Software is the new channel middleman in marketing


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The Internet was supposed to be The Great Disintermediation Machine, collapsing the relationship between marketers and customers from this:

Traditional Channel

To this:

Disintermediated Channel

And indeed, that disintermediation has happened in many businesses. E-commerce is now over a trillion dollars a year. While some of that goes through Internet retailers like Amazon, much of it is direct with brands themselves. For pure digital businesses, such as software-as-a-service (SaaS) subscriptions — where the marketer and the customer are separated by only a credit card field on a web page — it’s about as direct as you can get.

For many, that’s a welcome relief. Channel management was immensely challenging, with “vertical competition” between the different parties up and down the chain. They jostled for revenue, rights, responsibilities, and information — with mixed incentives to cooperate for mutual benefit, while competing for their individual interests. Competitors could interfere at any of those junctions. These were complex, multi-stage market dynamics.

So thank goodness for disintermediation, right? Marketers can now interact directly with their customers, free from the concerns of interventions by intermediaries.

Well, not so fast.

There is a new channel of intermediaries between the marketer and the customer, and it looks like this:

Software as a Channel

Think about it. In digital marketing, we don’t directly interact with the customer in the way we would if we were shaking their hand at a cocktail party. Software mediates all our interactions in the digital domain. Yes, that’s the same mediate from disinter-mediate. We have traded old intermediaries for new ones.

Everything in digital marketing is piped through this new “software channel,” and every code-powered piece along that path has the ability to affect both customer experiences and marketer perceptions:

  • Marketing Softwareall the marketing technology products that we use to build and deliver digital experiences to customers and to measure and analyze how those experiences work.
  • Web Services — the Internet sites that connect us with our prospects and customers, such as Google, Facebook, Twitter, and a wide mix of other content, advertising, and social media hubs.
  • Client Software — the software that our audience runs on their computers and mobile devices, including web browsers, browser plugins, and device-native “apps.”

There are a lot of “virtual hands” that touch what we’re sending downstream and what gets echoed back up. Indeed, at each stage along this chain of digital intermediation there may be multiple layers of software interacting together:

Software as a Channel (Expanded)

Each of these digital junctions along the way — through which our marketing intentions are transmitted and customer behaviors are received — acts as a lens that may alter, filter, warp, limit, color, block, enhance, magnify, or refract what is intended and perceived.

What we expect a customer is experiencing on the other end of this sequence, may not be what is actually happening from their perspective. What we observe from our dashboards and reports, having been filtered back up through so many software layers, may not accurately reflect the ground truth.

With this channel metaphor, there are five important points to note carefully:

1. Technology management is the new channel management. Just as traditional channel management was a big deal with physical world intermediaries, we should have a similar respect for the importance and complexity of digital intermediaries. Just as we had channel marketers, we need marketing technologists. Just as we had channel marketing strategy, we need marketing technology strategy.

2. There is vertical competition in these software channels too. All these different digital intermediaries want a piece of the pie, whether it’s software license revenue, advertising revenue, data collection revenue, etc. After all, each of them is owned by a company seeking to make a profit and grow its power in the world. They compete with each other, but they also compete with you — for time, money, and audience influence. You should understand the actors in this pipeline, in order to manage your relationship with them effectively.

3. This is why a large marketing technology landscape can benefit marketers. When you’re subject to vertical competition — i.e., leverage that other players along your channel have over you — you want as much horizontal competition among the firms at each of those subsequent stages as possible. You want them competing with each other, which gives you more leverage.

Of course, there are other factors to consider, such as ease of integration and sustainability. But as one marketer commented, “I don’t want consolidation. I want interoperability. I want choice.” To get a sense of what happens when too much power is consolidated in one stage of the channel, consider Google. They essentially control search marketing — any marketer who wants to be in search has no choice but to play by their rules.

4. Don’t underestimate client software as a powerful stage in the channel. Web browsers have largely competed as commodities, so this hasn’t been a factor for most marketers to consider — other than headaches with browser compatibility. But when browsers decide to unilaterally block third-party cookies, suddenly marketers realize just how much power is concentrated there. Browser plug-ins such as Ghostery and Adblock can have a big impact on marketing too. Apple’s iron-grip over its App Store — deciding who gets to distribute a client app or not — is another example of the strength of this last mile of the channel.

As more new devices enter our lives, there will be more client software — and the potential for the firms that own that software to wield tremendous power over marketing. Keep an eye on this.

5. Transparency into this channel is extremely valuable. The more you can know what is actually happening up and down the digital channel — even if you can’t fully control it — the better. I expect we’ll see more solutions designed to give marketers greater visibility, such as from marketing middleware (tag management vendors are a good example of this), service monitoring (e.g., search and social media monitoring), and client-side insights from panel-based audience measurement firms and technology companies such as Evidon.

As a related point, note that the more automation you build into your marketing, the more intermediation you’re creating. Not that you shouldn’t automate — just be aware of the trade-offs you’re making. I’d also be wary of black boxes in your marketing technology stack that don’t let you peek under the covers to at least audit what they’re doing, if not why.

Does this metaphor make sense to you? What characteristics about this new channel do you find most interesting?

Republished with author's permission from original post.

Scott Brinker
Scott Brinker is the president & CTO of ion interactive, a leading provider of post-click marketing software and services. He writes the Conversion Science column on Search Engine Land and frequently speaks at industry events such as SMX, Pubcon and Search Insider Summit. He chairs the marketing track at the Semantic Technology Conference. He also writes a blog on marketing technology, Chief Marketing Technologist.


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