There was a time when ad agencies represented an advertiser’s interest when interacting with media sellers to secure time and or space for the conveyance of the advertiser’s messaging. The media supply chain was uncluttered, machine-to-machine buying was not even a distant thought and the roles of the various players were understood by all parties.
As the media industry has evolved, the complexities of the supply chain and the clarity of “what” each intermediary does, what they are responsible for and what they earn have sown confusion, limited advertiser transparency and eroded stakeholder trust.
One of the key drivers of supply chain complexity, and all that comes with it, has been the rapid growth of digital media in general and specifically the expansion of programmatic buying. Thus, there may be no better barometer of this dynamic than the “Marketing Technology Landscape” prepared annually by Scott Brinker. Mr. Brinker’s landscape chart incorporates the logos of each available advertising, marketing and search solution. This year’s version contains logos for over 6,800 solutions, up from 150 in 2011. That is a staggering number of ad tech and mar tech solutions vying for a slice of an advertiser’s digital media dollar.
In spite of the dramatic increase in the number of marketing technology solutions and the exponential increase in the level of data available to inform practitioners media decisions, the industry is still grappling with issues that negatively impact media performance. Issues that include ongoing limitations in attribution modeling, difficulties with omnichannel measurement, a lack of standardization in assessing audience delivery and continued concerns regarding ad viewability, fraud, ad blocking and privacy.
Many would agree that the current state of affairs is not healthy for the global media industry which totaled $500 billion in 2017 (source: MAGNA Global Advertising Forecast, December, 2017).
Marketers, who are under increasing pressure to improve performance, are clearly not satisfied with the status quo within the media supply chain, which many describe as “murky” and “inefficient.” These marketers are committed to seeking out new partners, processes, tools and solutions that can improve working media and increase the chance that each dollar they invest in media has the opportunity to positively impact business outcomes.
Media agencies, for their part are increasingly being challenged to improve both transparency and the cost effectiveness of their clients’ media spend. Sadly, many agencies have taken the stance that there is a cost to be paid for improved transparency, enhanced viewability and brand safety and believe that these costs should be borne by the advertiser. Advertisers rightly disagree with this position.
Let’s be clear. When agencies strayed from a singular focus on their fiduciary responsibility to their clients, they did so at their own risk. Their pursuit of principal based media buys, non-disclosed relationships with other commercial entities in the media supply chain (including their own affiliates) and the myriad of unauthorized, non-transparent revenue generation practices employed by some agencies netted them significant profit gains… in the short-term.
However, as advertisers became aware of these practices and began to understand the negative impact on their business this created a crisis in confidence among advertisers and lessened the level trust that they had in their agency partners. In turn, this has created opportunities for management and technology consultants to make inroads with CMO’s as it relates to their media business and incented many advertisers to begin looking at taking control over portions of their media business, including bringing work in-house.
These trends coupled with the corresponding reduction in non-sanctioned revenue opportunities resulting from greater levels of advertiser transparency have constrained agency margins. How agencies positon themselves for the future in light of the evolving competitive set, while rethinking their service offerings and charging practices remains to be seen, but will be of critical importance.
As for the ad tech sector, there will surely be a shakeout that will result in a reduction in the number of vendors (over 6,200 in 2018) providing solutions. This will be driven in part by consolidation due to the convergence of ad tech and mar tech solutions and the dominance of large players, such as Google, Facebook and Amazon. In addition, the emergence of consumer privacy protection regulatory actions and the eventual emergence of blockchain technology within the media market has the potential for significant disruption.
Clearly, there are uncertainties and challenges facing the media industry and the myriad of supply chain participants. That said, while continued change will be the norm and course corrections required, there will be winners that are able to navigate these turbulent times and position their organizations for future success.
“It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change.” ~ Charles Darwin