Commentary
Conundrum: Volume Is No Longer Relevant For Media Agencies
- by Maarten Albarda , Featured Contributor, January 19, 2024
It was on this premise that media agency giants came into being. Media agencies sold themselves to marketers with a focus on volume. A large volume meant you could promise the lowest media cost, because quantity drove the negotiation. Additionally, what mattered in this world was relationships. Whom you could call or wine and dine made a huge difference in closing the best deal with the lowest cost.
In today’s digitally structured media auction world, these principles have all but eroded -- and media agencies are no longer necessarily best placed to deliver in this new world.
Most importantly, “volume” has been replaced by “capability.” The new pillars of capability were initially formed by tools, tech and people. Tools gave you the advantage to move fast and efficiently, critical to secure the deal in the nano-second when it comes to you. Tech is the enabler for the tools, and is critical for the people governing the tools and tech. It enabled decision making on how to manage the complexity of the advertising budget.
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This media planning capability race started a few years ago when programmatic became the predominant means to place advertising. In 2024, I think we are entering media planning capability V2. The pillars as described in the previous paragraph are still the same, but, perhaps surprisingly, I would now place people as the first pillar, followed by tech, then tools.
In the new AI-driven world, the ability to steer the machine, to set the strategy and goals, and to determine which data points matter most is more important than ever.
This is where traditional media agencies are struggling. Sure, they can and will throw money at tools and tech, but people is the most difficult, costly and fickle component in the operational equation. It is here that large media agencies do not have a very compelling offering. Large media agencies are themselves cost- and efficiency-driven machines, and they have gone to great lengths to strip and downsize the most costly and fickle component – people, and investing in their capabilities -- to something that can function at a rock-bottom price.
Advertisers are partly to blame here. They have long actively pursued and benefited from the pricing race to the bottom of media planning. They have also realized that by doing so, they were starting to miss out on certain media planning capabilities and control. And so they in-housed. Which in turn created an even further dressing down of the media agency function.
Media agencies need to completely rethink their reason for being. If volume no longer guarantees the best product (that is, a solid media plan at market competitive placement cost), and a smart-people-driven set of tech and tools does, then the investment should go towards attracting, keeping and educating smart people. Which means increasing operational cost and selling that through to clients.
P.S.: I'm so glad I'm not in charge of a large media agency!
Maarten, I believe that you are correct about the big media shops and digital media---but not, necessarily about "TV" in its exqanded form---"linear" plus streaming. I also don't see programmatic buying---I refer to the computers doing the actual buying, not just paperwork, data tabulating. etc.--- taking over the new media world. Indeed the smart money is increasingly on direct negotiations with a limited number of top sellers to get what you really want, to avoid being ripped off by fraud, to cut out the enormous "middlemen" fees, etc.
Programmatic is well established in digital media buys but not really for TV nor, for that matter, other forms of traditional media. And on that point, your typical branding ad campaign still relies far more on traditional media than digital, no matter what the overall spending stats suggest.
I think that we will evolve into two kinds of media planning and buying disciplines---one for traditional media which for TV includes streaming-----and another for non-TV digital media. In the former case, while the big media shops need to make improvements and fight for the full introduction of attentiveness measurements, they remain in pretty good shape. As for digital, currently it is handled by separate specialist groups almost everywhere and allowing that is a serious error by advertisers. What's needed is a major effort---spurred by advertisers---to integrate both kinds of media into their planning/buying machinations. So far, this need seems lost upon the advertiser CMOs and brand managers, who themselves mostly operate in silos with sales promotion separate from branding---though it will be claimed that the two are coordinated. LOL on that one---a few exceptions notwithstanding.
Ed your comment sounds like it seems to be classifying that media buying will probably end up with two options. One is 'planned', the other is 'plonked'.
John, I wouldn'tnecessarily call the "other" way, a "careless" way----"plonked" --but , rather, a lazy way, with computers used way beyond their true capabilities and advertisers, in effect, not spending their ad dollars as carefully as those who understand the true role of computers ---helping with drudge work, tabulating, etc. ---but not making the key decisions. That doesn't mean that I hate computers---but advertising and media planning/buying, needs a lot more than phantom "impressions" purchased at the lowest CPM to be effective.