The technology that is used to buy and sell advertising is constantly evolving. When I tell my team about standing by the fax machine whilst talking to a buyer on a landline to check whether they sent the IO, it seems a world away from the automated world of programmatic buying. However, despite these changes the organisations in this process remain largely unchanged: a client briefs a creative and media buying agency who in turn, conceptualise, plan and buys the media. Whilst there are exceptions to the rule with specialists and in-house teams operating, the fundamentals remain the same.
However, the tectonic plates of the media landscape are starting to shift. Media agencies have had a tough year in 2017, from the release of the ANA report to the series of investigations by The Times that laid the blame of ad placement at the media agencies door. At times, some of the ire directed at them has been rather misplaced. However, I do not see 2018 getting any easier as well funded competition is moving into their space. Unusually it is not VC-backed start-ups from Silicon Valley but instead the traditional big business consultancies that have their eye on the media buying budgets.
How are Business Consultancies winning media business?
The size of the digital arms of the consulting businesses is often underestimated, with a combination of acquisition and aggressive recruitment growing them dramatically over the last couple of years. Deloitte now has over 15,000 employees in its digital division, augmented by the acquisition of Heat in 2016. Whilst Accenture bought the creative agency Kamarama a little over twelve months ago. Accenture has sounded the starting gun in terms of winning buying accounts, rather than just acquiring or augmenting relationships, by winning not only Maserati’s media buying and creative but also managing “every touchpoint of the customer experience”.
But why is a business sector that has traditionally had such a different role to play, moving in on the media buying landscape? It initially starts at the top of the business, companies such as Deloitte and PwC have been involved in M&A conversations meaning they are talking to the CEO and the board, not just the CMO. Through the rest of the business they have been involved in the digital transformation of clients, working with them to deliver systems and processes that drive efficiencies internally. Crucially this is where they have gained their edge, by being able to view a company holistically, understanding the journey of a customer from their first touch point, through to purchasing, delivery and retention. Consulting businesses can then advise on ways to optimise this journey using analytics teams and UX specialists. This data-driven understanding of a business has meant they can help clients develop their digital touchpoints and compete against agile startups who are trying to break into the space. It is therefore only logical the consultancies also pitch to take over the marketing budget so that they can affect the inputs and thus completely own the strategy.
The rise of the consultancies is also coming at a time when the work of the traditional media agency is coming under increased scrutiny. I believe this is because the mechanism traditionally used for payment undervalues agencies work. Many clients still only pay a proportion of their media spend, essentially the planning of a campaign is seen as a value add. To make matters worse margins are being consistently shrunk by procurement departments that have no interest in output just cost. In a world where there are limited buying points across the major media channels, this structure could have potentially worked for many more years. However, technology is tearing up the planning and buying model. Within planning, lookalike models of clients’ customers can be built from conversion data. Whilst within the buying function, programmatic buying of these audiences dominates across desktop and mobile platforms and looks likely to take big chunks of TV and OOH in the future.
How can agencies fight back?
Technology is commoditising media buying and planning which leads to an increased pressure on the fee paid by clients as they are only seeing the end result. However, let’s take a look at some of the things that agencies do for free, that certainly will be charged in a different business environment.
- Idea generation is done at a huge cost in terms of time for planners and buyers, however, unless the campaign is booked, this is essentially a free service. How many times have RFP’s been generated with no plans to spend money?
- Vendor analysis is part and parcel of agency life; digital media has introduced an exponential number of vendors, the vast majority of whom are not the end publisher. Consultants are paid large fees to do similar work, yet it is a role that is just carried out for free in the media world.
- The days of producing a simple report of showing ads delivered are gone. Junior buyers regularly spend several days deep in pivot tables, reporting on conversions, cross checking against different audience segments for their client.
Who will win?
The result of this is that one of the ways media agencies are fending off the attacks on their business is by having a menu of products for which they charge clients. This covers ideas generation through to campaign reporting. By charging for items that used to be free, but highly valued, agencies will make clients think about what they truly value from the media agency. The recent announcement that Tribal is restructuring its business around six core practices shows how it wants to position itself in market. In addition, those that think about building and acquiring proprietary tech such as Dentsu Aegis with Merkle are declaring their intent to be seen very differently.
I would be surprised if any pitch for planning and buying business in 2018 does not have at least one consultancy in the room. Those agencies that simply offer planning and buying at efficient prices will fail as this is now often seen as a commoditised service. Conversely, those that think about the value they drive and can take the conversation into the boardroom to discuss media and technology strategy will win.
