“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 Carolina Abanente, founder, executive vice chairperson, chief strategy officer and general counsel at NYIAX.
Advertising agencies aren’t dying, but neither is the recurring storyline about their demise.
Maybe that’s why, at a recent conference full of agency CEOs, the moderator asked me if media innovations like blockchain would kill the agency. The short answer is no.
But the longer answer is that media agencies will look more like fintech. Here’s why.
The media business is cyclical
A recent ANA report found that 78% of brands have built in-house teams to handle work traditionally performed by agencies, compared to 58% five years ago. What that report fails to mention is that 2013 through 2018 were boom years for corporate America. In a downturn, advertising budgets contract and in-house teams suddenly look very expensive as their workloads shrink.
As third-party vendors, agencies are built for a boom-bust cycle. During the next downturn, brands will reconsider the expense of staffing by turning to agencies that can deliver service for a fee. Of course, the media business has seen this story many times before. But the next chapter will see an evolution that owes its lineage to fintech.
Agencies are the new broker-dealers
From a macro level, the disruption that swept through the financial services industry nearly two decades ago parallels the transformation that’s currently reshaping advertising. In fact, the concern many people currently express for the future of the media agency echoes the fears that once dominated financial services.
But online brokerages like eTrade didn’t put investment banks out of business. On the contrary, the same digital tools that brought us those online trading portals simultaneously opened up a new class of retail customers and helped investment banks thrive as market experts for institutional investors.
Within the context of advertising, the same tools that make it possible for mom-and-pop businesses to buy digital media also make it possible for agencies to add value by serving their brand clients in a more sophisticated way.
One capability that’s already achievable for media agencies is the ability to create economies of scale by trading on behalf of multiple clients, across industries. Historically, media agencies have leveraged economies of scale to lower costs for clients. But those same economies of scale also give media agencies a unique view of the market that is both wide and deep.
By leveraging that unique vantage point, agency traders can add value by advising brand clients on how to spread budgets efficiently across vendors and how to best deploy data sets to their media buys.
Looking a little further down the road, technological advances will expand the agency’s role as a media trader. Standardization and automation will increase trading volume. In turn, media agencies will act like broker-dealers by helping advertisers make long-term market projections that will have a dramatic impact on planning. Moreover, as true traders, agencies will help clients become nimbler, allowing them to adjust media plans on the fly.
Inevitably, some brands will go it alone. But while some brands invest in building in-house capabilities, countless more will discover the value of leveraging expertise that doesn’t fall within their core competency.
Brands aren’t in the business of trading media, which is why there will always be a place for agency expertise.