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Is The Agency Model Evolving Again?

The agency landscape is changing quickly, and there are several forces at play. Just a few years ago, marketing analytics was considered a signal of innovation, and an optional addition to the...

The agency landscape is changing quickly, and there are several forces at play. Just a few years ago, marketing analytics was considered a signal of innovation, and an optional addition to the agency’s toolbox. What we’re seeing now is entire brands forming around this function, and they’re doing it well enough to compete with well-established names.  

Today, many of the major advertising conglomerates like WPP are prioritizing their marketing analytics function to remain competitive and keep their share of the market. 

To understand how the agency's role is evolving, let’s take a look at how we got to this point. 

 

Answering the call for transparency 

The past couple of decades have seen a major evolution in the way media buying happens. While in the past, agencies would charge for traditional media buying and planning, brands today can run their own digital marketing campaigns internally. 

 

Now, because of the transparency that tech enables, agencies have been losing money on programmatic buying. 

Dany Eid, Director of North America, Adverity

 

New tools have provided clients with a clearer understanding of where their money’s going without the need to rely on the agencies, meaning we’ve moved away from walled gardens and towards a transparent, data-centric advertising model. Now, because of the transparency that tech enables, agencies have been losing money on programmatic buying. They can’t generate margins above it to sustain the same level of income. 

As brands have become more tech-savvy, they’ve reached a point where they can figure out for themselves if the numbers aren’t adding up, and pinpoint discrepancies in the data that’s been presented by their agencies. 

Before this shift, you’d often hear from brands that it was difficult to understand or trust their data, because they didn’t know who they could rely on. But as access to accurate reporting gave clients a clear view into the walled garden, more brands were able to see where numbers had been skewed to justify the budget or headcount of an agency.

 

No more black boxes - Brands need to take their data strategy in-house

While the mistrust that sprung from a lack of transparency was a trigger for marketing teams bringing more of their campaigns and reporting in house, clients have started to realize there are many other benefits to taking ownership of their data. 

In the current marketing landscape, it’s not enough to leave everything to the agency anymore. Understanding the methodology behind getting insights from data and taking ownership of it is key to a business’s success and resilience. I wrote about it in my thesis, which found that in order to remain competitive and relevant, companies need to have a strong data-driven culture at the entire level of the organization.

 

Understanding the methodology behind getting insights from data and taking ownership of it is key to a business’s success, and resillience.

Dany Eid, Director of North America, Adverity

 

This doesn’t mean that the CMOs have to understand every line of code and how it works. Instead, it means having a base knowledge of the inputs going into a marketing analytics algorithm, and why a system is recommending a decision to be made. Getting familiar with the types of limitations and biases that might be coded into the algorithms – and having that knowledge across the business. This way people at senior levels can understand what’s going into their analytics, and have trust in the output. 

Out of the companies I interviewed for my research, those that didn’t invest enough time or money in understanding these things were more likely to find their investments in analytics weren’t yielding desired results.

In short, if you want to remain competitive you have to in-house your data strategy - and brands are starting to understand and act on this. So, where does that leave agencies?

 

The next step: Moving towards a consultative approach

Brands are in-housing a lot of execution to avoid a conflict of interest in terms of how campaigns are executed or run. That means agencies are shifting focus to thought leadership in the hopes of recovering their margins that have been eroded over the years. They’re looking at the expertise they can bring in, and the brain power they can gather to help clients get more out of their marketing data and tech. 

There’s a reckoning within the agency world in terms of their identity now. Some of the more forward-thinking agencies are capitalizing by reinventing themselves as consultants rather than advertisers. Clients are increasingly in-housing a lot of their data strategy execution, but relying on the agencies in a consulting capacity to bring in expertise and thought leadership to support that data strategy. 

 

There’s a reckoning within the agency world in terms of their identity now. Some of the more forward-thinking agencies are capitalizing by reinventing themselves as consultants rather than advertisers.

Dany Eid, Director of North America, Adverity

 

In turn, agencies are moving towards a more subscription model and toolkit approach, and this is rivaling the retainer model. They’re focusing more seriously on developing their own IPs internally, which has been very challenging. It’s not the core business model agencies are used to. Tech and SaaS require a very different approach and mindset. So, for some, this approach includes using some third-party tools under the hood. 

 

A window of opportunity is opening for smaller, digital-first agencies

It’s not just the leading agencies that are embracing this digital-first approach. There are many examples where we see more agile agencies advocating for transparency through tech, and becoming extensions of brands’ in-house teams. For example, MIQ started off as a programmatic company that agencies would work with, but now they’re becoming competitors. Agencies like this that have built their entire go-to-market strategy and agency model from the ground up around tech - we’re seeing them become more competitive with the big agencies who typically take longer to adapt. It’s going to be really interesting to watch this dichotomy play out and see if smaller, digital-first agencies can carve out more of a space for themselves, and beat the industry titans to the punch.

 

 


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