Death of media agencies...noooo. Think Mark Twain

08 Jan 2018  |  Dominic Mills 
Death of media agencies...noooo. Think Mark Twain

The apocalyptic reports on the death of media agencies have been greatly exaggerated, writes Dominic Mills

The ANA’s decision to publish a report on December 17 showing a sharp increase in advertisers bringing, or thinking of, programmatic in-house, brought a rough year for media agencies to an even rougher close.

They might as well have sent the big cheeses at GroupM and Publicis Media an exploding Christmas card. Yeah, goodwill to all - unless you happen to work for a media agency.

Inevitably, the report brought forth a multitude of alarmist comment pieces predicting the death of media agencies.

Even the estimable Mark Ritson joined in, predicting media agencies would go the way of dinosaurs unless they changed tack on opacity.

Not so fast, people. I’m not arguing with the survey, which revealed that 35% of a sample of 149 big advertisers took some or more of their programmatic in-house. Nor with an Adobe study of Europe, cited by Ritson, where 35% said they would move in-house in the next five years.

Nor am I disputing the cause. Agencies - excepting, by and large, the independents - have played their hands badly; they are the principal authors of their misfortune.

Equally though, it is clear some clients have been asleep at the wheel. They have been complicit, sometimes through the sin of commission (chasing the illusion of low cost) and sometimes through omission (contract negligence).

But I am arguing with the conclusion that this is an irreversible trend. First, what easier way is there to fire a shot across agency bows than for clients to say they are thinking of going in-house? Some will take that route, but many will consider the threat sufficient to change behaviour.

After all, it’s not the first time we’ve heard this talk. Search ‘ANA survey 2017 marketers plan to take media in-house’ and you will see stories from 2013 making the same apocalyptic predictions for agencies. That trickle didn’t become a tsunami.

Indeed, if you go back 20 years or so in the UK, you will find similar news. Budweiser in the 90s went in-house, for example. And I’m told Boots once hired a load of media aces, moved them up to Nottingham where they twiddled their thumbs for six months...and then disbanded them. They did not set a trend.

To be clear: I’m not saying this won’t happen. But I am saying it won’t last.

Indeed, I’m told of one client that has gone so ‘in-house’ it’s ended up hiring an agency on a white-label basis. Er...not very in-house then. I’m sure it is not the only one.

So why is in-house a chimera?

#1. To go a bit Rumsfeld for a moment: most clients won’t know what they don’t know. Media looks easier than it is. You can build the best possible stack, acquire top-of-the-range AI and all that, but good media - nowhere more than in digital/programmatic - is bloody hard and good agencies are bloody good. Remember, this is a world that is infinitely more complex than it used to be and places a premium on thinking skills.

I regularly read winning awards entries and I’m blown away by the thinking they show. I suspect that this passes many clients by, largely because they don’t pay for the thinking so they don’t understand/appreciate it (and that’s a whole other story).

How do agencies do this? Read #2-4.

#2. Clients can have the best tech, but put rubbish into the machine and you get rubbish out. Talent is the answer. Clients will need to recruit the best talent, and I’m not convinced that this talent either wants to work in a business park in the Home Counties (a likely scenario) or work in one sector or on a limited repertoire of brands. Even if they can recruit top up-and-coming talent (i.e. younger, cheaper), it needs to be balanced with experience. And the experienced talent is even more bedded in to agencies.

#3. One area agencies add value is in the breadth and depth of market and sector experience they can bring to bear on a client’s business. What they know about retail will likely have some bearing on the auto sector or, say, travel, and vice versa. Cross-fertilisation of ideas or cross-referencing of use-case studies is an under-valued benefit agencies offer.

#4. Market clout: I’m not specifically referencing price/share deals here - although there are more than a few occasions where this will be paramount - so much as the long-standing relationships agencies have with media owners. Their ability to wheedle/persuade/bully media owners into favours or partnerships will far exceed that of the client.

(As an aside, I’m told there are some media owners who, in their wish to disintermediate agencies, are happy to encourage clients to go in-house with a nod and a wink on deals. But when a big agency with lots of budget comes a-knocking, they might turn out to be fair-weather friends.)

#5. Cost. This is where procurement rears its lovely head. If the client can’t buy at least as cost effectively as the agency, how happy is procurement going to be? And how likely is that, even if there is an implicit acceptance that the focus is more on quality than crap inventory?

That’s not the only cost dimension. Systems, tech, models, research...all these costs are amortised by agencies across multiple clients. Result: the agency cost is less.

And then there’s staff. Can clients recruit more cheaply than agencies? I doubt it. And what happens if budgets are suddenly chopped or a clutch of brands are sold to private equity? If you’ve got an agency, it’s not your problem. If you go in-house, it is.

No doubt agency readers of this column can think of more reasons clients shouldn’t go in-house. I’m more than happy to hear them.

Here’s a piece from VCCP Media in WARC telling clients what to look out for.

But agencies shouldn’t treat arguments like this is as meaning they get a free pass. Their house is ugly and they need to fix it.

Clients, for their part, should ask themselves if the hassle is worth it, especially when there’s a simple way to fix a problem: hire a chief media officer who knows their stuff and has the authority and knowledge, not only to hold the agency’s feet to the fire, but also to get the best from it.

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NealDeeprose, Director, Media Assurance, PwC on 10 Jan 2018
“Certainly agree we are focused on change (rather than death) and the key is how media agencies along with the wider ecosystem can evolve to meet client needs? We are at a tipping point, and we all need to facilitate change to help those clients achieve media excellence delivering marketing goals. The list of issues should ensure any savvy client employs a chief media officer to get the right solution - that client obligation is a big part of building a successful partnership.”
JohnBillett, Chairman, IDComms on 9 Jan 2018
“Take media operations in house? No way. Take media management in house? Yes . You wouldn’t have the factory run by procurement. You employ an engineer. You don’t allow procurement to run Human Resources. You retain a trained professional. So why allow procurement to control the way your media money is allocated especially in these fast changing and fractured circumstances? Advertisers need an in house media trained operator fully versed in the advertisers business, to direct, stimulate and encourage the chosen media agency to do brilliant work.”
MartinWoolley, CEO, The Specialist Works on 9 Jan 2018
“A perceptive piece as ever Dominic and of course you'll get no argument from me about the specialism and value a good media agency can offer. My life's work and all that...
However the starting point for the article is quite a specific one about in-housing programmatic advertising, rather than the in-housing of all media. As we have a lot of tech clients at TSW, we have a particular perspective on this. Many of these clients (think large mobile game publishers or international ecommerce clients) don't need to in-house programmatic - or various other digital disciplines depending on the client - as they have simply always been in-house. Their demands of a media agency are to augment this activity seamlessly.
This is not isolated to one or two clients - quite the contrary, it is the norm for this to be seen as a core function in high-growth, digital-first businesses.
From that perspective, creeping selective in-housing looks inevitable, so media agencies need to use their talents to find other innovative ways to add value.”
TessAlps, Chair, Thinkbox on 8 Jan 2018
“After 11 years of dealing with 'death of TV' comments, I realised a few years ago that I should take such predictions as more Tarot than anything else, where the Death card simply means 'change'. Agencies can and must change - and they will. They need reciprocal change within marketing and procurement, of course, and they need to fight for it and explain why it's vital, internally as much as externally, which might mean having to own up to a few things. But it's certainly not all their fault.”
AdamSmith, Futures Director, GroupM on 8 Jan 2018
“Agencies kiss a lot of frogs, all the time, in the tech chain; agencies are wise to vendors' sweetheart deals with such frogs; and agencies carry the risk of fat finger mistakes. In-housing does not have to be 'binary', either, and can be divided by degrees e.g. between strategic and tactical.”
AlanBrydon, Consultant, Consultant on 8 Jan 2018
“Absolutely spot on again Dominic. Good agencies ARE bloody good - and key individuals at most agencies are brilliant. It's the senior agency management of senior client issues that has been sub-optimal, not (most of) the work done day-in, day-out by the planners, buyers, etc.”

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23 May 2018 

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