DIGITAL MARKETING HUB v2.0 - AdExchanger

Digital Marketing Hub v2.0
BMO Capital Markets
hurdles and challenges around tablets, but it has also shown Google’s ability to develop and
scale IP platforms and serves a foundation for incremental ad dollars (even if they are lower
priced).
Agencies
As social networks and smartphone usage increases, agencies have the opportunity to
capture a greater share of clients' spending as they increase budgets for owned and
earned media. The concept of paid, earned, and owned media is not new, but we believe it is
becoming more important. Its components are:
• Paid media: spending whereby a brand is paying a media or marketing services provider
to deliver an impression to a consumer. For example, a 30-second TV commercial, an
online banner ad, or a direct mail campaign. The primary cost of paid media campaigns is
the money paid to a media or marketing services provider to deliver the impression, while
agencies are paid a much smaller fee to provide the business services for planning, creating,
and executing the paid campaigns.
• Owned media: includes a brand’s owned assets where marketing messages can be delivered.
For example, a branded website or mobile app. The primary cost of most owned
media is the money paid to build and maintain a branded media platform; this could be
managed by in-house staff and/or an agency, either of which can use off-the-shelf technology
solutions and/or develop proprietary ones.
• Earned media: traditionally earned media was focused on public relations, as it represents
spending whereby a brand is aiming to help fuel its customers’ conversations and
“word-of-mouth” around the brand. The use of free social media platforms to deliver information
to those who have “liked” or “follow” the brand creating new earned media
opportunities that agencies – including PR – are helping clients leverage.
Agencies (of different flavors) are the traditional CMO advisors on all three types of media;
however the latter two can offer very different economics. We present a hypothetical
example of two brands in Exhibit 3 below. We assume both brands have a total budget of
$100 million to spend. Brand #1 uses 100% paid media (for this example, we’ll assume its all
primetime TV advertising). Brand #2 instead contributes 80% of its budget to primetime TV
and 10% to mobile and social marketing each. For the mobile portion, the funds are split between
buying mobile display ads (paid media) and having an agency build multiple free mobile
apps (owned media) for iOS, Android, and other mobile operation systems. The 10% social
budget is also split: this time between paid social display ads and fees for an agency to
create a free social presence (where earned media can flourish) for Brand #2 and update it
regularly with news about product updates, viral videos, promotions, etc.
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Financial Group
9
June 7, 2012