So what can ad agencies do to protect themselves from becoming obsolete? Here are three steps they can take:
1. Play to their strengths. Ad agencies offer clients one thing that ad-tech companies cannot: the human factor, including such elements as brand development, advanced marketing tactics and methods, and large amounts of creativity. The human factor has always been key to the long-term success of ad agencies and will continue into the future, just as long as ads are displayed to humans and not robots. Another human strength is experience. You can’t expect ad-tech companies to provide brands with the same amount of experience, and expertise, as ad agencies. Even with all their complex targeting algorithms, they would still fall short in delivering the most powerful and relevant messages to end users.
2. Fight fire with fire. Even though ad agencies can incorporate technology from ad-tech companies, it is still highly likely that they will be bypassed in the future. By either acquiring or building in-house programmatic technology, ad agencies can once again position themselves as a relevant part of the media buying process, offer their clients greater opportunities to target their audience, and more importantly, take back some of their profit that has been lost to ad-tech companies.
In recent years, a number of major ad agencies have acquired ad-tech companies, invested in them, or started building their own ad-tech platform:
Publicis Groupe acquired the data-driven digital ad firm, Run, which has both a demand-side platform (DSP) and a data management platform (DMP) in its arsenal. Publicis also purchased a 24.9% stake in the digital media company, Matony. WPP announced last year that it will spend $25 million to build a proprietary DMP, and that it will be injecting $25 million into AppNexus, an ad exchange network.
3. Use data, data, and more data. Another important factor is the collection and use of data from past campaigns as well as advertisers’ first-party data. Having custom, in-house technology helps agencies compete against ad-tech companies by leveraging the data agencies have collected from past campaigns to help improve the effectiveness of present and future campaign. As long as the data stays within the ad agency, it will be hard to migrate it to other technology – which could be one of the key decision factors for a brand to stay with the ad agency, rather than take media buying in-house.
I don't think it has to be a battle. I think agencies have a unique place in the advertising ecosystem as they have a wholistic view of all of a company's advertising channels, as well as unique insight into overall strategies. Digital marketing is just one of the spokes, albeit the fastest growing. Agencies need to focus on what they are great at and partner with adtech companies that are in turn great at what they do.
Great points, Maciej. While platforms are driving the business, people are still the secret sauce. Agencies have "permission" and access to C-suite where they've established long-standing relationships; ad tech co's are still largely viewed as vendors.
Publicis has the better idea. Rather than "fighting" a battle that will be neverending, they're positioning themselves as startup/ad tech-friendly. This gives them a competitive advantage with potentially exclusive tools for their clients.
As an ad tech startup founder myself, I know that we are in no place to replace agency expertise, nor are we interested in doing so. As long as target markets are human consumers, tools must rely on the aggregated experience that agencies bring in order to help clients make the most of our technology. Partnerships are the way to make everyone more effective.
I agree that they can work together, and that ad tech won't replace the agency role. Agencies have much more holistic views of their clients' needs, where ad tech is usually solving a specific problem. I see it as a harmonious relationship, with each exhibiting individual strengths for a more intelligent overall client solution.