectionofMedia,Marketing,and
Technology;thesectorsofDigitalContent,AdTechandMarTechallseen
throughthelensofmobile.
Afterarockystarttotheyear,MarTech stockpriceshavestabilized.AdTech
stocksshowstrongerperformancewhenincludingtheindustry’snewest
entrant,TheTradeDesk,whichbegantradingpubliclyinSeptember.
Onan“apples-to-apples”basis,excludingthisyear’snewentrantTheTrade
Desk,weseetheAdTechsectorinnegativeterritoryyear-over-year.
Beyondthestockprices,whenwedividebyrevenueandlookatmultiples
overthesameperiod,wenotestablestockpricesbutgrowingrevenuesyield
decliningmultiplesforMarTech.
IncludingTheTradeDesk,whichiscurrentlytradingwellaboveitspeers,
multiplesinAdTechappearunchanged.
ExcludingTheTradeDesk,AdTechmultiplesaredownalmost50%while
revenuescontinuetogrowmeaningfullyforbothAdTechandMarTech.
RevenuegrowthremainstheprimarydriverofmultipleacrossbothAdTech
andMarTech.
SinceourlastDMSWestayearago,weseenonlyoneIPOintheAdTechand
MarTech spaces.TheTradeDeskpricedinSeptemberandisstillhovering
aroundits$1billionvaluation,ararebrightspotforpublicAdTechcompanies
andperhapsasignalofmoretocome.
Lastyearwenotedapalpablechangeinsentimentinthefunding
environmentandthischangeremainsevidentinthedatawithventurecapital
fundingdownsignificantlyinMarTech,andevenmoresoinAdTech.
Thatsaid,differentiatedcompaniesarestillfindingcapital.Infact,over30
industryleadershaveeachraisedatleast$20millionsincethelastDMSWest.
Theonerealbrightspotinthemarket:M&A!We’veseenalmostascoreof
scaledstrategicexitsinthelastyear.
Interestingly,valuationspaidforthesescaledstrategicexitshavebeenata
meaningfulpremiumtocurrentpublicmarketvaluations.
Whatisdrivingthisactivity?Agrowingpoolofstrategicbuyers.Wesee
continuedactivityfromtheusualsuspectsliketheenterprisesoftwareandAd
Tech,butanumberofnewentrantsarealsomakinganactivepushintothis
space.
Telcoshavebeenveryactiveastheyaimtomonetizetheirlargecustomer
basesandenterthefastgrowingdigitaladvertisingmarket.Theyhave
alreadymadeanumberofsignificanttransactionsjustthisyearalone.We
expectmoretocomeinthenearfuture.
Privateequityhasalsoenteredthespace.Withpredictablerevenues,high
operatingleverage,andhealthymargins,somecompaniesintheindustryfit
thefinancialprofilethatintriguesfinancialbuyers.
Lastly,internationalbuyers,mostnotablyfromChina,havebeenvery
acquisitivethisyear.
Interestingly,wehaveseenprivateequitybuyersstepupforMarTech assets,
payingmultipleswetypicallyassociatewithstrategicbuyers.
AndChinesebuyershascomeonstronginAdTechwithanumberofscaled
exitsjustinthelastquarter(e.g.Smaato,Media.net,andAppLovin).
Inthepast6-12monthstherehasbeenincreasingfocusandawarenesson
artificialintelligence(AI).However,asForbessuggested,wearenowina
periodofskepticism(“disillusionmentandchaos”)ofAIasthemarket
experimentswithAItodeterminewhetheritprovidesabenefit– ornot.But
wefirmlybelievethatwewillbeenteringthe“amazement”phaseverysoon.
TheAImarketisstillveryearly.Theaboveprojectionremindsusofthe
programmaticadvertisingmarketin2010whenmarketerswerefirst
experimentingwiththetechnology.Whentheindustrysawtheeffectiveness
ofprogrammatic,themarkettookoff– anditisnowabout2/3ofthedisplay
advertisingmarket.WebelievethesamedynamicwilloccurwithAIasitgets
appliedmoretoAdTechandMarTech andtransformstheindustry.
Wearen’ttheonlyonesbullishaboutAI.TechgiantslikeGoogleandIBMare
makingsignificantinvestmentsinthistechnology.Googleisplanningtoapply
machinelearningacrossallitsproducts,andIBMismakingthe“biggestbet”
initshistoryaroundcognitivecomputing.
EventhePresidentisweighingin.AIwillbeappliedacrossamultitudeof
industries:automotiveandtransportation(self-drivingcarsandlong-haul
transportation),healthcare,researchand- ourfocusarea- marketingand
advertising.
AIhasbeenappliedtothemarketingindustryforsometimebutmainlyatthe
“edges”,meaningnarrow,specificusecases.Forinstance,indisplay
advertising,AIhasbeenappliedtobid/creativeoptimization,andpredictive
analyticshavebeenutilizedforreal-timecontentinsertionforwebsitesand
email.WebelievethatAIwillnowmovetowardsthe“core”tocoordinate
activitiesacrossthesechannels.Moreonthislaterinthepresentation…
InthepastAdTechandMarTech wereverydistinctindustries,withlittle
connectionbetweenthetwo.AsAdTechevolvedintodata-drivenadvertising
andMarTech intodata-drivenmarketing,wehaveseenthedatalayer
becometheconversionpointfortheseindustries.ThisconsistsofDMPs,
online/offlinedata,andplanningandattributionsystems.
Twosub-trendsthatarepartofthelargerAdTech/MarTech convergence
trendare:1)theevolutionofdatatechnologies,specificallyDMPs,and2)the
riseof“identity”solutionsasacriticallystrategiccapabilityinthemarket.
WhenDemdex,oneoftheearliestDMPs,launchedin2010,itwasprimarilya
cookiemanagementplatformfordisplayadvertisingforpublishers.Inrecent
years,thecapabilitiesandusecasesofDMPshaveexpanded.DMPsnow
includeadditionalfunctionalitysuchasdataanalytics andtagmanagement
plusrobustmobiledatamanagement.Andusecaseshaveexpandedfromjust
displayadvertisingtoareassuchaswebpersonalizationandA/Btesting.
IthaslongbeenchurchandstatebetweenCRMsystemsandDMPs,
separatingpersonallyidentifiableinformation(PII)fromanonymousdata,but
wearenowstartingtoseethesedatasetsstarttoblendwithinplatforms
suchasDMPs.ItwillbeespeciallyinterestingtoseehowSalesforceintegrates
Krux oncethatacquisitioncloses– andwhethertheycombinePIIand
traditionally“anonymous”datasets.
TheDMPhasbeenknownasoneofthekeysoftwareplatformstoenable
targetingfordigitaladvertising.WiththeevolutionofDMPcapabilitiesand
usecases,itnowsits“atthecenterofthemarketingcloud”asthe“hubof
enterpriseintelligence.”
DespitetheevolutionoftheDMP,wearestillintheveryearlyinningsofthis
industry.LargeenterprisesareonlyjustbeginningtoimplementDMPsand
managingtheirfirst-partydataassetseffectively.Onetrendwebelievewill
emergeisadramaticriseofsecond-partydatasharingamongcompaniesin
complimentaryindustriesaswellasthegrowthofdataco-ops.Adobeis
pursuingthisopportunityaggressivelywithitsAudienceMarketplace.
IfyouobservetheriseoftheMarketingClouds,youwillnoticethattheyhave
beenveryfocusedonconsolidatingpointsolutions(Phase1)– whichmakes
sense.Asmentionedearlier,DMPcapabilitiesandusecaseshaveexpanded.
ESPssuchasExactTargethavealsoevolved,addingSMSandsocialchannels
totheirplatforms.Butacrossallthemarketingclouds,thevariouspoint
solutionsarestillfairlychannel-focusedwithonlyminimalintegration.
WebelievetheMarketingCloudswillnowaggressivelymoveto“Phase2”,
whichisto“orchestrate”activitiesacrosschannelsinordertooptimizethe
customerexperience.Thisorchestrationlayerwillincludebothrules-driven
andAIapproachestohelpmarketersaccomplishtrue1:1marketing:sending
therightmessagetotherightpersonattherighttimethroughtheright
channel.ThiswilldrivefurtherconvergenceofAdTechandMarTech.
“Identity”isakeyindustryfocussinceitiscriticaltobeingabletocoordinate
thecustomerexperience.Identityofferingshavebeenadvancingrapidly,with
incumbentsfurtheringtheirofferingswhileothershaveenteredthemarket.
WehavelongtalkedaboutOraclebeingthemostactiveinbuildingitsidentity
solutionswithits“DataCloud”,butthereareothermajorplayersbuilding
robustidentitysolutions,suchasAdobe,Neustar andAcxiom.
The“identitygraph”,whichorganizesmultipledatasets– purchase,demo,
behavioral,digitalIDsandlocation– foreachindividual,hasemergedasa
keyidentityoffering.Theidentitygraphsnotonlyenablesophisticated
targetingformarketing,butalsofeedintoplanningandmeasurement
applicationsaswell.Wewillcontinuetoseesignificantinvestmentinidentity
graphsfromtheMarketingCloudsandstartupsalike.
Predictivemarketing platformsemergedafewyearsagoandarebeing
adoptedbye-commercecompaniestoenable1:1personalization.These
systemscombinedatafrome-commerceplatforms(providingpurchase
historyforeachuser),browsingdata(short-termbrowsingbehavior)and
othersystems.Combinedwithapredictiveanalyticsengineandaproduct
feed,theseplatformsthencoordinatepersonalizedcontentacrosschannels.
Mobilemarketingautomationcompaniesemergedduetodynamicsinthe
appeconomy:1)consumersaredownloadingfewerapps,2)itisexpensiveto
acquirenewusers,and3)mostappsarefreeandapppublishersstruggleto
monetizeusers.Theseplatformscreateprofilesoneachuser,andcoordinate
triggeredmessages:in-app,pushnotificationsandemails.Somealsohelp
optimizetheappwithanalyticsandA/Btesting.
Whatdo“predictivemarketing”and“mobilemarketingautomation”
companieshaveincommon?Theybothhaveadatahub/CRMsystematthe
core,andalsoprovidetheorchestrationforinteractionswitheachconsumer.
UnliketheMarketingClouds,withpointsolutionsthatneedorchestration,
thesehaveorchestrationatthecore.Iftheyneedtoaddanewchannel,such
asemailorSMS,theygenerallyuseOEMsystemssuchasSendGrid orTwilio.
Wehavetalkedaboutaccount-basedmarketing(ABM),deliveringtheright
messageattherighttimetotherightaccount,andpredictiveanalytics,which
foldsintoABM.Theybothhavegrowndramaticallyinthelastyear.Thenext
keytrendtowatchistheconvergenceofMarTech andSalesTech.WhileAd
TechandMarTech convergenceappliestoB2Cmarketers,MarTech andSales
TechconvergenceappliestoB2Bmarketerswithdirectsalesteams.
Thereisnowaburgeoningecosystemofcompaniesfocusedonbuildingtools
forkeystepsandworkflowswithintheentiresalesprocess.Wehavecreated
theSalesTechLUMAscape tohelpmapoutthegrowingecosystem,whichyou
canfindonwww.lumapartners.com.
CRMsystemslikeSalesforcearefocusedonthemanagementlayerofan
organization,nottheindividualsalesperson.Inthelastcoupleyearswehave
seenanincreasingnumberofstartupsemergethatarefocusedonmaking
theactualaccountexecutiveorSDRmoreeffectiveathis/herjob.Investors
haverecognizedthisaswell,asweareseeingmoreVCinvestmentand
growthinthisarea.
Duringtheearlydaysofperformancemarketing,theindustrywasfilledwith
veryquestionablebusinessesfromtoolbarcompaniestoincentivesites.Not
onlydidthesecompaniesnotdriveincrementalsales,buttheyalsodrove
spam,adwareandotherproblems.Whenperformancemarketingis
mentionedtoday,manystillconjureupimagesofthesequestionable
practices.
Butwhatdefinesperformancemarketingtoday?GoogleandFacebook.
InMay,MorganStanleyreportedthatGoogleandFacebookcapturedover
85%ofincrementaldigitaladspendinQ12016.Thisisaverytoughdynamic
fortherestoftheecosystembattlingovertheremaining15%.Arecent
analysisconcludedthatGoogleandFacebookactuallycapturedover103%of
thegrowthinthefirsthalfof2016.Inotherwords,therestoftheindustry
mayactuallybeshrinking.
Butnotallislost.Marketerswantperformanceandifavendorcandeliverit,
theywillcontinuetospend.Criteo hasbuiltascaledbusinessbyservicing
advertisersdirectlyandusingCPCpricing.Customersspenduptotheefficient
frontier,justlikesearch,resultinginalways-onadspend.AppLovin hasbuilta
tremendousbusinesswithstaggeringgrowthandprofitabilitythrough
developingterrifictechnologyandusingpricingthatalignswithitscustomers.
WehavewitnessedtheevolutionofpricingmodelsfromCPMtoCPCtoCPI,
andultimatelyCPA,drivingtheactionmarketersaretryingtoachieve.By
aligningpricingwithitscustomers’desiredoutcomes(anddevelopingrobust
technologytodeliverthoseoutcomes),leadingperformancemarketing
companiesareabletocreateterrificscaled,predictableandprofitable
businesses.
WehearsomepeoplesaythatCriteo isjustanadnetwork.However,let’s
compareCriteo tothepublicadnetworksandalsotothemostsuccessful
SaaScompany:Salesforce.In1H’16,Criteo hadhigherrevenuegrowthwith
lowerS&Mcostasapercentageofrevenue– highlightingitspredictabilityof
revenuesandhighoperatingleverage.Thepublicadnetworks,incontrast,
generallyarenotgrowingandhavehighercostsingeneral.
LUMAInstituteisthedivisionthatincorporatesourresearch,contentandevents
initiatives.ThemissionoftheLUMAInstituteistoprovideeducation,insightsandmarket
developmenttoallconstituentsofthedigitalecosystem.Wepartnerwithmedia,
marketingandtechnologycompaniestoprovideadviceandeducationatleadershipoff-
sitesandcustomereventsonacustomizedbasis.IfLUMAcanhelpyourorganizationsort
throughthiscomplicatedanddynamicsector,contactGayleMeyersat