Your Programmatic Portfolio Management Strategy is Wrong
Slicing and Dicing Budgets Isn’t Mitigating Risk
We are not Wall Street traders. We are Media Technologists. We love to think of ourselves as the Don Drapers and Jordan Belforts of the world, but truthfully we make more decisions about technology these days than we do about Creative or Media itself.
Don’t get me wrong, we are media traders — but it’s only about 5% of the actual job that marketers perform on a day to day basis and these important decisions start well before media is ever bid upon. It starts at the technology layer. The problem is that we model our decisions and investments by applying Modern Portfolio Theory when we should be using IT portfolio management.
The current strategy tells us how we should divest and diffuse budgets instead of what we should continue to invest in.
Let’s look at three different portfolio management styles (1) Financial (2) Device/Technology (3) Media
Financial Portfolio Management
Modern Portfolio Theory focuses on the diversification of investments - the combination mitigates the risk of one investment alone. And like the Adobe-owned company of the same name, Financial Portfolio Management tries to find the “efficient frontier” where return is maximized while risk is minimized.
Device/Tech Portfolio Management
This is less of a proven/educational theory and more of my own opinion based on the bubble I live in that is SF. How many of us have all three of these: MacBook Air, iPad, and iPhone? We practice portfolio management to mitigate risk in other facets of our lives and businesses, but when it comes to technology and devices we do the opposite thanks to the ease of use and user experience of having one operating system, one platform, one experience. So why are we so nervous to use this for adtech and why do we use a financial theory to apply to a technology management strategy?
Media Portfolio Management
When looking at investing marketers’ budgets across channels, publishers, and technologies usually weighs the following factors:
Level of Effort (LOE) | Risk | Return For example Retargeting would be a media choice with a low LOE + Low Risk + Avg Return. On the High LOE + Avg Risk + High Return would be Native Ads. etc.
What is “risk”?
In the past, “risk” in media was about publisher/asset risk, but it has shifted now to technology risk. The “risk” factor in the equation for media planning isn’t meant to be tech related. A piece of tech is not an asset risk. Asset risk is different, but we’re misconstruing how we approach programmatic to make it more efficient and treating it like asset risk instead of technology investment.
We don’t like solutions, but Wall Street does
We’ve seen players in the space have strong IPOs with “stacks” and players that are focused on a particular piece of the conversation fall short. Wall Street doesn’t understand why we slice and dice responsibilities, but our industry gives players in the market that house more than one piece of tech under one hood a bad rap.
We have definition problems, cannibalism, and methodology issues in our industry and one of the biggest reasons is because of this idea that if you have four DSPs, two PMDs, and first/3rd/and 4th party data mixed together to target and measure everything then you’re mitigating risk. Using four different algorithms to bid and measure activity creates a complicated mess — not media efficiencies.
DMP // DSP // CRM System // Onsite Analytics // Ad Serving // Tag Management — Is it your stack or obstacle?
The systems marketers need to make business decisions based off of require technical resolution — not a dissemination of asset risk. So we use a financial methodology for mitigating risk, when we should be using a technology approach. Startups might come and go, but the languages and integrations will remain. JSON won’t die because an adtech company goes out of business. But if you try to mitigate the investment you’re making with a particular adtech company by investing a different piece of your marketing responsibilities with a second company in case the company goes under or because your media planner days told you it’s not a good idea to invest so much money into one publisher — then remember this: adtech firms (real ones) aren’t publishers on a media plan. It’s not just one line item. Don’t spray and pray your tech efforts because you don’t feel comfortable betting on an adtech company to deliver on your video, display, mobile, CRM, etc. — use as much resources as you can from one and build out the stack from there to create the whole story. Don’t build a stack to sleep well at night and because it’s what we were trained to do in “traditional” digital media planning.
