Why media agencies are on their death bed

Proctor & Gamble chief marketing officer Marc
Pritchard
Getty/Phil
Cole

• The future of media agencies is as grim as ever, according to
  a new report by market research firm Forrester released this
  week.
• Continuing transparency issues, clients taking media-buying
  in-house and programmatic advertising leading to the
  commoditization of services threaten the very raison
  d’être of media agencies.
• Media agencies must evolve to become media consultancies to
  survive, bringing more value, accountability and overall
  marketing strategy to the table, says the report.

It’s been two years since the
Association of National Advertisers issued a bombshell report
that painted the media buying world as being rife with opaque
financial practices and widespread illegal rebates.

And while many media buying agencies at that time vowed to clean
up their practices — their future is more grim than ever,
according to a report released by the market research firm
Forrester earlier this week.

Since the ANA report, brands have reevaluated billions of dollars
of media spend, and only become increasingly more skeptical, says
Forrester.

For instance, marketers have called into question agencies’
ability to gauge whether ad spending actualy works, while
focusing on what they see as wasteful media plans, 
irregular ad rates and unclear discounts.

In fact, as many 64% of marketers have said that they intend to
review their media agencies.

“To marketers, it represents the need for checks and balances,”
wrote analyst Jay Pattisall. “To agencies, this represents
an apocalyptical onslaught to their models and profit margins.”

Here are the biggest factors threatening the existence of media
agencies, according to Forrester:

An ongoing lack of transparency in ad buying

Transparency remains a thorny issue among brands and their media
agencies, and Forrester puts the blame squarely on agencies. The
researcher found that agencies are usually reluctant to accept
client audits of past work and brand safety guidelines.

“Given the cloud of suspicion hanging over the industry, agencies
that behave in this manner appear to be non-transparent, despite
offering clients full transparency,” it says.

Brands bringing media functions in-house

Besides being frustrated with a lack of ad buying transparency,
the need for for efficiency and a thirst for more control over
consumer data have led to an increasing number of brands take
media operations in-house and set up their own internal teams.

This, the report notes, is “an existential threat to media
agencies, forcing them to justify their value.”

• 64% of respondents of Forrester’s ‘In-House Agency Forum’
  survey, for example, said that they use in-house agencies in
  2018, an increase of 52% from a decade ago. The survey includes
  the 70% of marketers who command strategy and campaign direction
  in-house for programmatic advertising.
• 
  Deutsche Telekom and
  JPMorgan Chase are examples of brands that have moved
  portions of their media business in-house.

Media offerings becoming increasingly commoditized 

With programmatic advertising becoming widespread, anybody
from agencies and marketers to programmatic consultancies
can now automate the media-buying process. This threatens the
very raison d’être of media agencies as access
to digital media and planning capabilities is no longer
limited to a few.

In a programmatic environment, media agencies no longer retain
any buying power (clout and negotiating — staples of TV buying —
don’t really matter much), and the wide availability of
demand-side platform technology commoditizes their offerings,
forcing them to look for other areas to bring value.

Media agencies, therefore, must ramp up their offerings beyond
buying power and traditional media planning and buying services.
They must bring more value, accountability and overall marketing
strategy to the table, adopting a more media consultancy-type
role if they want to survive, says the report.