The recurrent discussions are all focused on new, nontraditional competition coming from the likes of Google, Facebook, and even Salesforce.com and other ad tech companies. The competitive threat to the legacy advertising agency model is data and reach; tech companies have a lot of data, which enables them to precisely reach microscopic consumer segments efficiently and at scale. Translation: Ad dollars are now flowing to those companies, often at the expense of the ad agency intermediary.
That trend is pretty obvious to those of us in this space. Speaking strictly from an agency’s perspective, our margins have been continually squeezed as our competitive set has grown. Our newer, hipper, flashier competition has forced many agencies to rethink some core business fundamentals. Value-based services and pay-only-for-performance models are examples of what has emerged to stem the flow of marketers going directly to accessible ad platforms like Google AdWords.
So what has Google become then, really? That’s a question I’ve found myself trying to answer in recent years. Is it a channel, through which I can connect my clients to prospective customers at the moment interest is expressed? Is it a publisher, which provides me with numerous advertising opportunities across its range of web properties? Is it a business partner that offers me free tools to more effectively deliver and measure the value Im providing to clients? Or is it a competitor (a stealth one?) that views the agency model as inefficient and unnecessary?
Are big tech ad firms like Google friend or foe? Maybe they’re both.
Admittedly there’s a certain irony to my line of thinking, and I get it. I have a career in this field because companies like Google exist. And I’m not being entirely fair, either. There are great programs in place, like Google Engage for Agencies, which make tremendous strides toward a healthier advertiser-agency-publisher ecosystem.
But if the rationale for the Omnicom-Publicis merger is any indication of what’s yet to come, it should give each of us pause. The big ad-tech giants wield an enormous amount of power. It’s clear that customer data has become the currency of the digital age. It’s also clear that there’s a frantic scramble to create competitive advantage through the power of big data. Further investment and consolidation will undoubtedly occur, and that will place an even greater divide between the data ”haves” and “have-nots.” Being on the right side of that equation is paramount; hence the Omnicom and Publicis $30+ billion bet.