MediaPost reported earlier this week that four year old ADstruc, Inc. (basically a software company with a workflow management solution to plan and buy outdoor advertising) is launching its own advertising agency.
This comes just months after one of the largest agency holding companies, Interpublic invested in it. MediaPost reported that the ‘new shop’, code-named ‘Project X‘ will pitch and service advertisers directly, competing with the kind of standalone out-of-home media-buying shops that typically are part of major agency holding companies.
ADstruc Founder and CEO John Laramie was quoted as saying “We’ve watched so many agencies botch how they buy out-of-home media that we figured we could do it better ourselves,” and as MediaPost said; adding that Project X was born more out of necessity (rather) than a desire to compete with other agencies.
Here are five reasons why it is doomed to fail (we can see history repeating itself): –
- Software company builds buying platform to aggregate industry and “make D/OOH easier to buy” (the famous last words from so many)
- Software company succeeds in signing one big buying agency (woohoo)
- Software company realizes big agency will not use the software, so software company starts offering managed services to agency (essentially using the software themselves)
- Agency wants a lot of customisation and custom integration, so rather than pay software company as a receivable, they instead negotiate in an equity stake in said software company (Interpublic invests in ADstruc, Inc.)
- It’s a pipe dream, it’s the acceptance phase as software company realises that the industry will likely NEVER use their solution so software company decides to change their business model and become an agency instead of a software company (Project X).
… and we all know what step 6 is (there isn’t a step 6) because so many have walked down this path before. Ladies and Gentlemen I present you with SeeSaw, rVue, DoMedia, and now ADstruc Inc.
Bottom line. Selling software to D/OOH agencies and specialists is a bad business. Only Donovan Data Systems and MediaOcean have succeeded, and that’s because they are cross-media (not just OOH, but all media).