I’ve been speaking to some of the main players in the leading marketing agencies across the globe, and the consensus is clear:
The pressure is on in the media industry.
Despite being the fourth largest advertising market in the world, and the biggest in Europe, the UK finds its back against the wall in a quicksand of rapid change.
In a climate where FMCG companies like Unilever are taking a large proportion of their advertising spend in-house, Martin Sorrel, CEO of media giant WPP calls the situation “very tough”.
Shrinking margins are partially due to a new towards transparency in media spend practices. Clients demand to know their budget spend exactly, meaning no more AVBs – rebates from media owners. And that means the main slice of profit from the traditional model has gone up in smoke.
Unilever’s Chief Marketing and Communications Officer Keith Weed hits on the heart of the client attitude to media spend in an interview earlier this year: "We should get the best price for our consumers, and if that means rooting out inefficiencies in someone else's business, I will do it." Some companies, like Deloitte and McKinsey, are taking matters into their own hands and buying media companies in order to have complete power over their investment.
A shift in the media paradigm
This pressure is the result of the changing face of advertising globally. Traditional methods alone won’t cut it in today’s information overload; gone are the days when people would sit and simply watch television for an hour.
A recent survey by OMD found that people switch between screens an estimated twenty-one times every hour, on average. Our attention span, according to studies by Microsoft, is now shorter than a goldfish’s - literally.
This attention deficit presents a new challenge to satisfy the multi-channel, cross-platform engagement demand. In order to seize someone’s attention advertising must become increasingly targeted and personalised to exact individual characteristics. Brands want to connect firmly with the specific needs of their audience, providing an experience, not just a product or service.
Big data isn’t enough
This is where big data comes into the picture.
The collection, storage, handling, and analysis of data is a cornerstone in the new model of measurable advertising.
Data giants Google and Facebook dominate the sector, commoditising media in a major disruption that’s echoed in property rental’s Airbnb and transport’s Uber. The more data a company has, the more effectively it can target its client’s audience with the right content; the larger the audience, the more data can be gathered. This now includes constant course correction based on real-time data on audience engagement, a key manifestation of the climate of urgency infecting contemporary media trends
But even this seemingly reliable cycle may soon be disrupted: May 2018 sees the introduction of a new piece of legislation from the EU General Data Protection Regulations, formalising concepts like the ‘right to be forgotten’, data portability, data breach accountability, and more. Mechanisms like ad-blocking technologies and ad-free, subscription based services are also threatening the new model. As the pace picks up, the only certainty is that frequent disruption will become the norm rather than the exception.
All of these trends demand that marketing firms find new business models that deliver sustainable profit. Major change is needed – commercially, structurally and culturally. The sticking point here is the contrast between the swift current of media change, and the unwieldy nature of media companies’ set-up.
So what does this change look like?
A consolidated, customer-centric, client-led approach
Success in the current industry climate means moving from an agency-led model to one defined by the needs of the client group. The marketing companies must shift from a “buying and selling” mentality, to a more proactive, consulting, service-led stance.
Large marketing companies like WPP, Dentsu Aegis Network and IPG Media Brands have multiple brands agencies under one umbrella. Each of these specialises in a certain area, such as mobile, experience, or OOH. Today’s multi-channel approach, combined with the pressure to reduce media spend, requires that these vertical functions align to create full service “shop fronts” that provide clients with a one-stop-shop for all their media needs.
One engine working at volume, serving multiple agencies; one kitchen prepping the food for multiple restaurants.
A simple concept on paper, this consolidation is hindered by the piecemeal composition of marketing firms, who are often themselves several agencies bolted together. The less-than-slick internal ‘wiring’ means that many of the basic functions like billing, finance and workforce tracking used to manage the P&L of agency ‘clusters’ are out-of-date, not fit for purpose or just downright difficult to use. Shared service centres – the stalwart of many a cost saving initiative – may be necessary, but are in no way close to sufficient.
In short, marketing firms need to put the client in the centre of their strategy. They need to become agile, nimble enough to keep pace with the sudden changes of course without losing their operational integrity. They need to redefine what they want from their people, and what the structure of the organisation is designed to achieve.
Finally, and perhaps most intangibly, they need to realign their company culture to de-emphasise individual achievement in favour of collective commercial and creative excellence.
In the second instalment of this two-part series, we tackle how marketing companies can go about doing just that.