Commentary

Are Agencies Doomed? DSPs And The Future Of Advertising

It is fascinating to me that large agencies are investing so much in their own demise.

It's no surprise that agencies are leery of crowd-sourced creative. Agencies whose secret sauce is the perception that big clients need expensively produced TV commercials, that only they can make, find it very disconcerting that someone might replace them with a post to a site where hundreds of wanna-be TV directors will be inspired to create a commercial for a few hundred or even a few thousand bucks.

But, agencies are investing in so-called demand-side platforms, DSPs, for the real-time, auction-based purchase and management of advertising media across networks. These networks can only lead to the enabling of smaller, even one-person, shops being able to compete on a level playing field with the big, bloated, agencies that helped created the commoditized media environment in the first place.

Clients want creative and tightly integrated campaigns. And yet the agency holding companies create more and yet more specialized business units that that don't talk to one another. First, it was "digital agencies," separate from those for analog media; and now separate search-marketing business units. What inspired this column is the creation of stand-alone "DSP" that would operate alongside a media buying service in a agency holding company.

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DSP technology and systems that aggregate internet media ad-networks for the purchase and optimization of online display, or video, advertising sound like the client-lure-du-jour. But in time they will enable little guys to buy media just like the big guys. It is just like the digitization of the financial markets that now allows me to trade stocks or bonds from my home when I used to have to call my broker, who made a fat percentage on the trade, not to mention that I had to rely upon him for information.

One effect of clients wanting well-thought-through and integrated campaigns is that media companies have begun to compete directly with agencies by offering complete multiple media 'integrated' campaign for millions, even for tens of millions of dollars in client investment.

In Balkanized agency holding companies, the digital unit doesn't know and doesn't care that the print unit bought magazine brand x in the print planning process. There isn't even a mechanism for them to find out, despite the fact that research from Dynamic Logic and others conclusively shows that integrated campaigns are more effective and efficient and that buying the same brand online and in print makes financial sense. I call it hybrid media because it represents two media (print and digital) from the same brand working separately and together to give the client more return on its investment. It's a direct analogy with a hybrid car, whose two engines work separately and together to give the driver more miles per gallon.

Because advertisers want the most effective advertising packages they can get, more and more they are open to integrated packages from media companies. And media companies are becoming more like agencies in order to provide them. In the last couple of years, Hearst purchased iCrossing to bring in search engine expertise, and Meredith purchased six new business units, including an interactive agency and a mobile solutions provider.

We know that the most powerful thing in advertising is not media buying clout, or TV production expertise, but an idea. A single powerful idea, created and communicated by a single individual can change the fortunes of even the biggest brands. Individuals, and small groups, with the distribution power of a DSP at their disposal, will undermine the foundation of the very large agency groups that invested in networked-real-time-advertising bidding and management platforms.

The demand for "big ideas" that will move the needle for advertisers will always be there. The DSPs will further enable individuals and media companies with those big ideas to undermine the old role of agencies.

4 comments about "Are Agencies Doomed? DSPs And The Future Of Advertising".
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  1. Bob Rose from SMA, February 24, 2011 at 4:46 p.m.

    Nice column...The biggest myth of all time in the media biz is that big buying entities get better value. This is not true, and never was. The DPS era will solidify the fact that buying is a commodity function. Creative thinking, planning and care in execution will always be the key to marketing success.

  2. Christopher Conner from SuperMedia, February 24, 2011 at 4:46 p.m.

    There will always be a need for agency services from a campaign strategy and creative standpoint. Anyone with a camera and a Mac can make a video or put together an ad but the quality of the work usually isn't there and major brands are leary about using someone that they found on a job board. Some local agencies may see some elbowing in by one-person shops but large agencies need not worry about this for now.

    Media buying will continue to become more commoditized and there is little to nothing that large agencies will be able to do about it. Also, from my experience, most large agencies are looking for full-service DSP solutions where the IO is handed over for implementation.

    But let us not forget that a large part of this business is about relationship building. Relationships give you access, insider information and better pricing. While DSPs have been able to aggregate a ton of inventory there will always be some premium publisher that will either not allow them access or limit them to a subset of their inventory. This is especially true with publishers that have premium inventory, own a good chunk of a particular vertical or that are brand sensitive. So large agencies will take advantage of the reach and pricing of DSPs while maximizing their relationships with their premium publisher partners.

    As for the issue with silo'd business units, I agree that this is a growing issue. In years past it wasn't as large a concern with digital budgets making up such a tiny piece of the overall media spend but as it becomes more important and fractured (social/site/mobile/search/display/hyperlocal) then it becomes a greater issue. I've advocated for a long time that agencies and any multi-channel media buying entity would be wise to tie attribution and other campaign details back to a centralized CRM or data repository with an easy-to-read dashboard. The technology exists and each channel has their own tools for tracking now but pulling them together hasn't been perfected from what I've seen.

  3. Don Scott from BH Media Group, Inc., February 24, 2011 at 6:03 p.m.

    Integrated, cross-platform media offerings are the most effective means of reaching the consumer (whether businesses or individuals). The research is conclusive on that point. What is still to be determined is whether advertising agencies will be able to add enough value in the media buying arena to make sense.

  4. Joshua Chasin from comScore, February 25, 2011 at 9:33 a.m.

    Well said.

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