Why Are Large Agencies Struggling To Adapt To Digital TV?

Victoria Milo MightyHive

"On TV And Video" is a column exploring opportunities and challenges in advanced TV and video.

Today's column is written by Victoria Milo, director of go-to-market digital media at MightyHive.

TV advertising and offline media budgets – especially those managed by large agencies – have yet to change at the speed required to match the rapid shift in consumer behavior.

Even amidst the pandemic, which saw a massive boost in CTV – time spent among US adults grew by 33.9% in 2020 – the ad dollars are slow to follow. “Roku recently reported that more than half of TV viewing time among adults aged 18 to 34 is now devoted to streaming, and yet CTV ad spend is only about 10% the size of linear TV ad spend,” according to Mike Baker, former CEO of dataxu.

So why are larger brands and agencies so slow to follow the clear trend toward streaming?

Large agencies have a vested interest.

 Brands stick with traditional ads because ad agencies make money or benefit economically when they sell TV ad placements. A rigid structure, built and sustained by ongoing relationships and incentives, leaves little space for innovation.

As a stopgap, agencies offer CTV as “added value” with their traditional buys. This approach limits innovation, integrated measurement, and investment optimizations. The agencies’ unwillingness, or inability, to jettison these old revenue streams will ultimately result in traditional agencies falling behind.

A new model to help brands evolve with audience behaviors is needed.

Large agencies lack the skills and agility to truly innovate.

It can be challenging to find a partner that can manage both linear and digital budgets well. Agencies that push TV ads don’t have many incentives to work in the digital realm, especially in a creative and innovative way that can compete with the digital-first agencies. Digital agencies often don’t have the relationships with top ad buyers or TV channels required to make the best deals.

Traditional ads do play an important role, but reluctance to integrate new media and interactive formats will leave many lagging behind. The right approach is to bring together traditional and digital. You’ll see a continued rise in full-service offerings: smart consultancies and in-house or embedded capabilities that can do a bit of everything, with experts to advise on the right approach.

Large agencies can’t handle the complexity of digital data.

The traditional advertising model relies on clear-cut metrics that veteran marketers understand. GRP [gross rating point] has a long history in the media industry and CMOs can quickly grasp what it delivers.

In contrast, digital advertising offers the opportunity to directly track sales and granular channel performance, but these metrics are difficult to digest holistically. There isn’t a formula for how many Instagram likes or YouTube views will consistently lead to a sale. When it comes to digital video, especially on social media, advertisers don’t have precise information about where their ad is being shown, which is a risk for many marketers.

For agencies, it’s easier to sell in predictable channels than to explain a new way of thinking. But testing this uncharted territory, is a change modern marketers must adopt in order to adapt to changing consumer behavior.

One format is simpler than many.

The countless formats and options in digital advertising production are less defined than TV, making them daunting to venture into. Television offers easy, seconds-long slots for video. With digital advertising, marketers choose from in-banner or skippable, to programmatic or influencer videos and many, many more consumer interaction variants.

It’s easy to see how this boggles the media plan and the creative production budget. Meeting this need requires a shift in mentality towards dynamic, testable and modular creative, and away from the “big spot.” Agencies accustomed to flashy productions struggle when asked to deliver 40 variations of a spot to allow for customized messaging – and struggle even more when asked to handle dozens of creative executions.

Brands need to demand a change, or make a change. 

Ultimately, the catalyst for change will be brands who demand that their dollars are shifted from traditional TV into emerging channels. Brands working with flexible and digitally-centered agencies, or who have brought these capabilities in-house, are going to be leading the next decade of advertising.

Other brands will struggle to catch up.

If brands continue to allow agencies to deliver media plans that lack innovation and benefit the agency more than the brand, then those agencies won’t have an incentive to invest in the future. If agencies are unwilling to change, then it is time for brands to seek a new way.

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1 Comment

  1. Casper Ng

    Hi Victoria!

    Firstly, great article that touches on the tricky point on how large agencies operate and function. On that note, with increasing push from publishers and ease of set-up for digital tv inventory via programmatic, do you think that the environment has actually made it easier for said agencies to switch to digital TV?

    Reply

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