In-housing media buying — Part 1: What does it mean for the future of agencies?

Where does this trend come from?

From the data, of course! The trend of advertisers in-housing media buying is closely linked to the digital revolution and the way it transforms companies. Most pure players internalised their digital media buying long ago. As advertisers have swapped out their traditional practices for more digital-friendly solutions, it is no surprise that they are adapting the same media buying organisation as pure players, including in-housing.

Digital media is changing the way we interact, consume, and stay informed, which means that marketers must change the way they reach their audiences. The digital transformation is moving through sectors one by one, with early adopters on the frontlines for change: tourism, media, and retail. Others will soon follow, including telecommunications, automotive, and banking. Advertisers’ traditional business models have been upended, as has their way of serving and communicating with clients.

In this context, data is the key resource when it comes to rethinking a relevant marketing plan – particularly for advertising campaigns.
While data was initially carelessly treated in a silo, it has become the core subject of client strategies and is the catalyst of wider-scale digital transformation in businesses.

Therefore, data can be best exploited through advertising campaigns from inside organisations (and not from outside). To properly manage efficient digital ad campaigns – that is to say, to give data its due primary role – you must be able to work closely with e-commerce, CRM, Data (perhaps also DMP), and IS teams.

Advertisers are thus willing to take back their digital strategy, as they become conscious of data’s enormous value – which calls the roles of media agencies into question.

Why doesn’t the traditional media agency model work anymore?

The role of media agencies is also evolving.

Of course, managing digital campaigns presents different stakes than classic advertising levers, and it has taken time for traditional agencies to adapt to the advent of programmatic media buying, and to develop the required technical expertise.

But above all else, the role of media agencies is problematic because of their history, and generally-accepted remuneration policies. The job was created at a time when managing advertising spaces (TV, print, OOH, radio) was based on negotiating large volumes. Historically, agencies were paid based on a percentage of the media budget invested, since, logically, a larger budget meant more negotiations with each advertising network. However, programmatic advertising means that this exercise can be largely automated. Thus, a higher budget does not necessarily increase an agency’s workload, and the historic fees model may no longer be relevant.

What’s more, services provided by media agencies come in a three-part bundle: managing campaign media buying, driving media strategy and performance, and providing the relevant tools. However, this remuneration model skews towards the media plan and leads to non-transparent business practices, particularly given the structure of costs and potential conflicts of interest for agencies (including intermediaries and hidden margins, negotiation of technical fees, retroactive commissions…). This was recently pointed out in reports published by the Association of National Advertisers in the US (read the original reports or our summary).

Lastly, the way in which ad serving tools (such as DoubleClick or Sizmek) are contracted is also problematic. In controlling advertising tools, media agencies are contractual owners of the respective data. Advertisers, who nevertheless pay non-negligible amounts to communicate through their clients, are not completely free to capitalise upon and exploit the data – especially because changing media agency might mean losing a given digital ad communication’s history. Is this kind of dependence sustainable in a world where data has taken on a strategic value for businesses?

What’s next for agencies?

Media buying internalisation is not widely discussed, because traditional media agencies are, understandably, ill at ease with the subject. At fifty-five, we don’t believe that internalisation means the end of agencies. Au contraire, it signals a metamorphosis, with agencies changing their role to provide more consulting and support to advertisers. Ultimately, the goal is to change the way brands benefit from agency expertise, which will lead to changes in the way they operate and are remunerated.

One benefit of this trend is that the black box mentality that drives the advertiser/agency relationship will be no more, which will result in greater transparency, empowerment, and trust.

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Want to learn more about media-buy in-housing?
Check the second part of this interview: In-housing media buying – Part 2: Is in-housing media buying a miracle cure?