Commentary

Software May Destroy Some Agencies -- But Won't Destroy Need For Them

by Dave Morgan , Featured Contributor, May 9, 2019

In 2011, noted entrepreneur and venture capitalist Marc Andreessen (the inventor of the web browser and founder of Netscape) wrote a piece in The Wall Street Journal entitled “Why Software is Eating the World,” in which he argued that all industries and value chains were becoming software-driven and that nobody in the world would be immune from massive, software-based disruptions.

I don’t think anyone questions that his prophecy is already playing out in an extraordinary way in the media, marketing and advertising industries.

Just this decade, we’ve seen software-born digitization, automation, aggregation and analytics displace tens of billions of dollars of market capitalization and many tens of thousands of jobs across media, marketing and advertising companies. I believe this disruption is just beginning, and the agency businesses in our industry will be hit even harder going forward.

Yes, software is going to eat (destroy) a lot of ad and media agency businesses over the next few years. However, I don’t believe that software will eat advertisers’ need for agencies or their services. As the world of advertising and media becomes more automated and real-time, the need for agencies will only increase.

What will change, though, will be the products, services, organization and business models of the agencies that survive and thrive in a software-driven world. Here's why I believe this:

Advertisers need agents. The world of advertising is a very specialized, unique and nuanced market unfamiliar to most companies that make and sell things. Many will always need and want someone to act on their behalf in that world. And, rather than expecting neutrality, advertisers will value expertise and true agency -- companies that act on their behalf, not primarily for their own benefit. Trust will always be imperative here.

Advertisers need market intelligence and insights. The world of advertising and media is a jungle; a dark coal mine with many shafts; outer space with no gravity. In those scenarios, advertisers will always need real, practical and highly informed market intelligence and insights from folks who know it better than they ever can.

Advertisers need strategy. For advertisers, knowing how to run their own business does not mean they know the best steps to take in their advertising. This starts with market knowledge and insights -- but driving desired business outcomes and growth predictably and profitably with advertising requires well-informed strategy.

Advertisers need excellent execution.Software enables advertising to be delivered at a scale and complexity that was never before possible. But, operating across so many different and disparate touchpoints in real time require abilities in analysis, orchestration and optimization only achievable by entities expert in making the markets work for their clients -- and, like the machine learning systems they use, get smarter and smarter the more and the longer they do this.

Many agencies will go away because of software, but the need for agencies won’t go away.

What do you think?

advertiser-agency relationship

2 comments about "Software May Destroy Some Agencies -- But Won't Destroy Need For Them".

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Alvin Silk from Harvard Business School, May 9, 2019 at 5:22 p.m.
"You can elimnate the middleman(sic), but not her/his function." Marketing 101.
Reply

Ed Papazian from Media Dynamics Inc, May 9, 2019 at 5:29 p.m.

Interesting question, Dave. I don't regard "software" as much more than a tool for tabulating and analyzing relevant information and for executing certain types of transactions, handling pperwork and communications more efficiently, etc. Those agencies that fail to use all of the available resources---including newer ones that help them to better understand consumer responsiveness and behavior---are alredy doomed to lag behind and/or fail entirely due to their refusal to adapt and stay in step with progress. On the other hand, I also believe that the emerging role of software and "data", itself, is vastly overplayed as there is ample need for true creativity by both agency "creatives" and their media planning/buying counterparts. What's blocking many advertisers' ability to benefit from the sort of creativity I'm talking about is the serious lack of integration between "creative" and media, which agency clients allow to exist. Indeed, they, themselves, perpetuate this by not making their CMOs learn---really learn---media and by the way their bean counters keep crunching the agencies on person-power costs, low CPMs for TV, by mandating corporate TV time buying for the upfront for all brands, etc. In other words, until agency clients wake up and are willing to move forward---not just pontificate about it at industry gabfests----we will be having exactly the same discussion five years from now.