Donovan Data Systems and the modernization of the ad business

(written by lawrence krubner, however indented passages are often quotes). You can contact lawrence at: lawrence@krubner.com

I just stumbled on this story from 2008. It makes me sad to think that Donovan Data Systems has had a tough time dealing with the modern ad market. I knew Michael Donovan, one of the great entrepreneurs of the 20th Century. He was a friend of the father of my business partner, and the father asked him as a favor to come and advise us.

But it is tough for a company to remain agile, after a long period of near monopoly. One gets used to the money. And then someone shows up and wants to take away the money, and it is a bit of a shock.

For 40 years, Donovan Data Systems has held a near monopoly on the business of media billing and tracking. But now, in the first defection of a major player, Publicis’ Starcom MediaVest Group has moved its spending power to MediaBank, a Chicago-based software company that acquired Donovan competitor DataTech last year. Laura Desmond, the CEO of Starcom MediaVest Group
Laura Desmond, the CEO of Starcom MediaVest Group

SMG has made no secret of its frustrations with DDS, which, by its own estimate, handles media billing and tracking for 10 of the top 12 media agencies in the U.S. market. The impetus for the switch was to find a tool that could simplify the task of buying and billing in an increasingly diverse and thorny media landscape (which now includes interactive platforms that didn’t exist when DDS was engineered). The breakup between the two companies was bitter, ending where so many long-term relationships gone bad do — in court.

Founded in 1967 by Michael Donovan, Donovan Data Systems manages more than $60 billion in media investments in the U.S. market alone. It counts heavyweights such as MindShare, OMD and Universal McCann as clients. There is really no direct competitor to DDS — save for maybe DataTech. Some smaller media buying shops use systems such as MediaPlex or Encoda Systems, but no other company comes close to handling the amount of billings DDS does.

…In court papers, SMG said it made the switch to MediaBank because DDS was ill-equipped to handle web-based advertising and digital media advertising channels such as video on demand and mobile. SMG also complains that DDS’s fee structure is based on total advertising spent by the agency’s clients, even though the agency largely has moved away from commission-based compensation to a fee-based structure.

Laura Desmond, the CEO of Starcom MediaVest Group, declined to talk specifically about Donovan, but said SMG decided to move into a new media billing and tracking system after plotting out SMG’s data for the next three years and seeing digital spend more than doubling year after year.

“Our decision to focus on the digital explosion really led us to a new exploration of system,” she said. “It’s based on data and facts and where the consumer marketplace is going. … We work with clients who are leaders in their own marketplaces. They expect us to take leadership positions.”

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