A Danish startup that threatens to disrupt traditional media agencies is coming to the UK

A Danish start-up that threatens to disrupt traditional media agencies is coming to the UK.

The relationship between traditional media agencies and marketers couldn’t be more strained, with concerns rife over agencies not being upfront about how much money they’re making from marketers. It is against this backdrop that a Danish media agency that is not financially dependent on how much an advertiser spends because it takes a fixed monthly fee is poised to launch in the UK following successful debuts in Germany and the US.

It might sound too good to be true but it’s a pitch that was good enough to woo Volkswagen away from MediaCom in Germany earlier this year, as well as impressing Unilever’s Dollar Shave Club and Uber rival Lyft. The reason is down to a preference for artificial intelligence over humans when it comes to advising advertisers on media spend. Marketers use Blackwood Seven’s interface to buy across online and traditional channels like TV and radio, which media owners have made available via ad exchanges.

The mix is optimised by an algorithm that uses data from various sources such as YouGov, Nielsen and ad spend trackers to predict the business results of a media plan, spanning everything from brand value to store traffic. Advertisers also plug in their own sales data, allowing them to see in near real-time which of their media investments are generating the best returns. Like other artificial intelligence systems, the algorithm gets smarter the more data it is fed. Marketers can do all this from their smartphone whenever they want without the need for daily check-ins with their media agency or attempting to navigate a convoluted dashboard.

And unlike media agencies, marketers need only pay a monthly SaaS fee to use the platform. Running campaigns in this way negates any need for Blackwood Seven to cut secret deals with media companies due to the fact that it’s not reliant on the commission a traditional agency would get from total media spend. Nor is it bound to ad spend deals to publishers or of the habit of purchasing ad inventory to then sell on to clients at mark-up, as has been known to happen at their media agency counterparts.

“It will be the ability to learn and predict the relevance and success of the emerging media properties and environments, where no data is available, where the machine will need to be able to make the types of quantum leaps a media strategist makes with ‘gut instinct," argued Darren Woolley, founder and global chief executive of marketing management consultants TrinityP3..

"But then this is really often just icing on the cake, with the majority of media trading already simply chasing an audience. But rather than asking will this replace the media agency, perhaps what it will do, as most AI does, is simply take over the mundane media selection and trade to free up the best media strategist to continue to look for those break through strategic opportunities?”

The ability to use data to select and trade media inventory is proven as shown by the explosion of programmatic advertising. The question is the effectiveness of the algorithm that is developed, or in the case of Blackwood Seven, the ability of its machine learning to keep abreast of the media market changes that occur. Naturally, Blackwood Seven believes its AI is up to the task, claiming that it can “easily” lift effectiveness to between 25 to 50 per cent with one of its simpler models, adding that one client boosted spend on media by 35 per cent this year after testing it during 2015.

“We think the media owner should give the rebates to the client directly and we are actually encouraging the latter to talk directly to the former,” said Carl Erik Kjaersgaard, chief executive and co-founder of Blackwood Seven. “The media owner wants to be in closer contact with the advertiser and we say we’re a platform who are focused on the most optimal and efficient – from a mathematical perspective – of your media investment. However, we are not a bank and should not be one like the industry is.”

Fuelled by this contrarian view, Kjaersgaard has already launched the business in the US as reported by Business Insider in June and today (30 August) announced it has raised €13.5m in funding to propel its push there further. At the same time, it has also been paving the way for its arrival in the UK, having already had discussions with media owners, which Kjaersgaard claimed are “quite far ahead”.

“We are looking at the UK and will come back in the autumn with a launch date for when we’ll start in London,” he adds. “Before we go into any market we actually go out and talk to all the big media owners and tell them who we are and what the software does so that they know what to expect from us and how our business model works. We say our business model will always ensure that your model will always get fair share; so radio, TV or print gets fair share, since we use maths to work out that fair distribution between the media groups.”

Such is his confidence in the process that he would welcome “anyone to audit us at any time,” claiming that “we are completely transparent and open books”.

Time will tell whether that confidence spreads to marketers, though there’s a sense that it’s now or never for Blackwood Seven despite being just three years old. Over half of British clients (58 per cent) believe/suspect that their agency is probably making additional revenue on their account, compared to 50 per cent in 2012, according to the latest Paying for Advertising report from ISBA and Arc. There’s a similar opportunity in the US, where only a quarter (25 per cent) of advertisers and around a third (32 per cent) of agency executives responding to a survey by K2 Intelligence said they were even aware of the ANA report two months after it was published.

Despite the potential on both sides of the Atlantic, Kjaersgaard is coy on where the business could end up. When asked by The Drum if it is Blackwood Seven’s aim to replace media agencies, the former agency executive said its only ambition is to be a “global company”. The “sweet thing about this model is that we don’t need an office everywhere because it’s a software platform,” he continued. “We need maybe two or three hubs depending on the languages in Europe.”

For all Kjaersgaard’s evasiveness on his company’s future prospects, there’s a growing sense that technology like Blackwood Seven will disrupt the market. German software firm SAP launched a similar online platform in May, pointing to the rise of more transparent, independent media buying technologies which can compete with the agency approaches.

“I would certainly see these businesses as a threat to the traditional media agencies,” said Tom Denford, chief strategy officer and co-founder at ID Comms, a consultancy that specialises in helping marketers get the best value from their media investments. Some of ID Comms’ clients are testing these third party media buying technologies against their existing agency approaches.

“Media agencies have been looking to automate the media buying process for a number of years,” added Denford. The aim is to reduce the costs of implementing campaigns and (in theory) improve the targeting and efficiency of media buying by relying on smarter use of data and computer aided optimisation.

“However, many of the traditional agencies, to varying degrees, have made this unnecessarily complex and this is leading some brands to seek and test alternatives… We expect more advertisers to want to test this self-serve approach, taking back some control in how their money is invested and wanting more visibility in the supply chain of media inventory, especially digital.

“An additional strength of companies like BW7 and SAP is that they are technology companies, not agencies. You'd expect them to win out in the longer term versus the agency model because they are dedicated tech experts at their core and operate to a different, SaaS based commercial model which gives the advertiser more control and transparency. Plus, they'll win the tech war over time because it's their core business, so we would expect them to be able to eventually provide better tech for less cost.”

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