Dentsu Aegis’ Chief Strategy Officer: Digital Has Fundamentally Changed The Economic Model

Dentsu Aegis wants to be a 100% digital-economy business by 2020. To get there, the agency appointed Nigel Morris to serve as the company’s chief strategy and innovation officer in June.

Morris will focus on the “important, not the urgent,” in the new role, an upgrade from his previous position as head of Americas. Over the next two to three years, he plans to ensure the agency achieves its ambition of being engineered for the digital economy.

“Consumers and producers have equal knowledge and therefore equal power,” Morris said. “The way you need to operate changes. You need to really understand who your customer is and what their needs are.”

That understanding requires agencies and brands to shore up their data assets, a key driver of Dentsu Aegis’ acquisition of Merkle a year ago.

“We had a vision of the [data] capabilities required to meet our goals and made the assessment that we couldn’t get there fast enough,” Morris said. “[Merkle’s] CRM capabilities allow us to put people at the center of decision-making.”

Morris chatted with AdExchanger about how Dentsu Aegis is changing to meet today’s digital demands and his take on why agency stocks are struggling.

AdExchanger: It’s not a great time for agency holding company stocks. What’s going on?

NIGEL MORRIS: There are not many huge advantages in getting old. However, one of the advantages is you live through cycles. I’m completely sanguine about agencies and the agency business model. Over the years, we have demonstrated we are a very resilient business model. We are a people business, and we have a bias toward implementation. We do things.

When have you seen this cycle play out before?

In 2005, I was doing an investor presentation, and someone kept asking me what I thought was a strange question about the agency model.

It turned out that most people in that room had a model that said agencies were going to be completely disintermediated. Every single advertising and marketing message and action would run through the Google platform by 2015. Therefore, what role would agencies have?

One, the history of humankind says that will not happen, let alone whether legislatively you would be allowed to do it. It’s nonsense. But even if that did happen, the role of agencies is neutrality.

If you ask Google, the answer is, quite rightly, Google. If you ask Facebook, the answer is Facebook. The role of the agency is to answer, “How should I be investing in data? How do I allocate my dollars across channels? How does TV work with Google?”

Our only business model is our clients’ success. Over the next year and a half, it’s really important for agencies to re-establish their sense of that role and not get too sidetracked. 

What about the idea that agencies are hurting because their biggest clients, often CPGs, are being disrupted?

The biggest issue is that a lot of big, traditional companies who have advertised a lot are being disrupted. That definitely creates an issue in the marketplace.

You have traditional media, which everyone understands is less effective every day, every month. There is a slight crisis of the moment within digital marketing. Part of that is born out of a lack of understanding. Part of it is born out of the fact that there are bad actors in a bewilderingly complicated ecosystem that has developed.

But the underlying thing is that if companies put too much faith in the idea that if they had 30% digital in their spend, that’s better than 25% of my spend, rather than asking the question, “What am I doing with it?”

This goes back to the fact that the fundamental economic model has changed, and therefore you need to understand your customers.

How do traditional companies understand their customers better?

CPGs and a number of traditional companies don’t have access to first-party data. You would go through the retail channel.

If you are spending money in a digital environment, you’re targeting and building segments out of real people. You generally understand who I am, what I did and whether I was satisfied or dissatisfied in an opt-in and transparent way.

That’s a complete reinvention of how the business works. A lot of digital economy businesses are not complaining about how the digital marketplace operates, because they are operating in it in a much more native way.

Programmatic – where brands can use their data – is having a real reckoning at the moment. Are these growing pains or something else? 

Taking out all the hype and noise, the world is increasingly going to become programmatic. Humans can’t reach consumers in real time, and clients will see more value and success as automation gets smarter. What you need to be successful at programmatic is a mastery of data – ideally first-party data. If you don’t do that, then you are subject to the bad actors in the ecosystem.

Why has programmatic attracted bad actors?

If you think of pure network theory, the strength of a network is dependent on the connection. But the more connections it has, the more vulnerable it is. Therefore, you have all these issues that have come up, like bot fraud.

The interesting thing is that it’s really difficult for a bot to impersonate a real person, but it’s a lot easier for them to impersonate the cookie. If you are relying on cookie and device IDs, you are more vulnerable.

With viewability, at least we know. I didn’t used to know when you got up for a cup of tea [while watching TV]. You had a panel of 10,000 people in the whole US. But, we trusted it – it doesn’t mean it’s right. The slightly shocking thing with digital is that the facts and the reality are right in front of us.

This interview has been condensed and edited.

This post was syndicated from Ad Exchanger.