Did you hear what happened in 2016?
For the first time in the US, about twenty years after the first dial up modems rang in our homes, digital advertising spending surpassed television advertising spending. North America is in fact merely catching up with the UK and China, and so will most countries soon enough1. Not only this, but i/ advertising hopped from television screens, magazines and bus stops into people's pockets and hands, with mobile investments covering half of digital spending2; and ii/ advertising now reaches people in unprecedented ways, as programmatic buying methods (whereby media is bought through platforms, automation and/or technology) are becoming prevalent3.
Concurrently, the rise of ad blocking reached critical levels, with about one internet user in four in the US using such software to prevent ads from showing on digital screens4. The phenomenon is not likely to be contained, as both desktop and mobile - web & apps alike - are affected, and adoption growth rates remain high around 30% year on year5.
To top it off, a little before summer, two reports ordered by the Association of National Advertisers (ANA) to K2 Intelligence and Ebiquity brought to the fore the issue of transparency (or rather, the lack thereof) in the US advertising industry. Their publication drew heated comments from the Big 6, while in France agencies waited for the digital extension of the Sapin law imposing transparency rules in advertising to be published (the law was finally published two weeks ago). But what exactly is there to learn in these reports?
We have a situation
There is a trust issue between brands and their agencies. At this stage, we’re only talking feelings and perception, which a series of surveys conducted in the 2010’s by the ANA, the World Federation of Advertisers (WFA), ID Comms and Forrester Research have brought to light. Now K2 Intelligence’s latest investigative work has confirmed, based on a series of interviews and the examination of contracts and email threads, that non-transparent practices are happening in the US. According to them, the following practices are “pervasive”:
- Retroactive rebates flowing from media suppliers or ad tech companies to agencies, and deliberately concealed from clients - in the form of cash, fees for unnecessary or non-existing services, debt forgiveness or equity.
- Media investment allocations driven by agencies (or the holding companies that own them) over client’s interests.
How did this happen?
Three factors can explain how it was possible for such practices to emerge.
- The marketing and media landscape has become remarkably complex, especially with the development of digital formats and of new modes of buying - what we also call the “brandtech revolution”. This resulted in the relative disengagement of advertisers from the execution (and sometimes, the design) of their media strategy.
- Remuneration for mediabuying services has significantly deteriorated, with brands often driving costs down and imposing unfavourable payment terms to agencies, forcing many of them to look for new streams of revenues.
- Market concentration has led to the formation of large holding companies that could theoretically bundle all services from brand ideation down to campaign management and performance measurement. The world’s top advertising agency networks have invested in companies along the whole value chain from creative to media agencies, and from analytics and data science companies to trading desks and media networks. As quoted in the K2 Intelligence report, the trend is seen as "a move away from ‘the separation of church and state' (between agency and media company)" by some observers.
The big brand theory
So what do we do now? According to Ebiquity, the solution lies in self regulation, and advertisers are to lead the pack.
If you start counting how many times the phrase "Advertisers should..." appear in their report, you might wonder who would want to be a CMO today. Surely CMOs are neither to work alone, nor to bear the entire burden on the brand side. In fact, Ebiquity recommends "high-level oversight of contract delivery", such as contract ownership by the CFO, and the appointment of a Chief Media Officer "who should take responsibility for the internal governance process that delivers media accountability and transparency throughout the client/agency relationship".
For sure, we at 55, are in line with the gist of the report and it's actually even a form of relief to see some of our long-held beliefs written in plain English, such as "Advertisers should take ownership of data and exert control over the media technology used on their behalf" or "advertisers need to have a data management strategy that affords them control and oversight of their channels". Yet, the sight of all the recommendations gathered in one place can be daunting when one's job is to ensure that in the end, the word is out about the product/service being sold by the brand, and in a proper, controlled way.
To give just a few examples:
"Each year (at a minimum), advertisers should:
Review all contracts
Assess and understand the changes in the media environment, especially for digital media, and the effect that has on contract governance"
They should also:
"Understand and (be able to) identify all research and data sets (e.g., first-party) that guide the planning process and their sources
Understand the ad tech supplier's software methodologies, data granularity, data security/privacy, and limitations
Evaluate any potential non-transparent distorting factors in the algorithms used to provide results
Understand the data collection methodology for each source
Fully understand and track the technology, uses of data, and processes involved in programmatic media trading
Understand the tools, technologies, resources, and costs associated with each vendor in the transactional chain"
And so on.
Ready for the job? Welcome on board
The key concept here is "stewardship". The in-housing trend that we are observing right now is in keeping with this. Brands need to actively re-engage in their media strategy - to carefully review and update their contracts, to take ownership of their data and of the technologies used to deliver their media strategy, to update their governance and media processes and to ensure that all teams involved internally receive proper media training to give them the confidence to act. They need to clarify the scope and the role of their agencies and ensure they get a fair remuneration in exchange for their services.
This calls for the unbundling of many services, on the paper at least, and sometimes in the execution - for the sake of efficiency, transparency and trust. This certainly calls for changes on the agency side too, for a reflexion on what the agency of the future should be, or more generally on how the advertising industry should natively allow for more transparency (about this, see Facebook’s latest announcement to authorise 3rd-party measurement and promote accountability solutions for marketers). But most crucially, this calls for the emergence of a new type of player that will be an extension to the CMO - where 'M' can stand for Marketing and Media alike -, whose purpose is to empower brand marketers.
Their role is to educate and enable teams on the brand side: to help them make sense of the fast-evolving marketing landscape through data and transparency, knowledge transfer and training, to help CMOs steer the media strategy by making the most of the resources available (set up a solid data management strategy, coordinate the work of agencies and suppliers, etc.) to successfully craft superior brand experiences leveraging data and technology creatively. Digital consultancy, brandtech advisor, data company... whatever you’d like to call us, we’re here to help.
Read the full reports here: K2 Intelligence’s investigation, Ebiquity’s recommendations
1 Digital vs TV ad spend: 37% vs 36% in the US (eMarketer Oct 2016), 27.7% vs 28.3% in France (PwC Jan 2016). More about China (eMarketer March 2016) and the UK (The Guardian Sept 2009).
2 Share of mobile in digital advertising investments: 68% in China (eMarketer March 2016) 63% in the US (eMarketer Nov 2016), 51% in the UK (eMarketer 2016), 41% in France (PwC/SRI Jan 2017)
3 Share of media bought programmatically in digital display investments: 70% in the UK (eMarketer Sept 2016), 67% in the US (eMarketer April 2016), 53% in France (PwC/SRI Jan 2017), 51% in China (eMarketer Nov 2016)
4 Adblock usage in the US: 26.3% according to eMarketer June 2016, 18% according to PageFair Adblock Report 2017
5 PageFair Adblock Report 2017