Complexity Vs. Simplicity: Betting On The Future Of Marketing Technology

“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Auren Hoffman, CEO at SafeGraph.

If you are going to start a new company or grow an existing one in the marketing technology world, you need to first place a bet on the future.

Will the future be more complex or simpler than it is today? Your strategy as a marketing technology company will greatly depend on where you think the future of the world is going.

Marketing technology landscape is certainly much more complex today than it was 15 years ago. Will that continue in the next 15 years or will the trend reverse?

There are three forces that determine complexity vs. simplicity in mar tech: regulatory rules, number of vendors and standardization.

1. Regulatory rules

Overlapping regulations from different jurisdictions almost always significantly increase complexity. Compliance almost always increases complexity.

An example from the finance world: The Sarbanes-Oxley Act of 2002 made operating significantly more complex than it was in the 1990s. That affected a lot of players in that industry.

Similarly in the marketing industry, the upcoming General Data Protection Regulation (GDPR) has the potential to substantially increase complexity because of the myriad of overlapping rules and compliance burdens. But depending on how you see the world, you could also make a case that this could reduce complexity in the long-term by creating a common standard (see standardization section below).

In the US there is a big movement to regulate social media.  Your business’s future may depend on what happens with regulation and compliance.

2. Number of vendors

The number of marketing vendors used by the average company has increased 10 times in the last 10 years.  This had made the marketing world incredibly complex (insert Lumascape joke here) and daunting.

When we started LiveRamp, we bet the entire company on this trend. Vendor proliferation would be good for LiveRamp. Vendor consolidation would be bad for LiveRamp. Luckily for us, we predicted the trend correctly and built a middleware product that promoted and thrived in that trend.

Getting the macro – where the market is going – right can end up being much more important than getting the micro – executing on the plan – right, especially if most don’t believe your conclusions about the market (when we started LiveRamp, most people in mar tech believed massive consolidation was coming).

In the next 10 years, you need to make a bet whether the trend of vendor proliferation will continue. Or will we see a counter-trend of vendor consolidation?

3. Standardization

Standardization has the potential to significantly reduce complexity.  The complexity vs. simplicity axis of an industry can often depend on what happens in standardization.

For example, if every electronics product charged and sent data using a micro USB cable, that could be very good for consumers but very bad for companies that make money selling cables.

We have seen a proliferation of important marketing standards in the last few years including RTB, header bidding, Ads.txt, viewability and more.

One way to predict if standardization will happen is to look at the most powerful players to see where they agree. The more they agree on an issue, the more likely we will see standardization. For instance, there currently seems to be a lot of agreement around fighting fraud amongst the most powerful players in the advertiser ecosystem.

Another lens is to look at the standard-setting bodies, such as the IAB, to see how powerful they are. Very powerful bodies can push important standards. Conversely, expect logjams from standard-setting bodies with diffused power.

Preparing for the future

Some scenarios to think through:

• If you believe native advertising will continue to grow, you are betting long on complexity.
• If you believe RTB will continue to grow, you are betting long on simplicity.
• If you believe the iOS IDFA and the Android Advertiser ID will continue to be persistent device IDs, you are betting long on simplicity.

If you are an executive in the marketing technology space, it is not enough to execute your plan effectively. You also need to accurately predict the future. Yes, you need to be a modern-day Nostradamus.

But even if you predict a broad trend, a reverse trend could be happening in your piece of the technology stack. Making the right bet in your microenvironment is really important. For instance, the advent of header bidding a few years ago, which resulted in more simplicity, had an adverse effect on many supply-side platforms that were set up to take advantage of growing complexity.

Follow Auren Hoffman (@auren) and AdExchanger (@adexchanger) on Twitter.

This post was syndicated from Ad Exchanger.