One of the biggest topics in digital advertising seems to be the increase in advertisers taking their programmatic trading out of agencies and bringing it in-house. Netflix and Kellogg’s have been amongst the most high profile proponents of this move, coming clean at the end of last year in AdAge about the benefits of taking control of their programmatic activity for themselves – improved transparency, greater efficiency and effectiveness and regaining control of their own first party data.
These are compelling arguments for taking programmatic in-house and the whole issue has put the cat amongst the agency pigeons. Not surprisingly, having been the most important partner for advertisers for so long, the new technology-driven landscape is leading to unsettling times for agencies.
The pressure on agencies is only likely to grow as Procter & Gamble also announce that they are looking to save half-a-billion dollars in intermediary and agency fees, with CFO Jon Moeller telling analysts: “We plan to significantly simplify and reduce the number of agency relationships and the costs associated with the current complexity and inefficiency while upgrading agency capability to improve creative quality and communication effectiveness.” P&G’s spend on agency fees has been estimated by people outside the business to be around the $1 billion mark.
So does ‘in-house’ mean ‘agencies out’? Certainly not. But what it does mean is that agencies need to let go of their traditional model in the knowledge that media arbitrage and percentage-of-media payments are unlikely to keep them in the manner to which they are accustomed for much longer. Instead, they need to refocus their position in terms of what knowledge and skills still render them invaluable to advertisers. It is now a question of them adding value, rather than complexity, to the digital advertising process.
Agencies’ understanding of their clients’ consumers, their desires, needs and aspirations, remains unrivalled. This is the fuel behind any great campaign, and agencies will continue to be the powerhouses in creating advertisers’ media strategies and planning. Clients will also need agencies to not only execute campaigns across media that is not transacted through programmatic channels, but also to connect online and offline. Agencies are the ones that have the over-arching view across all media and can bring their knowledge to bear in creating a more cohesive cross-media planning strategy.
Equally advertisers will need agencies to bring creative and disruptive thinking to the party. As online gets increasingly crowded, the ability for a brand to stand out is paramount. The agency’s skills in pushing creative boundaries and enabling high-impact, personalised campaigns that are in context and relevant will be invaluable.
However, once an advertiser brings programmatic in-house, a three-way partnership with advertiser, agency and ad tech partners is necessary to ensure client success. The agency focuses on strategy and planning, the technology firm brings the programmatic platform, training and support for implementing campaigns and the client takes overall control of all activity.
In this scenario the agency planning team becomes accountable to the client for the planning of all media under the client’s direction and communicating with the technology partner about how the overall strategy influences programmatic. The technology partner is accountable to the advertiser for executing against that strategy and sharing results with both client and agency to inform future campaign planning.
For all three members of this new-look team it’s about collaborating and working to their strengths to add value to the process – and ultimately both agency and technology partner need to earn their seat at the table.
Mike Peralta is CEO of AudienceScience