The Future Of Media Agencies Is Looking Very Grim Indeed!

The Future Of Media Agencies Is Looking Very Grim Indeed!
SHARE
THIS



In this thought piece, the advertising editor of Business Insider, Mike Shields, grabs a large bucket of petrol and pours it right on the “media agencies are f@cked” bonfire. In this challenging article, Shields says brands are increasingly recruiting their own data/media/strategists and cutting the middleman – the media agency – out of their slice of the pie…

Note: This article is written in the context of the US market. You can read the article in full at Business Insider here.

A few years ago, Booking.com, a hotel e-commerce site owned by Priceline, worked closely with a media-buying agency to figure out where to allocate its ad budgets.

“We’d have meetings where we’d sit down and say, ‘We should put this much on YouTube, this much on other sites,’ et cetera,” Pepijn Rijvers, Booking.com’s chief marketing officer, told Business Insider. “And then three months later we’d ask, ‘How’d we do?’”

But Booking.com is about to cut out that middleman, and it could have big implications for the advertising industry.

This week, thousands of top executives from the media, advertising, and marketing industries will touch down in France for the annual Cannes ad festival. There, these bigwigs will receive awards and look to ink major ad deals. Yet hovering over the proceedings are questions about the future of the classic ad-agency business.

In recent months, Booking.com has hired data scientists and researchers and other digital-media-buying experts. By the end of the year, all Booking.com’s digital-media buying will be done in-house.

According to Rijvers’ there are two reasons for the change: speed and data. And the more outside companies involved, the more that structure gets in the way of adjusting digital ad campaigns on the fly, which ultimately costs the company money.

“I would not like to have meetings with long decks of data,” Rijvers said, who recalled trying to set up “meetings with 30 people at agencies that take a week and a half to set up.”

“We have way more data than the media agency has. I’d make a very strong case that anything that generates data, you need to own as a business. You cannot have anyone else be the expert.”

Booking.com is representative of a new wave of marketers. These are brands born with the internet, and they don’t have decades of history running massive national television and magazine campaigns shepherded by traditional ad agencies. They don’t rely on selling their goods at Walmart or Walgreens or the local car dealer. Instead, they have direct relationships with customers and live and die on data.

That means they have a very different take on advertising than traditional marketers like Procter & Gamble or General Motors, and that should scare the ad agency world.

The pressure is mounting

The ad industry loves its clichés. “Content is king.” “Everyone’s scared of Google and Facebook.” “I’m a thought leader.” And these days, everyone loves to repeat the line “The agencies are so screwed.”

Though they usually use a different word at the end of that sentence.

There’s little doubt that traditional agencies — the companies that write and produce those brilliant Super Bowl ads and buy the media space to showcase their work — are under fire from several fronts.

‘Agencies are said to be like cockroaches’

Still, the agency business will be hard to kill. According to Ad Age, US ad agencies reeled in over $US48 billion in 2016. And the industry employs 200,000 people. So it’s not about to disintegrate overnight.

But growth in this business is undoubtedly slowing. The ad-agency holding company WPP recently posted its slowest growth rate in years, The Wall Street Journal reported. Similarly, Omnicom Group provided markedly cautious guidance for the near future.

“There’s little question that there are tougher times ahead,” Brian Wieser, senior analyst at Pivotal Research Group, told Business Insider. Wieser laid out the risks facing the ad-agency holding-company giants, which have enjoyed strong growth in recent years from their media-buying agencies. That may be slowing dramatically, because of marketers squeezing their budgets and reduced demand, among other factors.

“Agencies are said to be like cockroaches,” he said. “But even in a nuclear winter, cockroaches may have a tougher time.”

Yet even as advertising has been disrupted by macro trends, such as software-driven ad buying, agencies have proved fairly resilient. “People talk about whether agencies … and this function [they serve] will still exist, but there are a lot of people involved here,” said Brian Lesser, North American CEO of the ad-buying giant GroupM, at a conference hosted by the trade company VideoNuze.

“And understanding a client’s needs and determining exactly how to translate that into a media plan … we’ll always occupy that space,” Lesser added.

Things are undoubtedly changing

Jordan Bitterman, chief marketing officer at the Weather Company, logged two decades at agencies. He says they will survive but their scope will shrink.

For one thing, he said many big marketers’ overall businesses are struggling. Look at the retail industry, for example.

“This is just the new reality,” he said. “The problems roll downhill. Marketing is going to feel it early and often.”

Bitterman sees more marketers using smaller agencies and vendors on a short-term basis as needed. Need some social videos? Hire a specialist for a few months.

“The days of a full-service advertising agency offering full service to every client are gone,” he said.

Booking.com’s Rijvers agrees. He still works with several creative agencies as needed, but adds: We’ve “moved away from retainer relationships,” he said. “They are predicated on a predictable future.”

There’s not much that’s predictable about media and advertising these days. But Bitterman says there’s a role for a smaller agency. Marketers still want agencies to coordinate all the different things they have going on at one time. And they will always need an outsider’s perspective. “Strategy and ideas never go out of vogue,” he added.

Trust issues

Agencies’ operational structures are one thing. Relationships, of vital importance in the marketing world, are another.

The ad-agency industry is still reeling from last year’s bombshell report from the Association of National Advertisers, which found that cash rebates and “other non-transparent practices” to be pervasive in the US media-buying world. Essentially, the report, conducted by independent firm K2 Intelligence, found that ad agencies were buying ad space for their marketing clients, and not being open about what they were spending and how much money they were making.

And since no names were named, the effect made everyone a suspect.

“The tension has been heightened,” said Andrew Altersohn, CEO at the ad-tech company Adfin. “That’s led to an aggressive evaluation of in-house options.”

In other words, many marketers are saying, If I can’t trust my agency, I’ll have to take things into my own hands.

Examples abound. Chobani has its own creative officer. Netflix and L’Oreal have brought more of its ad buying in-house. Western Union has consolidated its agency roster from over a dozen partners, in part because it wants to have a tighter rein on its spending,

Libby Chambers, Western Union’s chief strategy, product, and marketing officer, told Business Insider that the company is contemplating a full audit of its ad buying, to make sure it’s running ads in safe, cost-effective places on the web. “Now we can hold somebody accountable,” she said.

Yet brands need to be careful what they wish for when they take on agency work, said Charles Cantu, CEO of the ad-buying company Huddled Masses. “In a visceral sense, this is something they want,” he said. “The reality is, some are prepared for this and some are not.”

Meanwhile, the ad-agency trust issues play into consulting companies’ hands, said one 30-year agency veteran. Those companies have a reputation for being straightforward and are all about driving business results.

“These kinds of companies get access to decision makers and are tied into financials,” said this executive, who did not wish to comment publicly.

Change is tough

Wieser of Pivotal Research said that big ad agencies are trying to evolve. Publicis’s acquisition of the digital-ad company Sapient — which boasted of prowess in consulting — in 2014 was a step in that direction.

Jon Mandel, a media consultant who logged three decades in the agency world, including a stint as CEO of the ad-buying firm Mediacom, said it would be very difficult for classic ad agencies to change their ways.

“They are still set up for fighting the last war,” he said. “They haven’t really set themselves up for the future war. Instead they are trying to eek out gains from a model than needs to change, while always trying to upsell clients on services.”

Rosemarie Ryan, another longtime traditional agency executive who know runs the creative-consulting firm Co Collective, put it in even more dire terms.

“Facebook and Google are the new agencies,” she said. “Look who’s taking over the beach at Cannes.”

The future

Wieser was not predicting total agency destruction, particularly given ad agencies’ entrepreneurial nature and constant ability to reinvent themselves. He cited the emergence of search-centric agencies in the early 2000s, mobile agencies a decade ago, and other specialty shops more recently.

“Agencies are good at moving onto the next big thing,” he said.

For example, that might mean building specialty practices for marketing via artificial intelligence, or virtual reality.

“What I can’t tell you is whether the next new thing they focus on will be as profitable as the old business.”

 

Please login with linkedin to comment

Latest News

Salesforce Launches Data Studio With Southern Cross Austereo & Mamamia
  • Marketing

Salesforce Launches Data Studio With Southern Cross Austereo & Mamamia

Salesforce has announced the launch of a data sharing platform with partners Southern Cross Austereo (SCA) and Mamamia designed to connect data owners with buyers and create new marketing opportunities for audience discovery, sharing and activation. Part of the Salesforce Marketing Cloud, Salesforce Data Studio enables marketers to expand targeted reach with valuable audiences, provides […]

Pedestrian.tv Partners With Domain To Launch Home Content Vertical
  • Media

Pedestrian.tv Partners With Domain To Launch Home Content Vertical

Aussie youth-focused publication Pedestrian.tv has bolstered its lifestyle offering with the launch of its Home vertical, with Domain signing on as launch partner. Pedestrian Home will deliver content focused on homewares, hacks for sprucing up your space, a peep inside the amazing homes of well-known Aussies, as well as covering the real estate news and […]

Zenith Makes Two Senior Appointments
  • Advertising
  • Media

Zenith Makes Two Senior Appointments

Kylie Sneddon & Mark Johnson stamped Zenith 'movers & shakers' after promotion. Not like to their forehead or anything.

Photoplay Signs Director Frazer Bailey
  • Media

Photoplay Signs Director Frazer Bailey

Boutique production company Photoplay has announced the signing of award-winning comedy performance director Frazer Bailey for representation in Australia and New Zealand. Bailey won Gold for Direction at the BADC Awards for the hilarious Air Asia escapism campaign ‘Come Back Refreshed’ via Publicis and Silver for Millionaire’s Run ‘Prince of Nigeria’ through Brainheart. He has […]

Cornerstone OnDemand Appoints FORWARD Agency As PR Partner
  • Marketing

Cornerstone OnDemand Appoints FORWARD Agency As PR Partner

FORWARD Agency announced that they have been appointed by Cornerstone OnDemand as its PR agency of record for Australia and New Zealand. Cornerstone provides cloud-based human capital management software to help organisations realise the potential of the modern workforce. The appointment will see FORWARD working across all of Cornerstone OnDemand’s PR activities, including media relations, […]

Brisbane Agency P4 Group Celebrates Growth With A Rebrand
  • Marketing

Brisbane Agency P4 Group Celebrates Growth With A Rebrand

Brisbane-based PR and marketing agency P4 Group has today launched a new look and feel to align with its recent growth, with its team and client base almost doubling in the past year. Expanding its service offering to genuinely deliver on the integrated agency promise, P4 Group has grown its team of 15 to 26 […]

Retail Software Player Vend Moves Into AI As Part Of Platform Revamp
  • Marketing
  • Technology

Retail Software Player Vend Moves Into AI As Part Of Platform Revamp

Point-of-sale (POS) retail software company Vend has taken its first steps into AI to help retailers grow and compete as part of a major platform refresh. Dott aims to help retailers make better decisions about their stores and how to grow, bringing the much talked-about promise of AI to life for retail. Neither male nor […]

Enough With Your Shitty Videos Already
  • Opinion

Enough With Your Shitty Videos Already

Is a cat wearing a party hat filmed on your phone the extent of your video production? Read this for all our sakes.

Opinion

by B&T Magazine

B&T Magazine
Bauer’s Christian Fricke Resigns As MD Of Xcel Media
  • Media

Bauer’s Christian Fricke Resigns As MD Of Xcel Media

Further to today’s news that Bauer Media will close three of its magazine titles, the publisher has announced the resignation of Christian Fricke, managing director of Bauer Xcel Media. According to a statement sent to media, Fricke, who had been in the role a mere 18 months, will return to Germany for family reasons. Commenting on Fricke’s departure, Bauer Media […]

Former Aussie Cricket Captain and photography enthusiast Steve Waugh for SnapSydney.  Picture: John Appleyard
  • Campaigns
  • Media

News Corp Expands ‘Snap Australia’ Campaign To Regional Titles

News Corp’s award-winning Community Media’s ‘Snap Australia’ campaign continues to build momentum. ‘Snap Australia’ is a social media movement that celebrates what Aussies love about where they live. The feel-good factor of the initiative has extended into each capital city and into News Regional Media, with an additional 18 regional publications joining the initiative. Today […]

Virgin, Yellow Brick Road & GoSwitch Flock To Sports Content Platform PlayersVoice
  • Marketing
  • Media

Virgin, Yellow Brick Road & GoSwitch Flock To Sports Content Platform PlayersVoice

Six weeks after its launch, sports content platform PlayersVoice is winning the hearts and minds of consumers and brands. Established as a platform for rich and raw first-person sports storytelling, PlayersVoice has created an environment where elite sportspeople feel comfortable sharing their thoughts, hopes, dreams and fears, shining a light on ‘The Human Behind the […]

Red Agency Grows Partnership With The Whiddon Group
  • Marketing

Red Agency Grows Partnership With The Whiddon Group

NSW aged care specialists The Whiddon Group – a longstanding PR and social client of Red Agency – have widened their remit to include content, paid social and SEO in line with the evolution of the aged care sector. Whiddon, which celebrates its 70th birthday this year, delivers care services that enable quality of life […]

Image lead story Toby’s Estate Taps Influencers To Launch First Concept Coffee Range
  • Campaigns
  • Marketing

Toby’s Estate Taps Influencers To Launch First Concept Coffee Range

Toby’s Estate Coffee Roasters has launched its first ever concept coffee range – the Underdog Series. The series shines a spotlight on the world’s relatively unknown, but emerging specialty coffee producing regions. The Australian business leads the local market in selling specialty coffee from regions including Uganda, Malawi, Mexico and Myanmar. For the first time, […]

Image lead story Our Revolution Shows Off Packaging For New Smallgoods Player The Smokeman Brothers
  • Marketing

Our Revolution Shows Off Packaging For New Smallgoods Player The Smokeman Brothers

Locally-sourced Australian brand The Smokeman Brothers, has hit shelves with packaging mastered by independent creative agency Our Revolution. The Smokeman Brothers is different to your average deli meat. It is a range of premium crafted meats, made in Australia, and authentically smoked using sustainable timber sourced from the Victorian Highlands and The Riverina regions. Our […]

Yarra Trams & Icon Agency Introduce ‘Tram Coach’ For New Passenger Safety Campaign
  • Advertising
  • Campaigns

Yarra Trams & Icon Agency Introduce ‘Tram Coach’ For New Passenger Safety Campaign

Yarra Trams has appointed Icon Agency to deliver a new passenger safety campaign, following a competitive three-way pitch. The campaign aims to reduce the incidence of slips, trips and falls on trams via Melbourne’s latest safety ambassador, ‘Tram Coach’. Commencing today, Tram Coach will be travelling the Yarra Trams network throughout the week. His mission […]

The Red Republic Appoints New General Manager
  • Marketing

The Red Republic Appoints New General Manager

The Red Republic has strengthened its management team with the appointment of Mai Aristoteli (pictured above) as general manager. Aristoteli joins The Red Republic from Talk PR in London, where she has worked for nine years as a board director. The appointment of Aristoteli follows The Red Republic managing director Lynn Mooney’s relocation to head-up […]

PR Deadlines Inks Deal With GlobalCom PR Network
  • Marketing

PR Deadlines Inks Deal With GlobalCom PR Network

Sydney-based agency PR Deadlines has extended its global reach after inking a partnership agreement with the GlobalCom PR Network. The agreement gives PR Deadlines’ clients access to some 70 independent agencies covering all European Union states, as well as 60 more in countries worldwide. In turn, clients of affiliated agencies will have access to PR […]

Fintech Start-up InstaReM Names Aussie Cricketer Matthew Wade As Brand Ambassador
  • Marketing

Fintech Start-up InstaReM Names Aussie Cricketer Matthew Wade As Brand Ambassador

InstaReM, which offers international money transfers to individuals and businesses, has signed on Australian wicketkeeper Matthew Wade as the sports face of the brand. InstaReM lists Australia as its founding market, having begun life here in 2014. Since the company’s modest start in Australia, InstaReM has since successfully spread its wings to other corridors by […]

Australia Is Diverse… Does Your Brand Have An Inclusive Digital Presence?
  • Marketing
  • Opinion

Australia Is Diverse… Does Your Brand Have An Inclusive Digital Presence?

As Australia continues to grow and the population becomes more ethnically diverse, it is important that marketers ensure digital environments are more inclusive, especially for those who don’t speak English as a first language, writes Siteimprove’s Haley Doel (pictured below). Having a readable and accessible website is no longer just a high priority for large […]

Opinion

by B&T Magazine

B&T Magazine
Pepsi MAX Teams Up With PHD & Time Out For New Data-driven Campaign
  • Advertising
  • Campaigns

Pepsi MAX Teams Up With PHD & Time Out For New Data-driven Campaign

Pepsi MAX has partnered with PHD and Time Out to not only inspire Australians, but also enhance their ability to ‘MAX’ out their summer this year. Through the use of a live dynamic data feed, consumers will be served ads by the brand on events taking place around them that are relevant to their personal […]