The Power Shift: The Media Agency-Advertiser Relationship

Managing Director TERRITORY Influence, a leading full-service influencer marketing agency activating 4 Mio creators for brands in Europe.

The Power Shift: The Media Agency-Advertiser Relationship

In the days when linear TV, print and radio were the primary advertising channels, the key role of a media agency was to understand the media landscape, identify the inventory enabling the client to reach their target audience, and negotiate favorable rates with media outlets. Negotiation skill was a key agency competence, and scale provided an advantage since it increased the negotiating power. The media agency industry consolidated into the mega holdings we are familiar with today.

The Power Shift: The Media Agency-Advertiser Relationship

In traditional media, agencies still identify where their clients’ target audiences are, create media plans and help the advertiser navigate the often opaque world of inventory price negotiations. Digital media, however, is a different story. Finding the right demographic is relatively easy—top programmatic platforms and even the top social networks can reach any demographic cohort. There are no rate negotiations—ad inventory is bought in an auction and advertisers pay a market rate for reaching a certain demographic in a specific time. The competencies of a traditional media agency are no longer necessary.

The Power Shift: The Media Agency-Advertiser Relationship

Digital has its own set of new and difficult challenges, mainly in terms of ad fraud, viewability and brand safety. In addition, the digital revolution has led to an explosion of new media platforms and channels, including social media, mobile, retail media and connected TV, and it’s not uncommon for each of the platforms to quickly evolve and expand their ad offerings. Executing a campaign takes more effort and increasingly more expertise. And last but not least, the use of first-, second- and third-party customer data has introduced a whole new level of sophistication and complexity in marketing execution.

The Power Shift: The Media Agency-Advertiser Relationship

The Power Shift: The Media Agency-Advertiser Relationship

In a world where rate negotiation is no longer needed, where specific audiences are easily reachable via major digital ad platforms, and where customer data ownership and management become critical, many advertisers have reevaluated the role of their media agencies.

By now, most advertisers have taken back the ownership of their brands’ accounts in ad platforms from their media agencies. With that came full pricing transparency that further eroded agency margins. Agencies responded to margin pressures with tighter cost management, specifically with “hubbing”—moving digital media buyer jobs to countries with cheaper labor like India or Eastern Europe.

The most sophisticated advertisers have taken digital media ownership even further, and we have observed a strong media in-sourcing trend over the past few years. Several large global advertisers have moved digital work to an in-house agency or have set up their own digital media teams. In 2019, Procter & Gamble started taking its North America media work in-house. PepsiCo also now does big part of digital in-house.

What’s next after the big wave of media in-housing? Digital media keeps increasing in complexity and new ad platforms have been stealing shares from Google and Meta. It’s likely that advertisers will soon discover that recruiting, growing and retaining the talent required to stay on the frontier of digital advertising is very difficult. It’s likely that agencies will maintain an edge in digital by being able to observe campaign results and learn from multiple client accounts across multiple ad media platforms.

What’s clear is that as advertisers deepen their expertise and understanding of digital media, they will expect more transparency and higher standards of media execution both from their in-house teams and their agency partners. Evaluating the success of brand campaigns is evolving beyond tracking basic KPIs like impressions and clicks to a holistic view of campaign execution, including the setup and creative quality. Given the complexity of the setup, monitoring and measuring its overall quality isn’t trivial, but innovative martech solutions have emerged to address that. Overall, I expect technology to play an even bigger role in advertising execution, with new martech tools driving better alignment, transparency and better collaboration between the advertiser and their media agency.

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