International: Why You Should Be in the Media-Agency Business

NEW YORK (Adage.com) -- Media agencies: They're the new creatives, campaign developers, insights engines, production shops and ROI trackers. And they're enjoying an increasingly close and valued partnership with marketers.

When Booz Allen Hamilton asked marketers which organizations would become more important to them by 2010, media companies, media planners and communications planners topped the list, with 52% believing they would be more integral. Ad agencies of record? Only 27% thought they would be more integral. At the same time, 53% of media agencies say they expect to do more business directly with marketers.

"If the media companies take advantage of a lot of the insight they have available and begin sharing that with marketers, they can have a different kind of relationship," said Christopher Vollmer, U.S. media-practice leader at Booz Allen. "Media companies sit on top of a two-way media platform, and with all these shifts of marketing becoming more of a conversation, they can listen and learn and potentially influence better than in the past," Mr. Vollmer said.

Toe-stepping

Publishers' ability to work directly with marketers fueled hallway chatter at the Interactive Advertising Bureau's annual meeting last week in Phoenix, at which the Booz Allen data was presented. The other, potentially more grim talk focused on fears that inventory was being commoditized.

Of course, the idea of media companies supplanting agencies altogether is unlikely. Mr. Vollmer describes media companies' relationships with marketers as an "and" strategy rather than an "or" strategy. But there's enough toe-stepping to create strained relationships. In the Booz Allen study, 63% of media companies reported that their development of agency-like services is causing friction with agencies.

Ninety-one percent of media companies report they supply agency-like services to marketers today, with campaign development, ideation and targeting creative to the right audiences topping the list. Creative development and custom content, cross-platform integration and execution come next. Surprisingly, supplying consumer insights is seventh on that list -- and might be the area of most opportunity.

Consumer insights and behavioral targeting topped the list of what marketers are craving, according to the Booz Allen data, and media companies, arguably, are in the best position to supply those, thanks to their direct relationships with consumers and subscriber and reader/viewer data. Plus, in many cases a media company is closer to a brand's marketing department than a brand's own research-and-development team, thanks to the silos that exist within most major consumer companies.

'Underleveraged'

"Media companies are the most underleveraged resource for insights that exist," said Kim Kadlec, chief media officer-worldwide VP at Johnson & Johnson, which owns a major online media property in BabyCenter. "They're making the content that people are paying to see, they're not paying to get away from it. We'd like to learn a little more about that."

She said there's the ability for a different type of partnership.

"I don't really think we want media companies to be our agencies," Ms. Kadlec said at the IAB meeting. "What we need them to do is what they do best: create great content and help us drive insights through that. ...

There's an opportunity we haven't gotten to yet. And it's more complicated than that."

One marketer need Mr. Vollmer suggested media companies address is education about digital technology. He said digital-immersion days -- the IAB has offered a form of this in boot-camp events it produces -- are a way for media companies to create direct-marketer relationships. Other forms he suggested include custom research, case studies, measurement and tools that demonstrate how spending in new areas will provide better results.

Risky business can be beneficial

Risk: the new agency business model?

Why not? asked Group M Interaction CEO Rob Norman, who spoke to the 400 publishers and internet-advertising execs at last week's Interactive Advertising Bureau annual meeting in Phoenix.

At a time when agencies are squeezed from every side, "we can take risk and create value," he said, describing the concept as "trading on your own account to create value."

What does this mean? It might mean taking the upfront risk of funding the creation of content to reap the end financial rewards that come with finding distribution for that content.

WPP's Group M is "not investing crazy money, but we've got well in excess of $100 million in productions around the world," he said. And if you're a major global company, those opportunities to distribute that content multiply. While the U.S. TV market is sophisticated and full of top-tier content, making it hard to secure distribution here, the Bulgarian market isn't, he pointed out.

Mr. Norman said taking risk can also come through an arbitrage of impressions and leads: snapping up inventory at a lower price and reselling it at a higher price, share of cost-per-acquisition outcomes, or owning direct share of the addressable value chain and the technologies that enable it. Group M is betting on this last one through its investment in addressable-TV technologist Invidi. WPP is also an investor in Videoegg and Spotrunner.

Group M, as the largest buyer of media in the world, is in a better position than most to take on risk, Mr. Norman pointed out, because "if you're a really big agency with big revenue streams and cash flows, your ability to absorb risk is greater."

Focusing on new business models and ways to make money will be increasingly important for the agency business. Mr. Norman quoted a colleague, Nick Emery, director of strategy for MindShare: "What kind of business do we have if clients ask for more and more then fire us when there is nothing left to squeeze?"

Source: AdAge.com

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