“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Jay Friedman, chief operating officer at Goodway Group.
Although 2017 prediction pieces are barely 90 days old, we’re seeing an important development that few, if any, mentioned: We may be able to soon call the time of death for the Google-Facebook duopoly, depending on the lens we’re looking through.
At the beginning of the year it seemed the duopoly was solidifying, eating up 100% of digital ad spend growth. But there is more to the story that this duopoly is solidifying, and agencies stand to benefit handsomely.
For example, just the other week, we saw that more advertisers are using Amazon’s demand-side platform (DSP) than any other DSP. That doesn’t mean advertisers are spending more, just that more dollars are flowing through Amazon than any other DSP. Oh, and AppNexus also topped Google. Facebook? It doesn’t have a DSP.
This isn’t to say that DSP spending is everything. Billions of dollars flow through Google AdWords and Facebook’s Ads Manager without ever touching a DSP. Dollars aren’t everything; metro survey areas and logins represent penetration, so there are fingers on keyboards and CMOs paying attention to much more than just Google and Facebook. How many platforms does a typical CMO need for non-search digital?
Fragmentation Creates Opportunity
Even if we assume the use of a social platform to aggregate social spending, a marketer or agency will still need to log into Google for YouTube at the very least, Amazon for ecommerce, Facebook and likely an independent DSP for other unique features. The promise of one central digital ad buying hub has now fragmented into four.
When fragmentation and complexity increase, businesses often look to external resources to simplify and streamline the information and effort. Isn’t this what agencies do? Multiple platforms make it difficult for marketers, but there are also at least 10 quality research subscriptions, dozens of third-party digital relationships, customized data science needs and invoicing and billing that must take place.
I believe agencies have been in the driver’s seat in recent years more than they give themselves credit for. Platform fragmentation is just another reason why.
Where Agencies Can Go From Here
A leader at an agency once said to me, “This is a brutal business. If we stand firm on fee demands, there are 10 other agencies lined up behind us to undercut us.”
I’m sure this is still the case. But there is so much more to differentiate on today than in the past. “We buy it cheaper” used to be the lead differentiator in a pitch. Today, agencies that lead with “We can buy digital cheaper” have a sign taped to their back that says, “We buy lots of fraud.” Low prices in digital media are not only no longer a badge of honor, they’re a warning sign. With price no longer the lead, real differentiation can occur.
Agencies that tell a client, “We’re not the cheapest, but for the $5 million you’ll pay us in fees, you’ll get approximately $50 million more in profit than you would without our strategies,” are going to face a much less determined client when discussing agency compensation.
The same strategies can be applied by using research tools whereby agencies can provide insights to their clients’ business and industries that even the client didn’t know. Agencies may also be able to bring a high-level leader from a key vendor in to meet with clients because of an agency’s aggregated spend. I believe agencies have more differentiators at their disposal today than in any other recent time period.
Agencies must use these times to their advantage.
Follow Jay Friedman (@jaymfriedman) and AdExchanger (@adexchanger) on Twitter.
