Media agencies are under attack! Not just from non-agencies branching out into activities that agencies traditionally do, but now it seems from clients as well. Michael Bratt explores.
At 4A’s (American Association of Advertising Agencies) 2017 Transformation Conference in Los Angeles, Procter & Gamble chief brand officer, Marc Pritchard, expressed the belief that “advertising agencies must reduce complexity, increase transparency and step up on brand safety in order to repair the breakdown of trust among clients”.
Then there was the US’ Association of National Advertisers explosive report into the “non transparent business practices” issued in July 2016 that led to a series of reviews by clients of their media and advertising agencies.
This breakdown in trust could be the reason that clients are looking to remove agencies from the picture and do their own thing in-house.
Here is what four media experts – Gustav Goosen, CEO of The SpaceStation; Liam Gibbs, director of strategy at Mirum Africa; Conrad Kakebeeke, unit director at OMG Digital; and Michael Walker, head of performance marketing and analysis/insights at Honeykome – have to say about this trend.
Why would a client prefer to do this rather than go through an agency?
Gustav Goosen: It comes down to control. Ad networks, ad exchanges and buying ads programmatically has many technology platforms involved in executing the buy (as well as limited IP readily available to understand the complexities) and this has created obscurity; clients are becoming more aware of the associated risks and looking for oversight of these type media buys to ensure transparency and procurement governance is adhered to, just as it adheres to procurement governance and protocols elsewhere in the organisation. Data ownership also underpins the move. Advertising clients are realising that media consumption, conversion and ultimately, customer data, are all assets they ought to own instead of trading off a data set they helped create and pay for, yet they don’t own. Integrating this data into their businesses, existing processes or business systems, e.g. CRM or others, become taxing if the data doesn’t belong to them and the integration thereof hasn’t been purpose spec’d from the outset.
Liam Gibbs: I think there are a few reasons: Cost, control and transparency, and the ability to react quickly and tactically. However, in a context where many clients are building their own agencies in-house, this kind of move also represents a much stronger chance at integration between creative (which many clients are moving in-house already), and media buying. This relationship is important in digital marketing.
Conrad Kakebeeke: Well most clients think that a) They will own the data from a risk perspective; b) It will be cheaper as they have the staff internally to do quick turnaround; c) They can hire staff that they prefer and would fit the company profile best.
Michael Walker: Clients’ first reason for considering taking their digital media buying in-house is because they believe they will be able to save costs. The question they ask is, “will we be able to do this cheaper in-house”. The other issues that make clients consider this are being able to have full transparency across the buy, owning the data (and the learnings that go with it) rather than having that sit elsewhere; that it may be quicker to execute campaigns. Media owners are increasingly acting like agencies themselves and going direct to clients with native opportunities. For these reasons the use of the traditional media buying agency is on the decline, and the new ‘Super Agency’, which acts as a true facilitator between publisher, advertiser (and agency) is stepping up to fill the vacuum.
Will this trend be coming to South Africa anytime soon?
Goosen: There are a few clients who have embarked on this already, albeit not at full scale or full solution deployment, but I’m sure it’ll gain momentum as skills become more readily available and the veil of complexity is lifted.
Gibbs: I believe it will come to South Africa, although how soon this happens remains to be seen. As noted, we are already seeing a trend to in-house agencies in general playing out in the South African market, so it stands to reason that the media work might follow suite.
Kakebeeke: I think in some instances it is already here. Think for example Takealot and some other international firms just running it out of their central offices.
Walker: It has already started, with a number of large enterprises having internal agencies. This modus operandi has in many instances already also become somewhat passé’, with companies finding that there is still a disconnect between their objectives and those of their in-house agency. What is needed is a closer relationship between advertiser (enterprise) and advertising channel (digital publisher or online platform), with this relationship being facilitated by a digital media management partner who provides transparency between all parties and follows best practices.
Do you see this trend as a threat to South African agencies?
Goosen: If their business model is heavily dependent on media procurement services, then yes. Effectively media buying moves closer to standardised procurement processes and their related efficiency drivers, i.e. integration with existing business systems such as SAP, SalesForce, or others. These environments resonate much more with IT, technology, finance and procurement processes than media ever did and alternative agents/business partners/consultancies are much more entrenched in these parts of clients’ businesses than advertising agencies have historically been. This is the space the Accenture’s of the world are comfortable playing.
Gibbs: It depends what your business model is. If you are operating traditionally, making money from spending at scale, and taking a linked percentage, this would be a threat. However, if your agency (for example our business, Mirum) is more about partnering with agencies to be fighting fit for a digitally enabled future, this represents opportunity. Also, don’t forget that strategy and planning, reporting, data mining and analytics, ongoing training etc are all media related services that can still be sold by specialists to clients, in this context.
Kakebeeke: No I do not due to the following: a) Staff working on one account become bored very quickly, the culture in agencies is very different from that of a corporate and I have seen many corporates move back into agency; b) Learning cross staff working on other clients and industries brings learnings; c) Shortage of staff in South Africa makes it very difficult for a corporate to upskill; d) The amount of staff that you need does not have economies of scale in South Africa. Think about it for a client that spend for example a massive digital budget of e.g. R30m which pays no more than 10% for their services R250 000 a month must employ social staff, analytics and programmatic, strategy, ad ops and tagging specialist etc. So in essence there is a lot of staff that agencies can use cross client to make it work for both client and the agency and the staff can cross learn and teach. Also to keep up with the tech changes a client will need to invest a lot which is currently cross-shared with agency and clients. It just becomes a very difficult model to keep up except if you are really spending massive amounts of money on your agency so it makes more sense. I think the biggest limitation is staff feeling secluded out of the vibe of tech buzz at a corporate.
Walker: Yes and no – I think that agencies need to start treating their clients as partners and together with any good partnership is honesty and transparency, as this will thwart any threat. However, as I mentioned before, I believe that the agency model and approach needs to change, and that there are already a few companies out there that are doing it differently, and gaining recognition from brands (advertisers) and publishers (media) alike.
What do agencies offer that in-house digital buying won’t?
Goosen: Media IP. Media as part of the total advertising fulfillment value chain. But this IP can be bought and in some instances that IP is becoming less relevant in the changing landscape. Historically, media agencies could also extract economies of scale through consolidated media buying or media owner negotiations and pass that benefit on to respective agency clients. The changes in the way media is being procured sees it moving away from a scaled approach (think – TV, print, radio ad buying), to a single instance approach with the price point determined real time when procuring that instance (think – this ad, on a specific, pre-qualified, customer’s mobile phone, right now). The ability to determine and evaluate the value of that instance, in the moment, and decide whether it’s worth buying (or selling by the media owner for that matter) or not, and then executing that buy in a fully integrated business process is powerful. Technology is now enabling these decisions that require a new skill set, new IP and it doesn’t have to be based in an agency.
Gibbs: The buying power of traditional media buying agencies allows discounts that in-house buying won’t likely achieve. However modern digital media tools don’t typically operate in this way – for e.g. Google and Facebook don’t offer discounts for scale buys. There is also the factor of specialist experience to consider. If you have a large team operating across many different clients (as you would in an agency), you will have broad experience that feeds the specialist skill sets. A smaller team, isolated within one particular vertical, might struggle to remain current and competitive without serious effort to do so.
Walker: Greater vertical knowledge of the media ecosystem, better skill sets and being able to retain staff longer due the variety of work. An agency also has the advantage of having the creative’s, analyst and media planners/buyers sitting around the table together so that they can truly maximise the clients’ marketing money with a cohesive strategy. When dealing with agencies that have gone beyond the traditional media buying model and have implemented advanced technology, data visualisation tools and can offer the benefit of third-party data enhancement for better ROI, there is no comparison between what the internal employee or in-house digital team can do and the results that are like to be achieved by the “super agency” or digital media management company.
Goosen: Accenture CEO, Pierre Nanterme, summed it up when he wrote: “When assessing the implications, consider the fact that that new digital business models are the principal reason why just over half of the names of companies on the Fortune 500 have disappeared since the year 2000”. Digital disruption is at the door of the agency business model.
Gibbs: The whole space of “clients moving services in-house” represents a shakeup of the traditional client/agency model that frankly excites us, as nothing is taken as “status quo” any more and agencies have to consider where they can really add value, rather than just pushing “business as usual”.
Kakebeeke: I have seen this that clients take media in-house and I have seen the majority of them moving it back to agencies mostly due to staff retention and getting the correct talent pool rotating within the business.
Walker: I do think that these trends are cyclical in nature – having seen in-house agencies being unbundled from clients in the past and now the inverse trend is occurring. I do think that clients need to be realistic in how they calculate the cost of their media planning and buying since, on the face of it, it may seem that taking this portion of the marketing process in-house is the best way forward, it is important to remember that there are several considerations which could mean that short term cost savings lead to a reduction in effectiveness and impact over time. Finding a digital media management partner is the route I would recommend.
Follow Michael Bratt on Twitter @MichaelBratt8