Originally published in The Drum, September 2016.
Media agencies are in the midst of an identity crisis as they adapt to their changing role in the ecosystem. In the first of a series on the collision of martech and adtech, The Drum explores what impact the increasing overtures of martech players are having on the incumbents of the media landscape.
It’s a jungle out there for media agencies. Stretched thin in order to keep abreast with the blistering pace of innovation, data centricity, etc, they must compete with the likes of Google and adtech companies while also implementing complex and different technologies to deliver for their clients.
The martech industry, seeking to simplify and consolidate the vast marketing ecosystem, should be offering a golden ticket solution. But is the technology the media agency’s saviour, or is it allowing others to move into their space?
The challenge presented by this vast technological ecosystem
Scott Brinker, author at Chief Marketing Technologist, says this hasn’t played out as previously thought. “For a few years, large brands were expecting large software. They thought they were going to be able to pull all the marketing technology together to create a single suite. It hasn’t happened yet as the market isn’t static. Virtual reality, artificial intelligence, the internet of things; hundreds of new technologies are coming to market every year,” he explains. “It’s not just like building the tower of Babel – it’s like building it while they change the blueprints each year.”
Paul Smith, senior vice-president and general manager EMEA at Salesforce Marketing Cloud, adds: “According to Salesforce’s State of Marketing report, high-performing marketing teams are over 13 times more likely than underperformers to be pioneering marketing use cases. Some of the newest examples of marketing opportunities include beacon technology, the internet of things, podcasting and wearables.”
Research from DataXu shows that 23 per cent of agency workers believe they are spread too thinly because they must manage so many marketing platforms and vendors. Indeed, Mark Finney, ISBA’s director of media and advertising, says: “It’s difficult for agencies to keep up with the developments and, in some cases, they're threatened by it.”
So, how are agencies adapting?
Building collaborative relationships between agencies, clients and technology providers is key to navigate the change, according to Stephan Beringer, chief executive of Publicis Groupe’s adtech hub VivaKi. “Because of the sheer complexity of the ecosystem and its deficiencies, discussion is very important to develop a common understanding of where the world is moving and how best to get there,” he says.
But even with a solid relationship between client and agency, the rate of change poses further issues as brands become distracted by shiny, new technology, outlandish promises and fierce competition from other players. The kind of long-term relationships of yore seem untenable in this shifting environment.
The key, it seems, is for agencies to develop flexible partnerships with a number of martech and adtech companies, allowing them to both ensure the best performance for clients and hedge their bets. As Brinker puts it: “I advise marketers and tech providers in this space they want to keep their options open. We’re in a moment where there’s a lot of change. If you’re trying to pick one system, you’re taking an enormous bet.”
Coalition of interests
Beringer describes the nature of the relationships VivaKi has formed with technology providers as ‘not exclusive’. He adds: “It would compromise Publicis’ relationship with clients and the other way around. Eventually, you will have to integrate technologies with other platforms. No one technology does it all.”
Technology is also shifting the role of the media agency. They now act as consultants, advising not only on media placement, but on the best technologies to employ to track, monitor and target their clients’ consumers. Indeed, the most advanced are also seeking to influence the technology being developed, tailoring it to the needs of their clients.
Oracle Marketing Cloud (OMC) is now focusing on training all of its partners (including media agencies) to be tech experts for their client in using OMC solutions, says sales director Ghislain Lefebvre, especially when it comes to using data management platforms (DMP) where specific skills and culture are important to doing so successfully.
New focus, new competition
Management consultants are beefing up their offerings and moving into the digital marketing arena. Accenture has made several high-profile acquisitions (such as that of Acquity Group in 2013) and formed strategic partnerships with Marketo. Plus, its ‘4R Personalisation Framework’ looks suspiciously like the offering from a modern media agency.
With a direct line to the chief executive and a history of commanding enormous budgets, this trend seems threatening. Is technology lessening the need for traditional media buying skills?
Anatoly Roytman, managing director for Europe Africa and Latin America (EALA), at Accenture Interactive thinks the convergence of agency and consultants has been a long-running trend which will continue, the only question being: “Who will get there first?”
“The whole world is becoming more complex. Management consultancies are in a better position as this is a tremendous culture shift for former creative media agencies. We started trying to get into the creative world a long time ago; it’s much more natural for us.”
Change management solutions have a great value proposition at the moment, adds Brinker. “Technology has outstripped the speed with which companies can adapt to it. Technology is not the bottleneck; embedding it is.”
Unsurprisingly, however, the media agencies disagree, citing their pedigree and customer knowledge as their greatest asset. Nicolas Bidon, chief executive, Europe, at GroupM’s ad tech hub, Xaxis, says: “Management consultants don't have the proven experience of understanding consumer journeys, buying the right media and putting a plan together.
“Agencies should keep their place as trusted advisors to chief marketing officers and marketers. It’s a set of skills they have that others don’t. The technology is just a tool; unless you have the fundamental skills, it won’t deliver results.”
James Harris, global chief digital officer at Carat, points to established networks and local knowledge which allows for precise targeting and nuancing.
“Having the right skills and ability to understand local nuances such as language is very important. A lot of the technology won’t do this on its own. If you’ve got someone on the ground in Nigeria who understands the local market, it’s a powerful advantage,” he adds.
Plus, it’s not just about having the right technology, says Harris: “Technology either needs to be clever and effective or different and better. This is a problem with adtech and martech – some of it sounds fantastic, but there’s no substance.”
Agencies’ ‘Darwinian’ approach
Whether you side with the more strategic, top-down approach of the management consultants, or the more operational, specialist approach of the media agency, there’s no doubt both have merit.
“Management consultants and financial analysts struggle to understand agencies,” says Vincent Potier, chief operating officer at Captify. They take a rational view of the world and forget that agencies are beasts of adaptation, they’re Darwinian.”
The changing role of the agency, plus scandals such as the fallout from the ANA transparency report have eroded trust and made new pricing structures essential for many brands. Agencies such as Publicis are acting as trainers, offering e-learning and certification to their clients, helping them interpret data, understand programmatic and use their DMPs more effectively. Importantly, this level of understanding builds trust and deepens the relationship between agency and client.
Crucially, what does this shift to consultancy mean for the traditional agency percentage revenue model? The data-driven approach doesn’t seem to have trickled down to pricing, however.
ISBA’s Finney points to a decline in ‘payment by result’ models. “I'm surprised we’re not seeing more ‘payment by result’ models. Our seventh ‘Paying for Advertising’ report shows that payment by results is actually falling. You’d think the days of commission would be over, but it’s surprisingly robust which is odd because it pulls against the idea of performance,” he reports.
What is absolutely clear is that martech has had a profound effect on the very fibre of media agencies, from the relationships they have with their clients to their role in the marketing ecosystem.
The transition to data-driven performance marketing is not yet complete, but the future looks promising. If they can continue to make good decisions about the blend of martech and adtech to use, build loyalty through deeper, more transparent relationships with their clients and position themselves as trusted, performance orientated consultants, they can cement their role in the new world.
As Beringer puts it: “Ultimately, we are all embarking on a journey together. It’s new, but it’s not difficult, particularly not now we have our focused, science-centric approach.”