OPINION - The most under-used term in digital advertising

Equilibrium

I rambled in a LinkedIn post on Monday and I got tons of direct feedback (mostly positive) so I wanted to explain it a bit further…

There are so many buzzwords in digital advertising but the one we rarely see is Equilibrium. Maybe because it sounds a bit intimidating, but it isn’t.

Definition – equilibrium is a state in which opposing forces or influences are balanced.

Definition – value is the amount something is worth, which therefore requires at least two entities.

In the ad industry we talk a LOT about value

·         Value to the consumer of an ad

·         Value of a media channel

·         Value of service provided

·         Value of a tech provider

·         Value not cost blah blah blah

However, how many arrive at value is very poorly thought through because they are unable to see where the opposing forces should meet, they focus on their own poor metrics, poor numbers or some poorly thought through benchmarks.

Exhibit A – when we (TPA Digital) put forward a price for a piece of work and the client goes ‘that’s too expensive’. It doesn’t consider how we got to the price, it’s someone having some pre-conceived idea on our business & what it should cost, which if you extrapolate out means they already have an idea on the value we can add and aren’t going to consider our perspective - how demoralising.

Let’s say TPA stomachs a price reduction, then we’re going to think we’re adding more value than we’re charging. Or, if the client accepts the perceived high price of TPA they think they’re losing. What a terrible scenario either way.

The best way is to collectively decide where equilibrium exists – i.e what value is going to be provided for both sides. Value isn’t equal on every task (i.e you can make small changes for huge value or big changes for small value), so perhaps there’s ways both companies can reduce scope for maximum impact and thus meet in the middle (equilibrium).

Exhibit B -a technology decision making process which involves be 5+ stakeholder groups (marketing, ecommerce, analytics, procurement, legal etc.) with differing incentives. For example, legal requires the technology vendors to adhere to specific policies, ecommerce needs certain ways of working for integrations, marketing requires campaign objectives to be fulfilled etc.

You can see where I’m going with this – there’s a lot of incentives which don’t pull nicely in the same direction (despite them often working for the same company), and that’s before you overlay any personal incentives such as ego, inertia, time availability etc.

The ability to plot these incentives, find where tradeoffs can and can’t be made, to derive value, is equilibrium. Let’s try to find equilibrium. Equilibrium is literally the way in which to live a fulfilling life - sounds excessive, but if you get it, you’ll see the benefits.