A Conversation with LUMA’s Terry Kawaja

October 19, 2018

By Bill Duggan


Terry Kawaja is the founder and CEO at LUMA Partners, the venture firm focused on marketing technology. Kawaja will be speaking at the ANA Masters of Marketing Conference in the new "Second Stage" forum, a more intimate setting for learning about what's new and what's next. In advance of his session, I spoke with him about the challenges and opportunities in today's complex marketing ecosystem with a view toward what is required to win in the future.

Q. Your firm, LUMA, is the leading investment bank focused on digital media and marketing. What is it about the digital media and marketing industry that currently excites you the most?

What I love about this digital media and marketing is its dynamics. Never have I seen a sector evolve so rapidly and undergo so much change. In the span of only 10 years, programmatic spend grew from zero to over $50 billion and that attracted more than 5,000 new companies that were formed to help along the way in terms of software, data, media, or services. This change comes with a price as existing players cope with these new technologies, new business models, and a new competitive set.

Today, I am most excited about the digital addressability of TV as it shifts toward more audience-based buying. I am hopeful that we will witness the advantages that digital addressability brings in terms of targeting and efficiency while avoiding the pitfalls of what happened to display and preserving the incredibly powerful storytelling capability of sight, sound, and motion. I suspect someday soon we will simply drop the adjective "digital."

Q. Given your focus on digital, how concerned are you with the various issues in the digital ecosystem such as viewability, brand safety, bot fraud, and transparency? Is the industry losing confidence in digital?

I am very concerned over these issues as they have material ramifications on the health of the channel. It is right for marketers to demand changes and the power of the purse will ensure these issues are addressed, even by the largest players. Sometimes I feel like these aspects are built into media pricing. That said, certain trends toward first-party identity and performance media will serve to mitigate these problems. If the marketer is only paying for business outcomes, many of these issues go away.

Q. Programmatic buying has a murky supply chain and some of those players may not be adding value. What advice would you offer advertisers, many of whom are concerned that they are overpaying?

I pointed out the problem of inefficient take rates way back in 2010 and have called for a rationalization and consolidation of the sector (which would mirror how virtually every other industry evolves). As a sector grows, it's natural to expect more spend across fewer intermediaries with lower margins. We are now starting to see this trend. Marketers should insist on transparency to know what is happening with their spend. Again, a migration to performance-based pricing solves many of these problems and simplifies life for the marketer.

Q. Your LUMAscapes are important industry resources as they organize the ecosystem across critical categories and provide clarity to a complex landscape. When did you publish your first LUMAscape and how many are there now? Do you see any new LUMAscapes emerging in the near future?

I first created the precursor to the LUMAscape in 2009 as an internal tool to understand the complex sector. It became popular once I debuted the original DISPLAY LUMAscape publicly in early 2010. Today there are 19 LUMAscapes depicting more than 5,000 companies that have been viewed and downloaded more than 7 million times from over 200 countries — which is crazy. We will keep making maps of important channels as they emerge. To cite two examples, we are working on an AUDIO LUMAscape to capture the high growth of marketing applications from podcasts to voice command home speakers and a D2C BRAND LUMAscape to map the explosive growth of the direct-to-consumer marketer sector. It is this latter D2C category that is the focus of my upcoming talk in Orlando.

Q. Do you have a favorite LUMAscape and, if so, why?

My favorite is the STRATEGIC BUYER LUMAscape. While there are more than 5,000 growth companies in the space, there still remain only about 200 buyers and, within that, a mere 50 that are the most active. So I guess you could say that I like scarcity! We have spent time with each one of these companies to help them fashion their strategies for inorganic growth via acquisition. I also like this scape as it manages to sort buyers five different ways (by type, propensity, capability, motivation, and end consumer) in only two dimensions.

Q. Your session at the ANA Masters of Marketing will address how traditional marketers can reinvent themselves. Can you give us a glimpse of how that reinvention could be done?

As the theme of your event — Growth: Mastering Brands and Driving Results — points out, the underlying priority of marketing is results. While such growth has been tepid across marketers as a whole, D2C brands are experiencing explosive growth. In vertical after vertical, these startup brands have, in a relatively short amount of time, successfully taken double digit share away from incumbents, many of which have built their brand equity for decades. It's a modern-day version of David and Goliath!

My talk examines why this phenomenon occurred, how D2C brands are achieving such incredible results, and what can be learned by other marketers to re-invigorate growth. It starts with a mindset that puts the consumer first and from there includes front-end elements like product design and enhanced storytelling as well as back-end elements like customer identity solutions and performance marketing. Any time you see such a disparity of outcomes, it behooves one to look at the root cause and seek out ways for improvement. I promise not to pull any punches with a presentation that is designed to inform, motivate, and entertain.


Thanks to MediaPost for originally publishing an edited version of this perspective


Bill Duggan is a group EVP at the ANA.

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