Since marketers are beginning to understand and ask questions of the complex digital advertising space (they have to) in a lot more depth and beginning to demand greater transparency to enable them to make more informed, savvy decisions when it comes to digital spend, there has been a lot of talk about the disintermediation of agencies.
It’s true, even for those of us working in the Adtech industry, the impact that technology is having on the development of the media industry is astounding. Does this impact mean that the agencies days are numbered?
As with other industries, the latest trends and even the most advanced technology has a shelf life. But what might be coming is not exactly disintermediation. A more positive way of looking at it is perhaps re-intermediation or even re-volution - because intermediaries are not going away. However the space is saturated and therefore the intermediaries need to be smarter, more streamlined, prove that they can add value rather than complexity by going back to basics and focusing on their core, specialist creative skills.
Looking at the current ecosystem, placement of a single impression might require a planning agency, buying agency, trading desk, DSP, exchange, DMP, SSP, publisher and two ad servers – that’s roughly 10 intermediaries. Miraculously, all mouths get fed and the ecosystem still manages to deliver good ROI.
These intermediaries provide essential functions, but their overheads compound. They all have sales forces, business development, marketing departments and so on. Advertisers find that the place to start looking for savings is the point where all overheads converge: the media agency.
So how did we get here? It may be easiest to give a brief history of the industry – so bear with me...
Thirty years ago, media-buying agencies hummed along, creating value mainly by segmenting and aggregating audiences to meet advertiser needs and serving both sides of the market nicely. TV made so much money for advertisers that no one sweated the small stuff. Then came media-buying groups at advertisers, which squeezed profits of agencies by forbidding arbitrage and rebates. Life got tougher for brands. Then came the Web.
The posture of agents, generally, is that they do what they are paid to do. The posture of advertisers, was that “the industry” would figure out how to send messages to consumers. So advertisers took a hands-off stance. Failure to incentivise agency investments made advertisers complicit regarding the lack of structure and process to manage digital media.
Into the vacuum flew ad networks. Just as agencies had done with TV, the ad nets aggregated inventory across media properties and resold it at a handsome profit, regroomed and segmented. This is where the trouble began: Networks usurped the traditional role of agencies.
The agencies’ point of view on networks in those days was that nets were just like publishers – send an IO. Many were site representation firms so it made sense. But agencies were, in effect, outsourcing to nets what they did internally in the past.
Then as the consequences began to unfold, agencies tried to regain control by building trading desks for digital, or buying nets outright. However, when campaign control took place within agency walls, the price went up. Trading desks did not live inside the contractual walls of the agency of record, and so could take arbitrage margins. No secret.
On top of taking nontransparent arbitrage, trading desks often take data from one client’s campaign and use it for another. It’s an obvious scale advantage, available to any big player in the ecosystem.
Agencies could stem the tide by establishing clear accountability for learning, insights, data and waste. They could treat data as an advertiser asset, negotiate arbitrage margins and treat waste as a serious issue.The need to evolve is not sudden, but the sense of urgency across the industry now seems contagious. The disruption is already proving to be a huge creative opportunity for agencies to work in new ways and tap into new skills. Brands, themselves, are under disruption. Leading brands continue to seek out creative partners who can help them navigate the disrupted landscape and work dynamically and collaboratively to connect business, brand, and users.
Advertisers are beginning to take ownership and will continue to be seen as the driving force. This is going to have a big impact on ad agencies - and most specifically their trading desks – who have enjoyed being paid significant sums for running clients’ advertising for years. They have maintained this role over the years due to the common belief that the agencies are more knowledgeable about media placement than their clients and can also buy media more cheaply.
In truth, these are no longer valid arguments. We are likely to see greater levels of ‘collaboration’ rather than ownership of inventories and data. From creative through to technology, it’s going to be about what the advertiser needs rather that what they are being offered.
Going back to disintermediation, it really is about the survival of the fittest. The agencies that are willing to embrace the collaboration challenge are the ones that will survive. The skill is in going back to basics. And these skills are no longer just side specialities; they are increasingly at the core of how we collaborate with our clients and their brands.
By Mark Connolly, Chief Revenue Officer and VP International at AudienceScience.
PrivSec Conferences will bring together leading speakers and experts from privacy and security to deliver compelling content via solo presentations, panel discussions, debates, roundtables and workshops.
For more information on upcoming events, visit the website.
comments powered by Disqus