Can Media Owners And Sellers Become Agencies, Before Agencies Become Media Owners And Sellers?

The world of who buys and who sells media and marketing services is going to change dramatically over the next five years, and not just because of the growing roles digital companies like Google and Facebook play in the ecosystem.

Companies that have historically bought media on behalf of marketers are realizing that to grow their businesses they now need to own core assets that would otherwise be described as media -- while companies that have historically owned and sold media are realizing that to grow their businesses, they now need to deliver full marketing services, not just media.

Whether speaking to investors or industry trade groups, WPP’s Martin Sorrell has been explicit on his vision for the future of his holding company.  WPP is investing heavily in three key areas: technology, data and content. Sorrell has said that building market-leading capabilities in these areas is key to retaining and growing WPP’s client base and margins. Interestingly, all these are the areas on which media owners and sellers have staked their businesses. While content is an obvious “media owner” domain, so is technology and data, whether it was printing presses and broadcast facilities, content management systems and ad servers, or subscriber lists and targeting databases.



Perhaps not coincidentally, we’re also seeing media sellers talk about the importance of building marketing service capabilities. Just this week, in announcing a licensing deal with IBM’s Watson, Turner Broadcasting’s Michael Strober, its executive vice president of client strategy and ad Innovation, told The Wall Street Journal:  “Over time we are looking to turn ourselves more into a marketing services group than just an advertising sales team.”

What an interesting juxtaposition. While these kinds of moves have happened in the past, we’re clearly hearing about them more these days. Here are some of the reasons why:

Market shift from media outcomes to business outcomes. Everyone is waking up to the importance of measuring and valuing advertising not just on media output metrics like GRPs and CPM, but on business outcome metrics like store visits and sales. Both buyers and sellers will have to build expertise in these areas, which means that agencies will need the technology and data to measure and optimize outcomes, and media owners will need marketer relationships to understand advertisers’ ultimate desired outcomes.

Control. To the owners of technology, data, content and audiences go control of delivering predictable, provable, profitable outcomes for marketers. Both buyers and sellers want that control. Enough said.

Margin. There is not much margin in providing cost-plus services. There can be massive margin in owning valuable technology, data, content and distribution. Both buyers and sellers want -- and need -- to grow their margins if they are to survive and thrive.

Everyone becoming frenemies. Sorrell used this term years ago relative to WPP’s relationship with Google. In this increasingly complicating and overlapping world of media, marketing and technology, the notion of competing and cooperating with many companies at the same time is becoming the norm, since having more capabilities and greater scale is essential.

Grass is greener. Might agencies be trying to be sellers, and sellers trying to be like agencies, because of their discontent with their current lot in life? Do they believe that the grass is greener on the other side?

I don’t think so. In fact, I think that the moves on both sides of the media market to build full capabilities makes most sense for those companies that not only like their current market position, but want to strengthen and grow it. It’s not about leaving that side behind. It’s just enhancing assets and capabilities to exploit it further.

What do you think?  Can media owners and sellers become agencies before agencies become media owners and sellers?

12 comments about "Can Media Owners And Sellers Become Agencies, Before Agencies Become Media Owners And Sellers?".
Check to receive email when comments are posted.
  1. Ted Mcconnell from Independent Consultant, March 3, 2016 at 4:22 p.m.

    From an advertiser perspective, its bad news when the referee decides to play quarterback. This invites the sort of conflict that got agencies into trouble in the first place. When one media choice yields higher margin for the decision maker than another, how can an advertiser trust that the right decision has been made? 

  2. Ed Papazian from Media Dynamics Inc, March 3, 2016 at 4:32 p.m.

    Interesting question, Dave. In general, I can't see ad agencies owning media that they buy ad time or space from in behalf of their marketing clients due to the obvious conflict of interests that this would create. Also, rival media could claim---and probably prove---that they are being turned down by an agency due to its vested interested in the medium it owns or is partnered with. This creates a potential legal issue--restraint of trade----that might be very difficult to deal with and could bring in the feds to restore order, transparancy, etc. I believe that the same thing applies to the idea of media owners becoming agency owners.

    This does not mean that the various parties can't develop closer ties with the respective diciplines---agencies being more involved in the entrepeneurial functions of a medium, for example, by jointly developing unique sponsorship opportunities for individual clients, as in the old radio and early TV days. As soon as an agency begins to move off the client by client servicing path and tries to sell sponsorship packages to all of its clients in media vehicles it has a financial stake in---then we 're heading for trouble again.

  3. brad berger from aim high tips, March 3, 2016 at 4:48 p.m.

    The problem is avertising and marketing gurus can't come up with great content so this is left for the product people. How can advertising people who base their lives on 30 seconds and 60 seconds now create content based on 365/24/7 People are not going to look at a commercial over and over and over unless they are getting something besides the commercial. My wisdom for better lives is a content platform that allows advertisers to stimulate people 365/24/7 with wisdom that is comforting and gives children the chance for better lives. This is why the page has over 1.8 million Likes. You need great content for the world that lasts the test of time, creates goodwill and gives people something. good luck agencies you have to always fill the screen with the advertisers product and have it ready for the world.

  4. Ed Papazian from Media Dynamics Inc, March 3, 2016 at 5:02 p.m.

    Brad, the agencies have often set up separate entities that are staffed by TV programming types---in some cases including copywriters who want to get into the TV show-movie production business. These entities usually give specific agency clients the first shot at sponsoring any suitable property they develop; if there are no takers, they are free to go elsewhere to solicit business. However, they are not selling blocks of ad time in network sized program lineups to all comers. Almost always, its a client by client, show by show proposition or a shared sponsorship package involving several like-minded clients.

  5. Paula Lynn from Who Else Unlimited, March 3, 2016 at 6:31 p.m.
  6. Mark Silva from KITE, March 3, 2016 at 6:54 p.m.

    Another great, insightful post, Dave. Your argument, business environment and market dynamics are correct, imo, but there's a missing link to either media going all-in with services and agencies succeeding with media ownership. The missing link is business model-based. It's also why the "Frenemy" Google is 25x larger in marketcap than WPP. Consider:

    1. Companies and people perform to how they are rewarded and they hone systems, KPIs, organizations and products to optimize margins from their core.

    2. Both sides will adopt as much tech and resources to optimize margins and reject those that fail to contribute to growth.

    3. Look to the company's roots/DNA to understand where they will naturally optimize

    4. Either side may even have some succcess in securing new revenues, but their lack of total commitment will create trust gaps we see from overpromising and underdelivery resulting in industry-wide firings and reviews.

    That said, can't tell you how many big brand meetings I've observed that close with a media company offering agency services bundled in as a way to remove objections, barriers, costs and even the middleperson. Agencies will make fits and starts attempts at reinventing their models and margins but my money is on the frenemies of today and the ones being built in tech startups around the world.

  7. Dave Morgan from Simulmedia replied, March 4, 2016 at 4:20 a.m.

    Excellent piont Ted. Without question transparency becomes a big issue as institutional roles become muddled.

  8. Dave Morgan from Simulmedia replied, March 4, 2016 at 4:24 a.m.

    Mark, I think that your points about business model and the advantages of frenemies and with their massive market cap/financial leverage advantages will be very telling as this develops. Without question, they have enormous advantages in being able to invest with much lower costs of capital.

  9. Ed Papazian from Media Dynamics Inc, March 4, 2016 at 8:02 a.m.

    Another issue concerns not only transparancy but exactly what functions are involved. If a media ad seller of some consequence---like a broadcast TV network or a digital counterpart, were to acquire an ad agency---or more likely an ad agency network with many shops bundled together--- it gets not only the media planning/ buying function but, also, the account handling and "creative" duties. This positions the media owner as helping some agency clients to sell their products in competition with rival advertisers. The latter might see this as a problem and seek out other media that have their own ad agencies, while boycotting the former as a media buy. The obvious solution is to stick exclusively to media planning/buying shops but these are where the large agencies make a lot of their profits....would they want to sell them off?

    One might argue that all of these operations would be kept strictly separate---the media owner from its agencies---- but if that's really true what's the "synergistic"  benefit to the media owner except having a somewhat profitable media planning/buying service under its corporate "umbrella"? Why not buy some other kind of company in the fashion, health, technological or other fields and avoid conflict of interest issues altogether?

  10. Dave Morgan from Simulmedia replied, March 4, 2016 at 9:19 a.m.

    Great point Ed. On the digital side, you do see a number of media owners also own and deploy creative teams and tools, particulalry when they are doing outcome and performance-focused campaigns.

  11. Beth Donnelly Egan from Syracuse University, March 7, 2016 at 2:57 a.m.

    These are all excellent points. And I agree with Mark that you increasingly see media companies boldly offering services that were traditionally the role of the agency. Agencies need to look internally and ask themselves why are clients willing to pay the media sellers to own the customer journey end to end while simultaneously cutting agency fees (ergo staff). 
    The agency model is in jeopardy, which is why I increasingly encourage my students to go work for the media companies. Anyone hiring?

  12. Nicholas Fiekowsky from (personal opinion), March 7, 2016 at 10:50 a.m.

    Root cause - rising tide of digitization means there's one link too many between the advertiser and the eyeballs. An intermediary / market-maker will still be necessary, but the role is up for grabs.

    Saw this in the travel industry 20 years ago. Worked at an airline / reservation system. We concluded that Moore's law and low-cost Internet connections meant there was one link too many between the suitcase (traveler) and the seat (travel service):

    - Travel agencies (retail) - who owned the travel buyers - could connect directly to travel suppliers and reduce the reservation service surcharge; or 
    - Reservation systems (distribution) - who owned the distribution - could open websites to serve travelers; but
    - Airlines and hotels could not step into the role. Travelers would still want/need a way to do comparison shopping.
    - So an intermediary could survive.

    Didn't seem wise to share these insights with travel agencies, reservation system clients who could become competitors. Instead we enrolled some of our parent airline's Reservation Agents (retail clerks) in the project to help us learn the traveler purchase process.

    You know how the story ends. Travel agencies didn't see the the risk/opportunity and are an endangered species. Nearly everyone plans and purchases their trips through online travel sites.

    At least someone's ringing the alarm bell for the ad biz.

Next story loading loading..