This investment bank presentation helps explain the complicated digital marketing industry for normal people

AdvertisingLUMA PartnersThe digital marketing industry is packed with big and small companies, as the LUMA Scape generates.

The digital marketing industry is a multi-billion dollar space. And it’s a complicated one too — even people who work in the sector struggle to get their heads around the latest acronyms and trends.

Investment bank LUMA Partners famously created the LUMAScape which shows the myriad middle-men technology companies that sit between a marketer choosing to spend money on an online ad, and that ad reaching the consumer.

Now LUMA Partners has created a new presentation that aims to demystify the digital marketing landscape — and it’s particularly useful for those who aren’t immersed the industry.

LUMA Partners has kindly allowed us to publish the presentation and commentary, which covers topics including the huge amount of M&A activity in space, the limited number of ad tech and marketing tech IPOs, and the newest digital marketing trends.

Here we go!

LUMA Partners

The LUMA team.

LUMA Partners
LUMA Partners
LUMA Partners

Good news (especially for an M&A guy!) Global M&A is on a record-=breaking pace this year. While this is an encouraging macro trend driven by, among other factors, historically cheap debt and decreasing organic growth opportunities, let's drill down to take a look at the markets on which we focus.

LUMA Partners

Let me take this opportunity to highlight LUMA's singular focus on the intersection on media, marketing, and technology; the sectors of digital content, ad tech, and mar tech all seen through the lens of mobile.

LUMA Partners

The current M&A boom is also evident in our market sectors as deal volume is up across almost every LUMAScape.

LUMA Partners

Looking at the recent activity on the strategic buyer LUMAScape, we've seen plenty of activity from the usual suspects ...

LUMA Partners

And increasingly, we're seeing active interest from a growing pool of strategic buyers.

LUMA Partners

This is the most encouraging trend we see as buyers across an increasingly broad set of industry verticals focusing on ad tech and mar tech targets. These buyers bring differentiated customer and data assets driving strategic value and adding dynamic competitive tension for differentiated tech and data driven companies.

LUMA Partners

But not everything is up and to the right this year. The public markets have been much less friendly with both mar tech and ad tech trailing the broader tech index. Ad tech has been hit especially hard as we emerge from what has been deemed the 'cruel summer.'

LUMA Partners

Which has resulted in an almost non-existent IPO market, seeing only one new issue this year (Shopify) and none in the last half of the year.

LUMA Partners

To highlight a few bright spots: While public markets may struggle to fully comprehend and value emerging ad tech and mar tech business models, technology-driven business models are being rewarded. We see this evidenced by the marketing SaaS (software as a service) companies which have continued to trade well or have been acquired at strategic multiples.

LUMA Partners

And in ad tech we see a clear bifurcation: Traditional media models continue to struggle, while companies leveraging technology-driven programmatic business models have maintained premium valuations.

LUMA Partners

The private financing market remains active as we've seen a number of sizable deals in the space. And while we've certainly heard increased chatter about fallen unicorns, this has largely impacted consumer-driven businesses (especially those with immature models) and felt less by companies in our coverage universe.

LUMA Partners
LUMA Partners

Sometimes the goal that marketers are trying to achieve gets lost in all the noise when discussing marketing trends, companies, or technologies. But the goal is clear: Drive more revenues at the lowest cost.

LUMA Partners

A key focus area for marketers trying to achieve this goal is to optimise the customer experience through delivering the right message at the right time to the right person. Form the 'marketing clouds' down to small startups, technology vendors are more focused on providing solutions to enable this (or at least an element of this) for their clients.

LUMA Partners

Two recurring technology themes we hear from mar tech vendors that are focused on the customer experience is the use of 'Predictive Analytics' (which enables the message to be delivered to the consumer on whatever device they may be on.)

LUMA Partners
LUMA Partners
LUMA Partners

The state of personalisation has advanced rapidly in the past five years. Not long ago, personalisation tools were very manual and/or broad-brush. But now, with 'big data' (and predictive analytics/identity,) one-to-one personalisation has become a reality (though is still nascent in its adoption by marketers.)

LUMA Partners

In every intersection, such as a brand ad driving a consumer to look at women's shoes on a website, marketers can start creating a profile of that user to more intelligently target future interactions.

LUMA Partners

Display retargeting is one of the simplest and most effective uses of personalisation that utilises information derived from a site interaction to bring the prospect back to the website.

LUMA Partners

Once a user becomes known, such as when she makes a purchase, it opens up even more marketing channels, such as email (and other email-centric targeting solutions such as Facebook Custom Audiences or Twitter Tailored Audiences.)

LUMA Partners

Now, instead of just a 'blast' email program, one-to-one marketing enables 'triggered' emails that can be personalised specifically for each individual. These emails can be personalised with specific content/products/offers as well as optimise the send times (by sending at the times each user has the highest probability of opening the email.)

LUMA Partners

This one-to-one marketing is continuous, providing that consistent experience across all channels over the lifetime of a customer, which increases the lifetime value of that customer.

LUMA Partners

Further, what is amazing is that one-to-one marketing is happening at scale. While 'mass personalisation' sounds like an oxymoron, big data technologies have enabled one-to-one personalisation to finally be delivered at scale.

LUMA Partners

At LUMA, we started using the chart on the left years ago to discus the role of the data management platform (DMP,) which was to manage cookies (and now mobile IDs and other identifiers) to unite the upper portions of the funnel. In the past couple of years, 'predictive marketing platforms' have emerged for one-to-one marketing (particularly for retail,) with DMPs being used for more segment-based marketing.

LUMA Partners

But 'identity' is critical for all marketing, whether it be segment-based or one-to-one. To provide that consistent customer experience, and to be able to provide the right message at the right time, marketers need to create a user profile and then be able to find that user on whatever device he or she may be on.

LUMA Partners

The importance of 'identity' is clear. Facebook has long focused on, and has had significant success with, its 'people-based marketing' solutions. Other large software vendors have responded with acquisitions (such as Acxiom/LiveRamp and Oracle/Datalogix,) or organic development/partner programs.

LUMA Partners
LUMA Partners

Marketers used to have the luxury of being able to develop marketing campaigns and craft all the necessary marketing materials with timelines set by the marketer. However, in today's world with Facebook, Twitter, and 24/7 news cycles, the marketing dynamic is much more real-time and dynamic -- and marketers must adjust to this.

LUMA Partners

However, traditional marketing was generally organised and executed in silos. Web teams running the website, email teams managing the email program, etc. But this type of approach created an inconsistent customer experience. Additionally, since different teams create specific content in separate systems, there is difficulty in discovering and re-using existing content.

LUMA Partners

To break down these silos, leading marketers have created integrated content marketing programs. As an example, Intel employs teams that create content every day, deploy that content in a coordinated fashion across channels, determine what content is resonating, and then amplify that content across paid channels.

LUMA Partners

And we have seen software companies emerge to enable efficient and effective content marketing programs. Companies such as Kapost,NewsCred, Percolate, ScribbleLive, and others are focused on providing integrated platforms to plan, create, manage, distribute, measure, and amplify marketing content.

LUMA Partners
LUMA Partners

I recently heard a comment that mobile devices 'are the remote control for our lives.'

LUMA Partners

And it is true! We use the device not only for communications, but for food, lodging, shelter, and entertainment.

LUMA Partners

So it is no surprise that this year, 2015, we use mobile apps more than we watch TV and that 90% of our time spent on mobile devices is with apps. But with more than 1.5 million apps in both the Apple App Store and in Google Play, customer acquisition is a challenge, with the cost to acquire a loyal user now more than $4.

LUMA Partners

With high user acquisition costs, and the fact that most apps are free, it is imperative for mobile marketers to maximise the lifetime value of each user. Therefore, just like in the 'mass personalisation' discussion previously, mobile marketing has taken off -- with the user profile/ID critical to coordinate the user experience.

LUMA Partners

Mobile marketing platforms are utilising tried-and-true methodologies such as A/B testing, retargeting, and deep analytics. Additionally, in-app messaging, push notifications, and email are triggered to improve the experience, bring back lapsed users, or upsell virtual goods or services. Finally, we have just started to see these platforms be used for general purpose marketing for mobile-centric companies, displacing traditional email service providers.

LUMA Partners
LUMA Partners

For a long time, business-to-business marketing did not advance nearly as rapidly as business-to-consumer. Salesforce dominated the sector with its CRM platform. Then marketing automation vendors helped drive more qualified leads into the marketing funnel. But sales teams continued to demand more leads and better leads.

LUMA Partners

Two trends have emerged recently in B2B marketing. First, account-based marketing is focused on delivering the right message at the right time to the right accounts -- since companies are the buyers in B2B, not consumers. Therefore, systems need to be designed specifically for accounts and provide a consistent and personalised experience for those accounts.

LUMA Partners

Additionally, predictive analytics are now being utilised in B2B marketing in order to: 1) Intelligently identify new prospects that should be targeted, and then 2) Score each opportunity so that expensive direct salespeople are focused on the highest-value opportunities that have the highest probability of closing. Therefore, driving revenues at the lowest cost.

LUMA Partners
LUMA Partners

If you were to draw up a fully integrated advertising platform for enterprises, it would look something like this -- integrated planning, execution, and attribution with the common data and campaign management, and a feedback loop to the planning software to adjust and optimise spend.

LUMA Partners

However, the reality is different. Execution of marketing campaigns -- especially media campaigns -- are typically performed outside the enterprise. Digital agencies running digital programs, media agencies executing TV buys, and many other specialised networks for other channels. And each entity is planning and measuring its campaigns/channel independently.

LUMA Partners

But there is an 'enterprise stack' emerging. A planning solution to allocate the spend among marketing and advertising channels. In today's data-driven marketing world, systems to manage, segment, and activate data is required: A DMP to manage anonymous data and a CRM solution to manage customer data. Finally, an attribution system to measure results -- and to continuously optimise the marketing efforts.

LUMA Partners

Strategic buyers have recognised the importance and strategic nature of these categories, with both large advertising and software vendors making acquisitions.

LUMA Partners

Neustar is aggressively building its marketing solutions business and now has very complementary and market-leading DMP, planning, and attribution capabilities through its acquisitions of Aggregate Knowledge and MarketShare.

LUMA Partners

Another aspect created by the distributed aspect of execution is that it makes it difficult for marketers to get a true understanding of what is happening across their marketing activities. The good news is that today's systems generally have robust analytics and reporting.

LUMA Partners

But the bad news is that it makes it very difficult for marketers to sift through the noise and gain an aggregated view of their business.

LUMA Partners

To solve this issue, there are innovative startups attacking this challenge. Companies such as Beckon and Origami Logic are providing robust SaaS 'CMO dashboards' that surface the most critical metrics marketers require.

LUMA Partners

The unifying element between ad tech and mar tech is data-driven marketing. There have been many acquisitions of ad tech companies and an accelerating number of mar tech deals as well. But a key strategic area is that convergence of these markets -- the grey area -- where large software and media companies are acquiring data-centric capabilities: Marketing planning, DMPs, online to offline data and attribution.

LUMA Partners

Over and out!

LUMA Partners

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