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San Francisco: How tech tremors are changing the ad industry in the city by the bay


By Katie McQuater, Magazine Editor

March 9, 2016 | 10 min read

Just a few miles up the road from Silicon Valley’s tech cornucopia, San Francisco’s advertising industry faces unique challenges, but opportunities abound in collaboration and embracing technology, finds The Drum.

It’s the city by the bay, a beacon of progressive America and home to grassroots liberalism. It’s also the epicentre of a multi-million dollar global tech industry and claims the highest cost of living in the United States. San Francisco is a place of contrasts – a city of entrepreneurship and invention, but also endurance.

It was in the aftermath of the 1906 earthquake that San Francisco earned the nickname ‘the city that knows how’ – a tribute to its ability to renew itself from the rubble. But now, different tremors characterise life in the city – those of the multi-million dollar tech industry. So how does technology impact San Francisco’s ad industry, and how is an emphasis on positive culture and a propensity towards development, nimbleness and iteration redefining the sector there?

Fail fast

It may be something of a cliché in the tech world, but the notion of fast processes and learning from mistakes has also bled into San Francisco’s marketing industries. Proximity to a culture of iteration and development normalised by startups and larger tech players has forced agencies and ad tech players in the area to adapt quickly to keep pace.

Clients are counting on agencies being on point when it comes to understanding technology. ”There’s an expectation that if you’re an agency out here you’ll be on top of what’s happening in the Valley. There’s really no excuse; they’re all here,” says Mike Barrett, managing director of creative agency Heat (acquired by Deloitte Digital shortly prior to going to press).

Barrett likens the way startup culture influences the business culture of the Bay Area to the influence of entertainment in LA. ”It is our industry. Venture-backed startups and the big companies they grow into and the lifecycle of those big companies in the Valley defines the business culture of the Bay Area in a way that’s profound. They’re all in this little stretch between here and San Jose – it’s 70km by 30km and it’s all right there.”

Even for clients who aren’t necessarily nimble (and arguably even more so) it’s key for agencies to highlight the possibilities. ”The culture of hack and invention is really important to bring to your big institutional clients,” says Michael Chamberlin of Publicis-owned Razorfish, where technical innovation is a key part of the business model. “It’s really important they don’t get left behind, that they understand there’s a whole world over here, where amazing things are happening.”

Fierce competition for talent is breeding culture

A hefty war for talent in the Bay Area, as companies compete with Valley giants Google, Twitter and, increasingly, the likes of Uber and Lyft, means companies need to be far more enticing.

Culture therefore becomes a top priority, with attracting and retaining staff boiling down to more than who has the bigger wad of cash, says Keith Eadie, chief marketing officer at TubeMogul.

Headquartered in Emeryville, CA, across the bay from San Francisco, the video ad tech platform is growing quickly and no stranger to the challenges of hiring. ”We place a lot of emphasis on training, career growth and culture. There are lots of very large tech companies here that can pay more than a company our size, so if you only have money to compete on it’s not going to be a winning formula.”

Instead the company recruits a lot of staff from UC Berkeley, its alma mater (it started with two friends in the business school there in the summer of 2007). The company’s strong ties with Berkeley continue to this day with The Founder’s Program ­(a joint effort between TubeMogul and Foundation Capital, a venture capital firm with a focus on martech, to provide an additional platform for early-stage startups to get seed funding and mentorship) and by recruiting engineers and client services staff from there. ”We take them from Berkeley for six to12 months and just immerse them in programmatic skillset training and then we develop a career path for them,” says Eadie.

Accountability is important too with flatter structures encouraging staff to take on more responsibility. ”We spend a lot of time thinking about culture, both in the way we conduct business as well as how we create a value system internally for how we all operate with each other. There is an incredibly high mark for accountability – if you say you’ll do something in an email or phone call, you are expected to do it and do it fast, and that has translated into the pace of our organisation.”

From a creative agency perspective, it’s about creating an environment where staff can work on a variety of briefs with a wide set of resources. Goodby Silverstein & Partners executive creative director Margaret Johnson says the agency strives to take care of its staff – but it’s not just about perks. ”Creative talent want to be in a place where they have the resources to produce innovative work,” she says. Examples include the agency’s Beta group which partners with creative talent, paving the way for innovative projects using the likes of Periscope or Shazam as well as virtual reality, such as the agency’s work for the Dali Museum.

New creative models

In addition to the speed of working and an iterative mentality, the emergence of internal creative capabilities within tech companies has potentially far-reaching consequences for the traditional agency model as brands seek to fully exploit burgeoning tech opportunities.
TubeMogul, for instance, has its own internal creative team – a fully fledged creative shop with capabilities ranging from executional campaign builds and design services to video post-production and strategic consulting, with recent projects including work for Heineken’s ’Subway Symphony’ series.

Developed to help clients leverage the creative opportunities afforded by programmatic, and adjusting its service offering whether it’s working with a brand’s AOR, a media shop or a creative shop, the company’s senior director of global creative Jeff Parrish maintains it’s not trying to displace the agency model. ”Working with brands direct is very satisfying. Our ultimate goal isn’t to compete against their AOR but to develop a strong working relationship as a tech consultant and sounding board for creative ideas.”

Another ramification of agencies working with tech clients specifically is a trend towards project-by-project business as opposed to a retainer model. It can make the resources that go into pursuing and staffing that business more challenging, says Dave Marsey, managing director of DigitasLBi San Francisco. Coupled with the speed of processes discussed earlier, the shift is proving challenging for agencies.

More generally, in the increasingly complex marketing ecosystem, agency models are changing as they try to best focus their efforts on where they can offer strategic leadership, according to Joanne Chen, partner at Foundation Capital. ”I’ve observed agencies acquiring tech companies or using technology to help them more efficiently help their clients, or thinking about some kind of niche they can play in where they’re really the strategy leaders. Or they’re becoming more like hi-tech consulting companies versus a traditional agency.”

True partnerships

Where agencies can sit particularly well is in bringing humanity to tech, says Will McGuinness, executive creative director at creative shop Venables Bell, whose client base includes tech players such as Google. “I think we’ve had a lot of success at bringing a heartbeat to tech companies, so being right up the road is helpful,” he says.

Agency businesses on the West Coast are well equipped to partner with startups, both as clients and as partners. They often work to advise startups on refining their narrative, operating at an advisory level as well as partnering to add grit to client problems.

One problem startups face – and an area of opportunity for agencies in terms of acting as strategic advisor – is how to articulate their product offering and understand the needs of their intended customer adequately enough to get on to the chief marketing officer’s investment plans. Though startups are very optimistic, says Chen, some founders are very technically minded, which doesn’t necessarily translate to understanding customers. “Just become you work at Google and you’re a great technologist doesn’t mean you’re serving the needs of your customer, which is, increasingly, a new generation of chief marketing officer. Startups need to focus more on figuring out how organisations work.”

From the perspective of startup founder Kyle Wong, chief executive of visual marketing platform Pixlee, agencies can play a role aiding brands in one of the biggest challenges of the Bay Area – cutting through the multiple offerings and vendors.

”It can be very difficult to stand out against the noise and that’s an area where agencies can be very helpful to brands, curating the best startup partners to work with. It’s hard for brands to know who they should be investing in and agencies can be at the forefront in terms of that thought leadership.”

An example of this in practice is Startup Connect, a programme established by DigitasLBi that identifies startups the agency believes have the right management, funding and potential for an interesting marketing application (the programme led to it partnering with Kiip to launch a mobile app loyalty programme for Taco Bell). ”It’s been highly successful and it all started over a meeting in a coffee shop. It definitely bears fruit for us,” says Marsey.

Though there may yet be a way to go to achieving true harmony in the ecosystem, as startups, brands and agencies ascertain the roles they can play, collaboration and true partnership breed success. ”If an agency just comes for a quick two-month campaign and treats a startup like any other vendor, I’m not going to reprioritise our entire product stack just for that,” says Wong. ”But if we’re working together in unison on a few key initiatives with a few key clients, a great true partnership can actually happen.”

Though startups are engrained in the West Coast culture, agencies can often find themselves at a stumbling block as to how the solution could be applied to clients, says Marsey. ”The biggest challenge we face is a failure of imagination. It’s not always readily apparent what the opportunity is and you have to work hard to see the potential, but don’t let the lack of immediate application to a client on a day-to-day basis disqualify them.”

This feature is also published in The Drum's print edition, out today (9 March).

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