By Harry Steer.
As I write, the ad industry is buzzing with reports of the imminent demise of WPP. While the reasons put forward vary wildly, what they have in common is the underlying assumption that the company founded by Sir Martin Sorrell – like its competitors – has failed to adapt to an industry environment that has outgrown the current media agency model.
Recently, P&G Brand Chief Marc Prichard delivered a speech calling for creative and media agencies to reunite. He’s not alone. In fact, this is something some of my more experienced media colleagues were prophesising throughout my career – in part, because they remember the way things used to be.
Where we were and where we are going.
Until the late Eighties, media and creative were typically managed by the same agency. Then today’s specialist media agencies began to spring up, offering economies of scale and deeper industry knowledge – a model that persisted well into the 21st Century. But in isolating media from creative, a certain agility was lost.
The landscape is now evolving again, thanks in part to the demands of influential clients like Prichard. Consumers now have more choice than ever, while on the supply side, the increasing prevalence of digital media allows for superior targeting and reporting.
This is a topic close to my heart, having spent my entire career at two of the industry’s giants – Mindshare and Omnicom’s Rocket – before making the decision last year to leave the media world and join a full service agency. My decision was rooted in my beliefs about the future of media, which arose from three big trends.
1. Transparency (or the lack of it).
As media agencies have shifted investment from traditional channels to digital, they have increasingly faced questions relating to the transparency of their work. As Jon Wilkins, chairman at Karmarama, recently said, “the media agency margin has been made up of a lot of non-transparent practice in the digital space – and that’s where they’ve succeeded in margin. With the transparency agenda at the forefront of most clients’ minds, this will be under pressure.”
One of the key areas to come under such pressure has been the use of agency-owned programmatic trading desks. During my time in media agencies, I saw an active increase in investment in agency owned desks – something that made transparent costing much more difficult to provide. Brand security is also an issue. The World Federation of Advertisers recently cited that around two thirds of marketers are uncomfortable with the conflicts these desks create.
2. Trust (or the lack of it).
This is a tough one. Not only have the channels used by consumers changed, but their attitude towards advertising in general has changed, too. Currently 69% of consumers do not trust advertising. This has resulted in 39% of adults using an ad blocker, an increase in use of ad-free services and an increase in ad blindness. Instead of looking to rebuild this trust, media agencies have increased the number and size of ads shown to the consumer, which has only increased their problems. Recognising the opportunity, consultancies such as Deloitte and Accenture have entered the market – and rather than limit themselves to media buying, they are extending their offers to include operating models, forecasting and even creative services such as product design.
3. Google and Facebook.
Recent figures suggest that the expenditure going to Google and Facebook accounts for 90% of online advertising growth. The meteoric rise of these platforms has impacted media agencies in two important ways:
• No media discount: The traditional media model is based on a 15% buying discount, which allows the agency to charge the client the market rate, and take the 15% for itself. Neither of these platforms offer such a discount so, as spend in these channels increases, the traditional agency revenue stream decreases. This reduction in profit means media agencies must look for alternative revenue models, which brings us to…
• …self-service media. Both platforms allow anyone to set up and run their own ad campaign. This bypasses the need for a specialist agency. For clients who are frequent high spenders, both platforms offer specialist teams to ensure they make best use of the platform (while increasing spend on said platform, of course). By allowing anyone to run campaigns, the big tech players make it even harder for media agencies to generate profit. Clients are naturally reluctant to pay a commission for something they can do themselves.
The future is sort of blurry.
In the case of WPP, this is not the first time the company has faced a major challenge. It has survived two recessions and one full-on global financial crisis. What we are seeing now is more fundamental, however. It is a specific challenge to the business models on which our industry is based. No longer can the giants of media rely on their clients to adhere to their business model. Many of the challenges facing agencies are also facing clients – and the clients are already responding.
One way they’re doing this is to look outside the bubble of media specialists. In some cases, they’re empowering creative agencies like my new employer to unite media and creative on a project-by-project basis. In other instances, they’re taking the process in house.
There’s still a role to play for the big shops, however, with all the specialist tools and insight they can bring to the table. My prediction is that, just as creative agencies are encroaching on some of their work, today’s media agencies will start to integrate some creative work into their offering, at a level they haven’t considerd in the past. And maybe we’ll see one or two full-scale reunifications of creative and media under one roof. Whatever happens, the lines we’ve all respected for the last two or three decades will become blurred.