It’s easy to find people with the next big investment idea to plough all your money into – talking heads on TV, your neighbour, or that “inside tip” from a broker. I bet you know someone who can’t shut up about Bitcoin, and all the money they’ve made from it! But these are not investment strategies, they are bets.
Instead (now that we all have pensions) take a look at your pension manager’s investment strategy. Boring I know, but let’s not forget, these are the people you are wholly relying on to keep you in the life to which you have become accustomed all the way through your (fingers crossed) long retirement.
You may be starting to wonder what I am writing about, and what on earth this has to do with media buying. But hear me out, there is method to my madness!
When you are looking at your quarterly report, you will very quickly note that they don’t seem to be following the same “strategy” of ploughing all their money into that one big idea.
Pension and long term investors diversify, buying from a range of different areas. The goal is not necessarily to boost performance, but to mitigate risk. By making sure every area is covered, but no one area is overly exposed, you won’t have lost too much if something goes bust.
To provide a simple and current example. It’s speculated that the Bank of England will raise interest rates soon (up to two per cent in the next twelve months at the time of writing), however this is not guaranteed. So if you put all your money into bank shares on the hopes that rates rise and they don’t, you will underperform. You might be better off investing part of your money in banks, and another part in companies that build houses (low interest means high house prices).
By covering both angles, whatever happens we don’t lose. And this my friends is investing, not betting.
Media buying has often been compared to financial markets and indeed there are a lot of similarities. Both seem to have investment managers, real-time bidding is comparable with the trading platforms and huge amounts of money are being transacted on a daily basis.
With the rise of GDPR, media buyers are having to become risk managers, not just growth hackers. With four per cent of global turnover at risk for non-compliance to any European consumer, this is no laughing matter.
I would go one further and say that they need to become portfolio managers. But at present the strategies of the investment managers from the two industries couldn’t be further apart. Whilst the financial investment managers have been busy diversifying to mitigate risk, Media investment teams have optimised their buying, backing the winning horse based on prior results again and again.
The results are already documented. But in light of the current backlash that both platforms have received, there is an outcry from the media industry for a healthy third competitor to the duopoly.
To build a healthy third competitor you must back several players, and slowly reduce the exposure on the existing two players. This means lots of work.
When investing in a stock, you need to perform due diligence on the management team, the financial statements and the wider sector. This is no different to investing in media. It will take the same amount of work to understand the USPs of a vendor’s tech, get sign-off for creative, set up the campaign, install the trackers and review performance.
Furthermore – remember from earlier – financial investment managers are not looking for immediate outperformance, but sustainable long term performance. So whilst one vendor may not be performing as well, optimising is actually increasing your risk profile for a sustainable future.
The bottom line: to achieve your long-term goal of building a prosperous and sustainable Media industry, you need to balance risk and reward. Choosing the right mix of Tech investments, based on both the short-term and long-term is essential.
If all of this is underpinned by sound relationships and periodically rebalancing, you can make a big difference in the outcome of a sustainable internet with healthy competition and free access for consumers.
Or you could put all your money in Bitcoin, and see how that works out 😉
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