Infectious Media’s CEO, Martin Kelly, talks with MarTech Advisor about the impact programmatic advertising is having on the traditional agency model and why the ability to manage global programmatic ad campaigns from one central location is challenging the dominance of the big agency networks.
Traditionally, the world’s top brands have tended to value one attribute above all else when it comes to the media agencies they pick to power their advertising – size.
This attitude has helped the big agency networks to reach a massive scale and obtain significant power in today’s advertising ecosystem. The largest of the networked agencies now boasts 110 offices around the world. Even the agency in tenth spot has 90, serving 85 different markets.
But, times are changing, and the benefits of size aren’t what they used to be. The reason behind this is the same thing that’s driven so much disruption in advertising over the last decade: programmatic. From humble beginnings, programmatic has grown to take up a dominant role in digital advertising, accounting for 70 percent of the UK digital display market in 2016.
Programmatic has reached a point of maturity where it is challenging the idea that agencies above all else need size in order to thrive. Programmatic advertising can now be scaled globally from one central engineering hub, while campaigns themselves are adapted to each market. The algorithms that power it are programmed to take into account an almost limitless number of variables, be that language, time of day, weather conditions, location and even local pollen counts. The level of adaptability open to advertisers grows by the day.
In Europe in particular, having local offices in every country has always been expensive and complex, because of the 50-odd countries making up the continent. As multi state regions in Asia and South America continue to develop, the same will be the case for them. Although it’s very cool to be able to say you have an office in Copenhagen and Buenos Aries, we need to be asking ourselves if it’s really necessary in today’s digital marketplace.
As knowledge and understanding on the brand side of the potential of programmatic grows, advertisers will be less and less attracted to the benefits of global scale and more interested in nimbler agencies that are able to operate global campaigns from hub locations, because the efficiencies are immense. The idea of ad budget going to where it matters rather than to propping up expensive networks will be hard to resist.
I’m not saying the world’s largest agencies should reduce their office count from 100+ to 1 overnight. Having a base on the ground in certain key areas – North America, APAC and Latin America – will always be important regardless of the impact of programmatic. But the big global networks operated by some just won’t be necessary anymore.
This may sound like a daunting prospect for the many established agencies that have built their reputations on size, but the opportunities will outweigh the challenges. Technology will obviously be crucial in creating that hub structure, but this won’t mean just buying programmatic capabilities off the shelf from one of the many ad tech platforms. Most of them are made for the relatively homogenised US market and don’t offer the level of variability that is required for more complex regions like Europe.
The only way agencies will be able to realise the full potential of programmatic, and have the control necessary to adapt it for the advertiser and audience, is if they start building the tech themselves. It’s an expensive process, but by allowing the development of a more nimble global structure, it saves a whole lot more time and money in the long run.
The efficiencies it creates for media agencies will also be reflected in the brand. Rather than needing vast teams to manage the relationship with various agency offices around the world, the brand can centralise its activities and give one person oversight over all of its digital marketing. In essence, it makes the advertising ecosystem far less complex for the brand, something most advertisers are crying out for.
Programmatic advertising has come in for some criticism recently and some of the concerns held by advertisers are justified. But, whilst it isn’t perfect, the impact programmatic has had and will continue to have has been overwhelmingly positive for our industry. Even now, we’re only really scratching the surface in terms of the benefits it will bring. It will be the smaller, more nimble agencies with technology in their DNA that will win in the race to harness its full potential. The global media agency is dead; long live the programmatic media agency.