Death of the Digital Media Agency?

Here are the three major trends making media agencies less relevant every day.

On the surface, it would seem that running a modern digital media agency would be fun. Being on the cutting edge of media and technology, being in the “social media conversation,” helping clients understand and deploy groundbreaking new technologies…that is the stuff that has turned scores of English majors into media professionals. Unfortunately, the reality of digital media is somewhat more mundane. At the end of the (long, thankless) day, the digital agency is more valued for reconciling ad serving numbers, collating performance reports, and swapping ad tags than delivering groundbreaking new marketing ideas. The true standalone independent digital agencies (MediaSmith and MediaTwo being great examples) happen to manage both, for most traditional agencies that have added a digital practice struggle to make the technology—and, more importantly, margins—work.

If it wasn’t enough having to make a living on the slim margins digital media offers, the industry’s tendency to constantly and rapidly shift means there are major, fundamental challenges that require the digital operator to adjust their approach to the market. Here are the three latest ones, and how they are impacting digital media shops:

Platform Technology

For digital marketers, it’s all about the tools. Ad campaigns need to be researched, negotiated, served, tracked, analyzed, optimized, billed and reconciled. Just five years ago, each of those tasks would require a separate, and often expensive, software tool. There were relatively few agencies willing to build and maintain the expertise to deliver digital media effectively, and fewer that had the scale to do it at a profit. Companies like Operative were born out of the complicated nature of tools like DFA and Atlas, which were so frustrating to use that agencies were willing to pay others to manage it for them.

The sea change in the industry has been about SaaS model “platform” technology that is giving anyone willing to login the tools to effectively manage many different aspects of digital media, from guaranteed display advertising, to real-time bidded display, to search and even social. This not only levels the playing field for smaller agencies, who now have nearly the same level of access as more deeply pocketed rivals, but once obscure DSP type technology is blowing the lid of the supply side’s hold on inventory, giving the local corner agency the ability to arbitrage media like a pro. Not only that, but many of the platform technologies available are venture funded startups out for any revenue they can get, and more than eager to sacrifice some margin to win sales by offering service behind the product. Most trading desks are pushing the buttons for agencies, and many platform technologies do the same. Ask yourself if your technology partner is looking to help you—or eventually displace you completely.

The challenge for digital media practices these days is not how many digital tools they have access to, but how they are utilizing them to extract the best advertising performance, whether it is for branding or performance or even the nauseatingly titled, “branded response.”   There are only so many tools an agency can realistically use, and fewer that they can use effectively. Getting the mix correct, and choosing your partners wisely is the difference between being a digital media tools provider, and your client’s digital media expert.

Shift back to Premium

Back at the Digital Publishing Summit, I heard Greg Rogers of Pictela say this: “Nielsen says people visit 2.9 sites a day, and one of them is Facebook.” I don’t care how many industry conferences you go to this year; you will not hear anything more significant than that statement. Why does it matter? It matters because everything this industry is trying to do with audience targeting depends entirely on reaching consumers across a wide variety of sites. The Holy Grail of advertising we have been chasing (well, venture capital has been chasing) is based on the notion that you can find me with a targeted ad, wherever I am on the web, and not have to pay some huge publisher gatekeeper a premium to get to me. If those people are all on Facebook, that’s kind of a big problem.

It also means that all of the standardization we have done with ad units and ad operations procedures that have been designed to make deploying 3 ad sizes all over the web was a terrible mistake. If a consumer is visiting 2 sites a day that aren’t Facebook, and nobody is clicking on an ad (well, 0.03% of people are clicking on an ad, but it turns out they have no money anyway), then what? It means that marketers have to engage consumers with ads that do things on the page, such as expand, or play video, or tell a story. The exact types of things you cannot do with a standard 300×250, 728×90, and 160×600 commoditized ad unit.

Sorry, but we made a big mistake. Flooding the web with cheap banner ads doesn’t work for performance (unless the media cost is so low that ROI is almost  guaranteed), and it doesn’t work for branding either, thanks to “banner blindness” and a the general reluctance of consumers to drop everything they are doing online, only to be transported to someone’s really big ad (their website). Coincidentally, nobody really wants to “like” your client’s brand, or be their “friend” either. That’s the modern version of the .03% click rate: the sub segment of consumers that will “like” a washing machine company are the same people that have been punching the monkey for the last ten years.

The future of digital display advertising is about using highly premium ad units to engage consumers on the page, and provide them with a rich branded experience. That is why concepts like Project Devil are coming back to the forefront. Your agency has to be an expert at understanding how to deliver customized ad experiences at scale, but also leverage the existing, commoditized tools for display to achieve reach. That means that creative agencies, who increasingly have access to platform technology advertising tools, can put themselves in the driver’s seat by making  the creative—and deploying it too.

Social Media

Now every Tom, Dick, and Harry has access to platform technology, and creative is once again coming back into the forefront. What’s the next challenge for the digital media agency? The coming threat from social media.  If you thought the increasing dependence on social media for marketers would be a boon to the digital media agency, you may want to think again. Much of the social media focus for big brands is within their PR firms, who are challenged to build and maintain a brand’s “social media presence” on Facebook, Twitter, and LinkedIn. I recently met with a few PR firms who were charged with attracting “friends,” getting tweets, and “likes.”

They are going to do that with media money—and some of them want to keep that money in house, rather than partnering with media agencies to do it for them. A few years ago, this would have been unthinkable, as the cost of hiring a media team would erode much of the margins. Now, with ubiquitous access to platform technology, PR agencies are looking at building small in-house media teams to leverage social budgets, and make deploying social marketing campaigns a core expertise.

The successful digital media agency’s greatest expertise has always been adaptability. The best ones are already building the tools and expertise to help marketers navigate through these times, and partnering with technology companies that can evolve alongside them.

[This post was originally published in eConsultancy on 7/12/11]

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