With the trend for in-housing programmatic hitting client agendas, it is clear that a shift is taking place in the relationship between advertisers and agencies.
At its root is an erosion of trust. Prompted by concerns in transparency and brand safety, advertisers are increasingly looking to seize control over programmatic spend.
As a result, legacy agencies are facing a major challenge to transform the structures that underpin their existing approach.
The changing relationship
Evidence of the nature of this change can be found in Infectious Media’s own research, which questioned 200 decision-making marketers with programmatic remits in EMEA, APAC and NOAM. The study revealed that 84% of respondents are seeking greater control over their programmatic operations. At the same time, it found that 96% of marketers would still look to agencies to manage multiple aspects of their programmatic advertising in the future.
These seemingly contradictory findings hint at what’s going on beneath the surface of a rapidly-shifting market: on one hand advertisers are questioning their faith in group agencies and considering bringing more services in-house; on the other, they don’t have the resources or expertise internally to manage this themselves.
So, with trust at an all-time low, and advertisers increasingly taking the reins on how their media is run, where do agencies fit in?
Agencies at the cutting edge of this trend are adapting, pivoting to a hybrid model where modular services are provided according to client need. Crucially, this approach is backed by the specialist expertise and agility to engage and deliver value.
But in this fast-moving industry, most advertisers are still locked into rigid agency contracts. These are often a ‘one size fits all’ model negotiated in one territory but serviced globally, benefiting some regions but leaving others without the tools or services to get the most from their programmatic spend.
The last few years have seen this standard agency model being pulled apart by opposing forces. Agencies are billing on a percentage of the media and their costs are static, being based on territories, creative executions, and channels.
But their margins are trending downwards, and there is a growing need for investment in the people and technology to deliver in programmatic.
They are caught in a trap. To remain competitive, agencies need to be spending more and more in analytics, ad ops and data, but this does not make them any more money. So, if they are to remain profitable, their model dictates they must make money in un-transparent ways.
Agencies must get to a point where they do not need persuade clients to spend more on media to make money Instead, they need to show clients how to spend less in a smarter way, without internal agency conflict.
So, as we go through these shifts in media buying, what do agencies need to do to succeed? Agencies need to be agile to change, ensure they take a strategic view of programmatic, provide access to the skillsets that solve complex and emerging challenges around data and analytics, and invest in the technology to bring together the fragmenting media world.
If they can do this, agencies can remain relevant, even with brands taking greater control over spend. But what is abundantly clear is the rules of the advertiser-agency relationship have changed, and agencies that resist change will be in trouble.
Attila Jakab is managing director at Infectious Media.