This year global digital advertising spends will smash through the $300 billion threshold, before ballooning to almost $420 billion by 2022. According to eMarketer, which published the figures, within two years digital will absorb the majority of the world’s advertising spend.
That should mean happy days for the media buyers that service the brands, but the reality is more complex than that.
To begin with some context; those spending figures demonstrate how digital transformation will have entirely upended the global advertising and media market in the 25 years since Wired ran the first ever banner ad – for AT&T – on its Hotwired site.
Media buying is subject to the same transformational forces that have disrupted other industries. The “consumers” in this ecosystem are the brands who pay for the advertising and, like consumers everywhere, they are discovering they are better equipped and more independent than ever before. Those we spoke to in preparation for this article gave their agencies a pass mark — but not much more.
Steve Axe, the global CMO of Nomad Foods, a UK-headquartered frozen foods business with revenues in excess of $US2 billion, recently said, “Media buying has become more of a commodity, and we need breakthrough media strategies as well as buying from our media partners given the growth in channels in recent years.”
When asked about his own relationship with agencies and how well they have adjusted, he described their results as mixed.
“They are desperate to change and stay relevant, and some are more successful than others. However what still remains is the core of their added value: creative and media.”
Axe says he what he really wants his own agencies to do is to develop a clear mid- to long-term roadmap, “… where we will — together — build a competitive media advantage.”
Nomad Foods also faces the challenges of running campaigns in multiple international markets, and on this point in particular, Axe sees value in the role of agencies.
“I believe in the power of networked agencies — with the global nature of consumers and customers that is critical.”
Marketers don’t expect the pace of the transformation in the relationship to slow any time soon.
Leah Pope is the CMO of global marketing intelligence business Datorama, which was acquired by Salesforce in July last year for $US800 million.
New York-based Pope said, “The greatest change between brands and their media buying agencies will be a move from a more traditional service provider relationship to partnerships involving greater collaboration. This is because we’re moving into a period of increased transparency and accountability.”
She described this trend as a positive one for the industry, saying digital and technology have enabled better communication about campaign strategy, performance, and results between brands and their media-buying agencies.
“Both brands and agencies are no longer operating in silos, and marketers are seeing the value in having a single source of truth that brings in all the marketing efforts together so that no matter who is managing the marketing campaigns, everyone is working off the same set of data and the results are delivered in an easily understandable, digestible and actionable way.”
Pope also argues that agencies and brands are deepening their relationships. “Digital disruption has meant that agencies are offering more to the brands they work with and they have adapted to the new role they occupy in this ultra-competitive landscape.”
With digital capabilities no longer a nice-to-have but rather an essential part of any media strategy, Pope says marketers need to be able to act on the right insights in the right moments or risk losing campaign momentum.
“These days marketers are expected to wear many hats: collecting, cleaning, consolidating and analysing data as well as being tasked with creating unique brand visions/strategies, proving the role of marketing in the growth of the overall business, and reporting.”
That, in turn, is driving a general trend which companies like Datorama are well-placed to exploit, she says.
“Marketing teams are opting to use marketing intelligence platforms that not only unify all of their marketing data across the stack, but also allow them to spend less time preparing data and more time actually understanding insights. AI-enabled technologies have allowed marketers to act in real time and produce more effective marketing programs as a result.”
There is plenty of evidence of other trends driving further disruption in the relationship, according to industry watchers.
For instance, some large brands are looking at bringing traditional agency functions such as programmatic buying and campaign attribution in-house, although it remains an open question how many brands are genuinely equipped to pull this off.
There’s no doubt though that as digital advertising grows, the temptation to take more control of their advertising — and, just as importantly, data collection and management — is appealing to many CMOs.
Research group Gartner argues that as digital media has grown over years to become the dominant component of advertising spend, the talent pool has grown apace.
According to Eric Schmitt senior director and analyst, Gartner, “This gives advertisers both the motivation [in the form of cost reductions] and means [in terms of talent availability] to tackle more work in-house. The current trend to insource aspects of programmatic advertising underscores this dynamic.”
Indeed, in a report published last year called How to take programmatic advertising in-house, Schmitt argued that managing programmatic advertising internally offers favorable economic and strategic advantages in data and segmentation — but brings with it significant execution risks. “Marketing leaders focused on advertising should calibrate investment to media spend, take a phased approach and leverage hybrid tactics.”
Schmitt says this trend toward developing in-house capabilities adds to the pressure on media agencies to perform — and to do so transparently.
This is just one more problem agencies have to cope with, he says. It is one more layer atop other challenges, including media spend consolidation with Google and Facebook, and competition from systems integrators.
“That said, it is unlikely that we see wholesale insourcing by advertisers of media agency work anytime soon. We expect many large advertisers to continue to rely on agencies for media strategy and buying work for a long time to come.”
Schmitt and the CMOs we spoke to for this story all echoed another familiar theme: in one sense the value that media agencies provide to brands hasn’t changed.
The Gartner analyst says partner agencies are expected to streamline advertising planning and execution, and to help the brand to outperform its competitors.
“In another sense, the value has shifted away from efficiency to effectiveness. Media agencies are still often expected to deliver low-cost media (arguably the original remit for the category).”
However, the analytsts at Gartner argue that the emphasis on effectiveness has increased greatly.
“For example, most media agencies today offer services related to audience segmentation — including data sourcing, and targeting strategies. Another example is media strategy — an agency can deliver real value by helping brand clients to effectively navigate and capitalise on the fast-growing but chaotic landscape of streaming video media options.”
For their part, the leading agencies long ago abandoned any gimlet-eyed insistence that the old certainties of the past might remain or return.
Mike Wilson, the CEO of Havas Australia, recently said, “Fundamentally, what we deliver for clients hasn’t changed since Charles Havas started pasting posters in Paris in the 1800s. We put our clients’ brands and products in front of people who are likely to buy, at the time of demand.”
But, he said, “The methods of delivery in 2019 are entirely different — and that’s where change has occurred. And our agency has evolved to match or even lead the market.”
GroupM Chief Investment Officer Nicola Lewis likewise describes how companies such as hers have embraced the change as a competitive reality.
“You only have to look at shifts in consumer habits and consumer sentiment towards brands to understand the seismic changes our industry has embraced.”
She says the role of businesses like GroupM is to navigating a complex ecosystem, whilst still delivering to an overarching brand strategy.
“To do this we have moved from a world of brand or performance to one of brand and performance. This is solely due to the complex nature of media, and the ongoing blurred lines between new media and old media, where we are seeing digital deliver highly sticky, rich messages, and OOH and TV moving towards a world of addressability at the core.”
Lewis acknowledges that significant disruptions in technology have propelled most, if not all, organisations into a period of ongoing transformation. “This isn’t something to be feared, it’s to be embraced. But leaving legacy systems, processes and beliefs behind is not only hard, but also time intensive, and often cost prohibitive.”
Digital technologies sit at the heart of this change.
“Our unwavering focus on technology feeds into transformation, and enables our clients to navigate media more efficiently and effectively than ever before,” she says.
Havas, likewise, has embraced a deep dive into technology as a core part of its business, according to Wilson. “We have very close relationships with all the major technology vendors and our teams are at the forefront of the capabilities of today’s (and tomorrow’s) digital technology.”
“But we also have a view beyond the traditional media ecosystem. If we have a focus on delivering business benefits, we have to understand what happens when consumers reach our client’s site or store; how best to convert prospects into customers; how to convert customers into profitable, long-term customers.”
Havas built a business specifically to address this issue: Havas Helia. “This team of technology specialists is different from the usual analysts and techies in that they are also practitioners — they have experience in operating the tech, not just implementing it.”
He says the Helia team has a deep understanding of what the technology is there to deliver in terms of business outcome as well as an understanding of how a particular piece of technology links to a client’s broader infrastructure.
“Rather than a team of egg-heads sitting in a dungeon, they work alongside all other teams in our agency.”