This is the start of a new era for media agencies

So many forces are bearing down on global media agencies that many of them will be unrecognisable in five years.

Transparency has been the most immediate challenge. Too many media agencies boosted margins from opaque and undisclosed practices. But they have been found out, following last year’s report by the Association of National Advertisers into “non-transparent” practices in the US.

Agency leaders know the truth. “Transparency is the first thing every client wants to talk about,” says one in London. “It’s been an absolute nightmare,” says another in New York. A slowdown in revenues at many agency holding companies over the summer suggests that questions over transparency have started to bite and share prices have tumbled.

Technology is a bigger disruptive force and it is undermining media agencies in many ways. Just keeping pace with the latest tech is a challenge. Then there’s the problem of dealing with Google and Facebook, which are smarter, richer and miles ahead when it comes to data and innovation.

Crucially, trading scale matters much less in a world of biddable media, where ads can be bought, served and optimised in real time. The old ways of securing the best prices through volume and share deals that worked in traditional media don’t cut it when buying is automated through artificial intelligence.

Digital disruption is already having a disproportionate impact on the agencies’ biggest clients, the fast-moving consumer goods giants, which have cut media spend and agency fees as they struggle to cope with ecommerce rivals.

But there’s an important flipside. There is now a parallel universe of new advertisers that were born in the digital age. They look after marketing, data and customer relationship management themselves so feel less reliant on agencies.

Read more from Gideon Spanier on Campaign Live.

 

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