How Media Management Systems Block Agency Innovation and Efficiency
I’ve been vexed by industry problems throughout my career and couldn’t quite put my finger on it. I think I’ve figured it out: its legacy financial systems. Admit it, you’re thinking “what?!”-- well let me explain.
I’ve seen and personally felt the pain from several unique vantage points. It took me longer than I’d care to admit to fully understand that the blocker to so much of the fun stuff we want to do as an industry is caused by siloed, outdated media accounting systems-- yes, accounting. As an industry, we figured out workarounds to do some of the fun stuff—but those tedious workarounds ultimately contributed to one of the biggest problems facing the advertising community: high turnover of new talent. Because of a quirk in the historical evolution of the way technology was used in agencies, an accounting system was holding media innovation, efficiency, and an omnichannel future hostage.
The list is long, but here are a few examples of first-hand challenges I bumped into along the way…
While at a programmatic pioneer, I saw how legacy software resulted in legions of tedious, manual work for programmatic buyers, which negatively impacted their trading partners as well. Inflexible legacy accounting systems also effectively turned each of the players in the chain into a quasi-bank that had to carry media costs—an incremental financial service that ultimately diverts money away from media owners.
Digital was growing at a frenetic pace, yet relying on a core activation system built long before online media existed (it was actually just jammed into the print financial system, a workaround still used today). Given the fragmentation of the digital landscape, it took an army of employees an unthinkable amount of hours to execute campaigns. This deluge of manual labor and tedious work trickled down to sellers who had no choice but to opt in to this patchwork of compensatory processes.
Part of what the programmatic tech providers had to solve for were the media accounting workflow problems that popped up at scale. It was impossible to feed the agency financial system with granular enough (and up to date) transaction data to ultimately reconcile buys -- so the programmatic providers had to create a solution. I can distinctly remember sitting in a room with no windows in LA (extra cruel in sunny California) trying to wrap my head around the problem. A big part of the early value proposition of what became the major programmatic players was actually reconciliation of buys. We solved for that by actually inserting ourselves into the money flow-- and charging a big enough % to leave a buffer for us to still make money even when there were downstream reconciliation issues —a solution that has ultimately bloated the so-called “ad tech tax”. In fact, today as much as half of digital media investment goes to third parties vs. media owners! Much due to the original sin of outdated financial systems that cannot enable the innovation agencies and media owners want to bring to the market.
At a billion dollar revenue media company, I learned how legacy buy side platforms effectively “cap” the amount of innovation and progress that’s possible for media owners. No matter how excited your agency partner is about working with you, the fact is that even forward-thinking sellers with great ideas and effective technology still are stuck in legacy silos -- regardless of how omnichannel they are as a media partner.
Our teams spent a tremendous amount of time and energy making our sales systems more efficient and our inventory easier to buy. We were focused on how to sell audio with broadcast, leverage new data sets, get paid faster, reduce sales costs, and more. We implemented opportunity management systems, yield management systems, and modern dashboards. Though we made strides, ultimately there was simply a point where we couldn’t innovate any further because the systems that buyers were using were unable to fluently exchange data with us. And more fundamentally, because of system limitations, agency radio buyers couldn’t buy audio impressions because their system couldn’t handle the billing (that had to be done by a different team who were on a different system)! All this time, energy, and money by media owners and their technology partners ultimately stuck because of hidden challenges caused by legacy buy side systems.
As an advisor and investor, I watched ad tech companies struggle under the weight of the status quo as they toiled to reduce friction so that agencies and marketers could use their data and tools to help reach the right audiences at the best price.
All constituents in the media supply chain are eager to activate data at scale (and they are smart to do so). However, it can be very difficult if not impossible to get data in and out of buy side systems. For example, I worked with a data company that had very excited agency users -- but there was nowhere to actually stick the audience data in the legacy system for tv buying (it could only go in the “digital” system which didn’t support tv buying). That meant: 1) buyers had to manage everything in excel before they jammed it into their accounting system in a crude format for purposes of billing or paying vastly increasing their work or 2) Buyers ultimately didn’t have the bandwidth to do all that manual work of keeping their financial system up to date -- so the data was never truly used. I used to think this was just a legacy buying system problem, but when I dug in deeper I learned that the fanciest buying tools in the world are ultimately at the mercy of the media accounting platform they are built on. I come across cool data or tech companies every week who could better partner with agencies without the limitations caused by siloed legacy systems.
We started Hudson MX to build the modern omnichannel infrastructure for the advertising ecosystem
Through my experiences and those of my like-minded co-founders, it was abundantly clear that agencies, their clients, and their trading partners could never fully transform while on legacy systems. Yet constituents in the ecosystem felt stuck. And for good reason, since historically there was only one solution to provide media accounting solutions at scale—one that had become a huge drain on profitability for everyone in the industry. Tedious and time-consuming workarounds and technological barriers to innovation led to high talent churn. Artificially siloed media budgets and media activation led to waste. Sales costs ballooned due to the inability to pass data easily to agencies and their clients.
Hudson MX was borne of individual frustration - but with your help, we can help drive the industry forward with collaborative excitement and effort.
Make no mistake -- these challenges are decades in the making. As an industry, we won’t solve them all overnight -- and they certainly won’t all be solved by Hudson MX. But the industry’s failing underlying financial system can no longer be an excuse for a lack of progress, innovation, or transformation for the future.
The launch of FinanceAssist™ is a major milestone for empowering the next wave of creativity, effectiveness, efficiency...and choice
Yes, FinanceAssist™ is a modern, cross-media, cloud-based media accounting platform. And that's a big deal with lots of positive benefits for agency finance departments (and they deserve some TLC). For the rest of us -- FinanceAssist™ provides agencies with the scalable, secure, and powerful financial foundation to transform for the future, which allows innovation to flourish with the efficiency we require. This new platform is purposely unbundled from buying software, working with any best-of-breed buying tool or ERP system, and is fully configurable across all clients and media types. This means the next generation of advertising professionals will be able to focus on (and do) the fun stuff.
