Quote:
Originally Posted by 10023
Shawn, to what extent do you think that Amazon can, by virtue of its presence, elevate the right host city (like a Boston or Chicago) into the global top tier of ad tech centers (thereby rendering that question somewhat moot)?
Or is it more like the example of Charlotte, which is at best a third tier financial center despite having Bank of America's HQ?
In other words, how much does the addition of one of the biggest fish move the needle in that industry/ecosystem?
|
Complex question. It comes down to how big of a presence overall media has in the market, not just ad tech. Let me explain.
Media owners are wholesale migrating to digital - this isn't new, we all have been aware of this for the past decade. But the movement has accelerated among the major glossies like Condé Nast and Hearst, and the major holding companies have finally accepted that over-the-top, non-linear delivery will be the norm moving forward. This means that traditional advertising revenue streams are drying up, while new ones are opening (non-live event TV rates are globally tanking, whereas digital premium video placements now go for $60-$70 CPM, which is 1000%+ price inflation over the past 5 years alone).
Tier 1 advertisers now tend to care about three things when it comes to digital media: is it premium? is it addressable? is it brand-safe? Premium meaning things like 100% 1st fold in-view (not 5 folds down) on a top portal or glossy site; Addressable meaning there is ad tech in place to allow granular segmentation and targeting; Brand-safe meaning the placements appear in context appropriate for the brand's image. If a media property can tick all three boxes, the price of this Goldilocks-zone media won't be a barrier to booking. This is because supply of this type of media is still relatively scarce, in any market.
Amazon sits in a pretty unique position. It is both a massive supplier
and purchaser of Goldilocks digital media. Amazon has one of the most developed "stacks" in the industry - they have the most thorough set of addressable consumer-purchase data in the world for all the markets brands care about save China, which they make available to advertisers via their DMP (data management platform, which sorts, categorizes and segments user data), and they are on any given day one of the world's largest suppliers of digital inventory, which they pump into their own and other partner SSPs (supply-side platforms, which allow publishers to manage their media yield by setting floor and ceiling prices). Amazon is a large enough publisher to also have direct inventory deals with many of the world's largest DSPs (demand-side platforms, where advertisers go to buy placements based on segment and audience data crunched in the DMP). Amazon needs to work with the big DSPs to ensure it can hit as close to 100% run rate as possible (otherwise they're just leaving money on the table). And they can never own their own DSP, as the DSP functions as a price arbiter for
all media, not just Amazon media. Meaning Amazon always will have to rely on third party partners to move a big part of their inventory.
The important thing to keep in mind is that Amazon (and Google / YouTube, and Facebook) all operate within the Agency-Media Rep framework. This means that Amazon will not go directly to a brand and strike a deal; instead, they go through the brand's media agency of record. Amazon doesn't have a direct deal with P&G - Amazon has an absolutely amazing deal with P&G
via Omnicom. Unilever has an almost-as-awesome deal with Amazon
via GroupM. And Amazon also works with both of these agencies
on Amazon's behalf (meaning Amazon is the client) to better monetize their own properties and to meet their own marketing-communications strategies, especially in new markets where the OMDs and GroupM/WPPs of the world have been operating for 30+ years already.
So Amazon needs the big media owners and the big media agencies in order to work with the Tier 1 brands and their $billions in ad budgets. The ad tech makes up the entire delivery ecosystem for the most profitable part of Amazon's business, especially on the demand-side. But the "demand" here is largely gate-kept by agencies, and not unlike high finance, personal relationships between leadership among media owners and publishers, ad tech, and the agencies make or break where spend gets funneled.
So to answer your question: in most cases, Amazon would not elevate the HQ2 city into an ad tech center, because Amazon is just one admittedly big player in an even bigger field. GroupM, Omnicom, Interpublic, and/or Publicis are not going to up and leave New York City for wherever HQ2 goes. The ad tech giants like AppNexus, Pubmatic, Xaxis, or The Trade Desk aren't leaving New York or Boston either. None of the big media holding companies are leaving New York. The corporate media cluster in NYC exists for the same reason the finance cluster does. This is where the "Amazon hires from anywhere, the local talent pool doesn't matter" line doesn't gel with the reality I live every day: ad tech people are in extremely short supply. I have a bunch of open head counts now for both execution-level and manager-level positions, and the salaries are ridiculous - still cannot fill them, because of scarcity. People jump from one ad tech company to the next, doing the "agency dance": 1 year here, then negotiate a better salary at a competitor and move there for a year; reverse and repeat. Ad tech people don't move to a market where there's only one job option, even if it's as big as Amazon. New York, the Bay Area, and Boston are the three markets in the US where ad tech clusters exist, not just one company. New York is the only market where an ad tech cluster sits in many cases
in the same building as the world's largest media owners
and advertising brands.
And to your point, Charlotte didn't become a new finance cluster just because BOA moved there.
Prev
Linear Mode
