Not so long ago, the media industry, and most other industries, were driven by a desire to be big. Volume mattered to claim the best deal, the biggest advantage, the top spot, etc.
It was
on this premise that media agency giants came into being. Media agencies sold themselves to marketers with a focus on volume. A large volume meant you could promise the lowest media cost, because
quantity drove the negotiation. Additionally, what mattered in this world was relationships. Whom you could call or wine and dine made a huge difference in closing the best deal with the lowest
cost.
In today’s digitally structured media auction world, these principles have all but eroded -- and media agencies are no longer necessarily best placed to deliver in this new
world.
Most importantly, “volume” has been replaced by “capability.” The new pillars of capability were initially formed by tools, tech and people. Tools gave you the
advantage to move fast and efficiently, critical to secure the deal in the nano-second when it comes to you. Tech is the enabler for the tools, and is critical for the people governing the tools and
tech. It enabled decision making on how to manage the complexity of the advertising budget.
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This media planning capability race started a few years ago when programmatic became the
predominant means to place advertising. In 2024, I think we are entering media planning capability V2. The pillars as described in the previous paragraph are still the same, but, perhaps surprisingly,
I would now place people as the first pillar, followed by tech, then tools.
In the new AI-driven world, the ability to steer the machine, to set the strategy and goals, and to determine which
data points matter most is more important than ever.
This is where traditional media agencies are struggling. Sure, they can and will throw money at tools and tech, but people is the most
difficult, costly and fickle component in the operational equation. It is here that large media agencies do not have a very compelling offering. Large media agencies are themselves cost- and
efficiency-driven machines, and they have gone to great lengths to strip and downsize the most costly and fickle component – people, and investing in their capabilities -- to something that can
function at a rock-bottom price.
Advertisers are partly to blame here. They have long actively pursued and benefited from the pricing race to the bottom of media planning. They have also
realized that by doing so, they were starting to miss out on certain media planning capabilities and control. And so they in-housed. Which in turn created an even further dressing down of the media
agency function.
Media agencies need to completely rethink their reason for being. If volume no longer guarantees the best product (that is, a solid media plan at market competitive placement
cost), and a smart-people-driven set of tech and tools does, then the investment should go towards attracting, keeping and educating smart people. Which means increasing operational cost and selling
that through to clients.
P.S.: I'm so glad I'm not in charge of a large media agency!