A new type of media agency that uses predictive analytics and artificial intelligence to help clients decide where they should be spending their ad dollars launched in the US last week, with the aim of challenging the traditional agency business model in order to pick up big clients.
Blackwood Seven was founded in Copenhagen in 2013 but has now entered the US market, thanks to the acquisition of performance marketing agency Two Nil, which has a roster of clients including Dollar Shave Club, Groupon, Wix, Zillow, Blue Apron, and The Honest Company.
Speaking to Business Insider, Blackwood Seven’s chief analytics officer Dr Michael Green explained that the company doesn’t rely on “gut feeling” to make media decisions on behalf of its clients.
Instead, Blackwood Seven is a software platform, which charges clients a software fee, rather than taking an agreed commission on total media spend like normal agencies. Nor does the company make bulk ad spend commitments to media owners or buy media slots in advance and sell them back to its clients.
The platform allows clients to use automated processes to buy across internet and with traditional media such as TV, print, and billboards (where media owners have a real-time bidding offering).
The algorithm picks the optimum media mix by predicting a forecast of the expected business results of a media plan. Clients also plug in all their transactional data to determine, in near real-time, which of their media investments are giving them the best returns once they have placed their ad spend. The machine learning aspect works in a similar way to Google’s self-driving cars: it becomes more intelligent the more data you feed it.
Carl Erik Kjærsgaard, Blackwood Seven cofounder and executive chairman, said: “We don’t care about all the ad dollars between a client and a media owner as it’s not part of the equation. We are very different from the existing media agency: We recommend [media] using AI, we help with buying, but the revenue stream we don’t touch and because of that, we’re really transparent as we earn all our money through the software platform.”
Blackwood Seven caught the attention of the German ad market in February this year when it won the bulk of Volkswagen’s digital account from WPP’s huge media agency MediaCom. Its other clients include Unibet and Danish companies Coop, Nykredit, and BRF Kredit.
The company launches into the US at a time when the media agency sector is still reeling from a report that alleged agencies have been systematically padding their profits by using non-transparent practices such as taking rebates from media owners and not disclosing them to clients.
The 58-page report, commissioned by the Association of National Advertisers (ANA) and published earlier in June, was the result of an eight-month probe into the sector by investigative consultancy K2. The ANA now recommends marketers “meticulously review” all the terms and conditions in their contracts to ensure their advertising dollars are being spent in their best interests.
Agency groups, meanwhile, have denounced the report’s findings. The 4A’s, which represents advertising agencies in the US, said the report had “immense shortcomings” due to its “anonymous, inconclusive, and one-sided” nature.
It remains to be seen what the real (if any) effect of the report will be on US media agencies: One potential scenario could be that some marketers look to review their current agencies and take their business elsewhere. Blackwood Seven will be hoping that it can pick up some of the pieces.
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