Turf wars: Ad tech vs media agencies

Today, display budgets are very much controlled by agencies, especially in Europe and the APAC region, but elsewhere – notably in the U.S – there has been a shift towards clients managing their own programmatic buying minus all the intermediaries. Brands partnering with platform providers directly has become a reality and the shift means that ad-tech is gaining ground by effectively proving to advertisers how well they can offer returns in comparison with the traditional agency model.

A number of factors have brought about this shift. For brands, the pull factors are in the realisation that they can win back control if they deal direct with a vendor to integrate a programmatic trading platform into their e-commerce or marketing teams. The questions around entrusting an agency to do a client’s bidding have been around since day one and many agencies are having trouble coming to terms with how to use clients’ first party data in a way that’s transparent and ethical. For an advertiser, moving operations in-house often mean that their data remains a strong competitive advantage for their own brand – and that brand alone – as it should.

The implementation of this sort of model may seem like a pipedream for the UK or European markets, but this isn’t without precedent – and is an idea that’s gaining ground among our own client base. From our side, ad-tech companies are keen to develop their own direct client lists and on the other hand, advertisers are looking to flex their muscles when it comes to controlling their own data and lowering costs. Several big names like Procter & Gamble and Kellogg’s, for example, have set up their own trading operations in-house, whereas Unilever and Kimberly-Clark have worked alongside WPP’s Mindshare to create their own dedicated data-management platforms and trading desks, making sure to stay separate from the group’s own trading desk, Xaxis.

But working with switched-on and tech curious individuals at brands such as T-Mobile, Deutsche Telekom and Group Air France-KLM has revealed the pitfalls of trusting a media agency intermediary, when activity – although requiring an outlay in terms of training and manpower – could be done in-house to a more specialised degree.

In the past couple of years, the industry has realised the power of data and what can be done when you deep dive into customer insights to inform campaign planning and execution. The promise of programmatic buying becomes all the more appealing when optimised with first party data, as targeting becomes that much more unique to both the brand and consumer. We’ve recently worked with T-Mobile, helping them to increase their revenue stream from existing customers by 200 per cent, by segmenting their CRM data and retargeting existing users with relevant ads, at the right time. 

Media agencies and in-house trading desks bring with them the issue of conflicts of interest when it comes to data, transparency, pricing and so on. For example, it’s never in the brands interest to select an agency trading desk rather than seek a third party solution. Agencies offer programmatic trading as a service but despite the obvious benefits to brands of buying media programmatically, agencies still work within their age-old parameters of service, maintaining a non-transparent service to the client and brokering this service to a network / demand side platform (DSP). 

Recently I saw one of them going IPO with a gross margin of 49 per cent, mainly serving agencies. This tells me that the company’s clients are not always made privy to the exchange that goes on within the buying and selling process, although this varies hugely between the agency groups. The lack of transparency between an agency and client means that relationships are built upon simply that – relationships – rather than true ROI in a business sense. In Dutch we would say ‘oude wijn in nieuwe zakken’: or, old wine in new bottles!

From my point of view, I would like to be seeing more brands in the room when I go to events focussed on programmatic trading. It makes sense for marketers to absorb and learn what kind of technology is driving the industry today – after all, we are essentially talking about the future of their ebusiness results. The barrier to entry now is the fact that it’s almost become an expected norm for the digital industry to be impenetrable from the outside, but if we want to start talking a brand’s language all we have to do is focus on driving ROI and transparency. Then it’s a win-win.

Mendel Senf is CEO of YD

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