Media spending patterns show 'the death of the media agency' is much exaggerated

Separate studies published on both sides of the Atlantic this week demonstrate that media agencies are needed more than ever before in the digital era, especially as digital media goes programmatic. The Drum's digital editor Ronan Shields offers his opinion.

The IAB UK this week published a report delving into two of the most buoyant sub-sectors in the digital advertising sector – both mobile and programmatic – finding that almost two-thirds (64 per cent) of mobile display ads are being traded using programmatic media buying technologies.

The study, conducted by Circle Research, quizzed over 300 brand-side marketers from different industry verticals, and found that over half of all brands are buying mobile inventory using programmatic media buying technologies. This is despite less than half (45 per cent) of all those surveyed necessarily understanding how such technologies work according to the findings.

Low understanding of tech among brands

On the face of things this is a startling discrepancy, and is even more alarming when among the insights also unearthed in the study was that only 29 per cent of respondents claimed to have an “excellent” understanding of the discipline.

Additionally 45 per cent of respondents reported "no or little knowledge" of the sector – this despite half of all mobile display ad buys being performed with these technologies.

And the fact is, that's entirely understandable, keeping up to date on such tech is a full-time job. Programmatic advertising is complicated enough on desktop, and when you add cookie-less targeting using IDFA IDs, verified Facebook IDs, etc., etc. into the mix, you just find yourself mired in evermore confusing acronyms.

However, I put the above-raised anomaly to IAB mobile manager Mike Reynolds, who worked on the report, and his explanation was that the findings reflected the enduring importance of media buying agencies.

To quote him: "In a lot of cases the buying [reported in the study] will be through their agencies, so effectively they are outsourcing."

In my view this is a ringing endorsement of the role of the media agency, sspecially in an era when many are beginning to question of media buying houses.Technological advancements (theoretically at least) mean that brands could easily decide to cut agencies' profit margins out of their overall media spend.

True, this title has played its part in adding fuel to the fire over the prospect of brands taking their media spend in-house, with some of the advertising industry's largest spenders opting to work more directly with ad tech outfits in order to achieve greater transparency as to where exactly their spend is actually going.

Plus media agencies are also under pressure from the ever-growing 'client-direct' business interests from the industry's biggest names such as Google and (to a lesser extent) Facebook. But can brands necessarily trust all that they are told inside those walled gardens? After all, Facebook and Google are not exactly not-for-profit organisations themsleves.

The growing role of Facebook and Google

A separate eMarketer report looking at US spending patterns would further suggest that brands more than ever before will need the advice of a third party as they turn away from online search advertising (i.e. Google) towards display ads (where Facebook is increasingly dominating).

To give you the top-line figures; US digital display ad spend is expected to surpass search ad spend for the first time this year, with video sponsorships, rich media and ‘banners and other’ set to make up the largest portion of digital ad spending this year – 47.9 per cent.

I quizzed Martin Utreras, senior forecasting analyst at eMarketer, on the figures, enquiring what the figures meant for media agencies given the aforementioned industry dynamics, and his response was unequivocal.

"We don't think agencies are out of the equation. Although they've had to evolve and adjust to the new realities of a rapidly changing market, many have successfully positioned themselves to continue serving their clients in this changing environment," he said.

"As with any shift there will be winners and losers, and we think those agencies quicker to adapt to the new technologies will be ahead of the competition."

The indsutry's leading agencies are taking note aof the above sentiments. We need only look at Publicis Groupe's Vivaki (an entity that would formerly have been labelled as an 'agency trading desk') repositioning itself as a test hub for programmatic media trading technologies. The others (Xaxis, Amnet et al.) are also doing likewise.

True, this is largely the response over previously questionable practices, but the underlying principal is clear: brands need their agencies just as much as they need their ad tech.