The next few years will see clients look to aggressively leverage the big data wave that is washing over all areas of business says Chris Walton, who argues the changes will see some prosper, others disappear and new data savvy entrants arrive in the market.
Of course you may well disagree that big data is going to have an impact. You may hate all the connotations the term forms in your mind or indeed the label itself (I can’t say I am a huge fan of the term Big Data, but for now it is a moniker that has stuck). If so, this article isn’t for you. And also good luck to you, because if you operate in media agency land and you do not recognise the impact Big Data will have on your business, you will need all the luck you can get.
As media agencies attempt to understand and adapt to the Big Data age, there are several factors that will be fascinating to see play out:
Clients will not need media agencies
Competition amongst media agencies is rife – always has been. An agency looks for any and all opportunities to get one over on rivals, and why wouldn’t they? Ironically this is driven by a lack of differentiation (a key reason media agencies go from hero to zero and back again in 4-8 year cycles). The proliferation of awards is evidence of this. Whilst agencies don’t seem to realise their clients don’t care too much about awards, the larger issue is that the Big Data age significantly reduces the need for clients to employ media agencies at all. Whilst many media agencies have an identity crisis, in the future all media agencies will have an existential crisis. If clients fully embrace the opportunities Big Data offers then their marketing and sales channels will merge, many will turn into pseudo media companies, and all will know more about their customers than anyone else. Clients will be able to directly and dynamically engage their customers in ongoing dialogue and won’t need to employ a media agency to help them do so.
Media agencies that survive and thrive will need to completely re-invent how they work for their clients in order to clearly and consistently add value to their clients’ businesses. Clients will need to understand exactly how their media agencies help them build their brands and drive their sales. Currently they do not.
In the United States Kellogg’s has taken most of its online media in-house. They feel this delivers better value to their business. This is just the beginning of a much bigger trend.
Transparency will be much more important
Client trust in their media agency is at an all-time low. Many clients do not enjoy their media agency relationship, they endure it. There are many reasons for this but the key one is the lack of transparency about how their media agency makes money. This has led to reduced trust – is their media agency team working in their interests or in the interests of the agency’s bottom line? Nic Christensen’s recent article on this website was an excellent illustration of the myriad ways media agencies now make money, none of them having any direct link to driving client sales. Depending on who you listen to media agencies now make either most or all of their profit through kickbacks and rebates from media owners. In the Big Data age a brand will have tens, hundreds or even thousands of different audiences (ultimately a brand may have as many different target audiences as customers). The current approach of doing large, volume-led negotiations with media based on dumbed down audience definitions is increasingly irrelevant. However, media agencies benefit from keeping things dumbed down as this adds leverage to their rebate discussions. In the future they will need to satisfy increasing client scrutiny that the channels they are recommending are the most effective at engaging their audiences and driving sales, not agency profits. Big Data will also require a client’s agency partners to operate in a far more ‘open source’ way, working with clients to interrogate, combine and develop unique data sets and then using these to underpin marketing strategies. The goal of building client sales will deliver the agency its profits, not the under-the-table deals committed to behind closed doors. Now there is a novel thought.
Negotiation size will matter less
The last 10 years or so of agency consolidation has been driven by operating and trading efficiencies – gaining control of a larger and larger pile of cash to negotiate with media owners that not only delivers better rates but also better kickbacks to subsidise ever-decreasing client fees. Let’s not fart about here – despite all fancy talk about strategy and insight, rates and fees are still the key deciding factors in media pitches.
In the future negotiation size will actually matter less. As channels continue to fragment and more is known about target audiences right down to an individual level, ‘media buying’ will become an increasingly bespoke practice. What will be gold to one product will be worthless to another even if today’s descriptors – Grocery Buyers with Kids or People 25-54 are a couple of corkers – make them all look and sound the same. For those of you who may flag DSPs as a great example of media agencies delivering what clients need in this area of audience fragmentation, I politely guide you back in the direction of my point on transparency.
Do not get me wrong – size will be important but for different reasons – an ability to invest in tools and systems for example. However, media agency groups usually don’t have the scope to make significant investments due to the relentless pressure to deliver smooth profit growth year on year. Also, let us not forget that marcomm groups are very small in the whole scheme of things. In the last Forbes Biggest Public Company list, WPP came in 355th. Wal-Mart earns more revenue in a fortnight than WPP does in a year. It is realistic to imagine genuine breakthrough in future trading platforms to be driven from the client side by the largest marketers – big retailers or FMCG companies for example – or even media companies.
Collaboration will improve
Media agencies are paranoid about retaining control of their client’s spending decisions because how a client spends has such a large impact on that agency’s bottom line. This not only results in a lack of transparency as already discussed, but a terrible ability to truly collaborate. Former Nestle marketing boss David Morgan was very vocal about how much time his team had to spend actively managing their agencies. He is not alone. However, leveraging the opportunities of Big Data needs a client’s partners to collaborate better than ever
Client disciplines such as marketing, technology/IT, sales, pricing, sourcing and NPD will become more integrated and everyone will need to work less in a silo and more in a matrix style;
Increasingly specialised skills will be required, for example business analysts, software programmers, content creators, creatives, strategic planners, loyalty programme managers, neuro-scientists, pricing analysts and corporate affairs. Whilst highly developed, Australia is a small market with a limited talent pool – there is not be enough good talent to go around;
As clients get closer to their customers and work with a large number of partners to effectively engage them, an increasing number of clients will take strategic planning in-house. Media agencies will by default have to work better with other organisations as they will not be deciding where and how money is spent.
The successful Big Data media agencies will be very good at collaboration. They will realise that you don’t need to know all of the best answers, but you need to know (and work well with) a man that does.
We will be in a world where a decent agency may actually do less for any individual client, but work on more clients, with the value they deliver being seen not only in what they do, but how they work with others.
Media agencies will employ different talent
If anyone was to design a media agency for the Big Data age, I struggle to think anyone would come up with anything vaguely resembling the media agency of today. This includes the staff that work in them. The DNA of media agencies remains trading – again you only have to look how profit is delivered to appreciate this. This DNA needs to shift to data analytics and customer insight. This has huge commercial and cultural implications as most of the staff in current media agencies will not fit with the agency of the future, and most of the staff in an agency of the future will need to be identified and attracted to such a business. Media agencies will look for staff that can understand the implications and develop the links between hard core data analytics, customer insight, brand proposition, neuro-science and corporate partnerships. If you think they currently have more than the odd individual who fits this mould I would suggest Kerrigan-esque that you are dreaming. Even those full service media agencies that claim to have good data analysts are falling woefully short.
When I bought my first mobile phone it was pretty much a choice of Motorola or Nokia. Apple and Samsung didn’t make phones back then. In fact in the late 90s if you suggested these brands would dominate the phone market today you would have been laughed at. I gave up my Motorola in the early noughties to get a ground-breaking device called a Blackberry and was convinced the future had arrived. Enough said. There is a very good chance that the media agency market leader of tomorrow does not yet operate in the media market. New competitors may enter aggressively with a Big Data model and approach that makes sense and send many existing media agencies out of business. Those media agencies that do survive will have done so because they have completely re-invented themselves.
Chris Walton is a Board Advisor to Skyfii and formerly Principal of Quantium and CEO of Mindshare.