Programmatic ads, Martin Sorrell, and what they mean for agency and other media jobsOliverLuft 14th November 2014
A recent article in The Wall Street Journal summed it up succinctly: some brands, it said, are increasingly using programmatic systems to buy digital ads themselves, rather than paying third parties to do so for them. A survey from Forrester Research and the Association of National Advertisers suggests a reason: it says 46% of marketers are concerned about the transparency of agencies tasked to buy online ads. Put simply, if the agency doesn’t tell you how much of your money its live buying desk spending on ads, and how much it’s taking as a fee, fears can spread.
(If you’re unsure of what programmatic ads are – might be an idea to pause here and read this…)
If an increasing number of advertisers are choosing to cut out the agency altogether and deal directly with ad-tech firms, what does that mean for agency and other media jobs? Is it a real threat or a short-term trend? And is it all really about transparency?
No lesser person than Sir Martin Sorrell, WPP chief executive, addressed the issue of transparency this week. He told the Ad Tech conference he was ‘puzzled’ by some of the debate around transparency in the ad trading market.
‘I’m a little bit puzzled because nobody knows what happens when you double click with Google or use Facebook,’ the Drum reported him saying. ‘People don’t know how they work. Algorithms change, and people don’t know how they change.’
Sorrell said margins from his firms’ programmatic systems were around 15/16% of revenues, but added the last time he checked Facebook and Google’s profit margins were ‘in the stratosphere’.
‘Up to between 40 and 50 per cent [profit margin from revenue for Facebook and Google]. What we’re trying to do is act as we have always done, in the middle.’
If, as Sorrell hints, value for money is really the key factor, there are significantly bigger, more obvious targets, than agencies.
Sorrell has also previously said the trend for in-house marketers to license and manage their own programmatic technologies would not last as ad-buying, comprehending and implementing complex ad technologies, wasn’t their core competency.
‘It’s a temporary phenomenon,’ the WSJ reported him saying. ‘Our view is after a year or two it will change. I question whether [clients] will be able to apply technology successfully.’
While transparency is certainly a concern for advertisers, and it is true they lack some know-how when it comes to applying complex technologies, these aren’t the only reasons why brands are looking at bringing some ad-buying in-house. For some observers, other significant and compelling grounds exist.
Writing on the iMedia Connection blog, Alex LePage, VP of client development with programmatic advertising firm Chango, outlined some key points why advertisers might move ad-buying in-house or deal directly with specialist firms, without going through an agency.
If brands do their programmatic buying through agencies, he wrote, it’s the agency that gains all the direct support and intricate, insider technical knowledge from the ad-tech partners. Sorrell is right, advertisers don’t have the technical knowledge their agencies do, but if they had a direct relationships with the ad-tech firms, this would improve and innovation would foster. It would also bring the bills down, ’cause just one set of fees would have to be paid.
As programmatic buying takes a bigger share of the ad-market, advertisers will naturally want to broaden their knowledge to strategically build and execute campaigns. LePage argues brands will need to know as much as possible about customers and targets to help shape, then tweak, their campaigns. To be truly responsive, a direct line of communication with an ad-tech firm can also help speed up the process and remove unnecessary delays.
Through direct use of programmatic, LePage says, advertisers can gain data insights more quickly than ever. Having their hands directly on information, owning the data, can help improve their analytical abilities and help them understand more about their customers and prospects.
All of which doesn’t mean that agencies are going away. The huge well of creative experience they have is too valuable, it’s just that there may be some adjustment as a handful of advertisers improve their own technical understanding. Instead of a linear process: from advertiser, through agency, to ad-tech firm, some might instead choose to work in a triangular way, where there is an integrated partnership between the three specialist businesses.