It reminded me of a media training course I used to teach, likening media planning to playing roulette... Where do you place your bets? Which brands in the portfolio; what media and at what weights?
And as it happens, I'm just back from playing the tables in Monte Carlo - Comme d’habitude, another drizzly bank holiday weekend of fish and chips at Monaco's aquarium and casino. We only have one zero in European roulette (the Americans being bigger and better like to have two) but still there's always the house advantage.
And that's my segue into talking about bringing more advertising "in-house", and the associated technology and analytics ecosystem. Is there a house advantage for in-house media?
Advertisers like Unilever, P&G, Diageo and RBS are bringing more creative, more media planning and buying in-house; what does this mean for agencies? What does it mean for opportunities across the whole adtech ecosystem and value chain?
It started in 2017 and has continued unabated in 2018, with more to come. Actually, this is a simplification as many major advertisers did their own TV negotiations, and in 90s New York, typically major advertisers did print and radio buying in-house. The in-sourcing of creative and media planning and buying work is now one of the biggest challenges for agencies to address (if we keep the consultancies getting into advertising work separate for the time being. We'll talk more about my friends at Accenture shortly - full disclosure: I sold an analytics business to Accenture in the 2000s and I'm still an investor there).
I have a first-love affection for everything about advertising, both creative and media agencies, and I've witnessed and measured the huge value they bring to advertisers. In the past I've been a board director at J. Walter Thompson, part of the leadership team launching MindShare, and eventually within my portfolio of Accenture businesses was Accenture Media Management (which I also directly managed for a year, as we integrated a number of media businesses together). So I've had some great front row seats and I've played a couple of games on the court.
In March 2018, P&Gs Chief Brand Officer Marc Pritchard announced that the company would reduce spending with agencies to the tune of $1.2 billion by 2021. P&G had cut agency and commercial production spends by $750 million in the past three years. In 2017 alone, Pritchard hacked away $200 million of "wasted" digital ad spend. This is heading to be a billion dollar resume for Marc. I hope they give him at least 1% of his achievement! The enterprise value of saving a billion is (lets say) another $10bn on the stock, so wow, this is serious. P&G are intent on re-inventing the advertising/media value chain, and it's shifting the stock price materially... and Pritchard's only just getting started (I think).
In a similar vein, Unilever announced it would continue on its ‘5-S’ savings programme and zero-based budgeting strategy by diverting more work through its in-house agency U-Studio. U-Studio was launched in 2016 as part of a wider initiative to achieve $2 billion worth of efficiency savings in brand and marketing spend. As of date, U-Studio has a presence in more than 20 countries. Unilever's Foundry programme and Unilever Ventures support marketing technology businesses who want to partner with Unilever brands to address marketing challenges and (my words, not theirs) sidestep agencies. Keith Weed's headline-grabbing IAB Annual Leadership keynote speech could be taken as another CPG titan's response to P&G noting the investors have pricked up theirs ears. There'll perhaps be an investor clamour to spend less and bring more spend in-house under direct control.
Chobani has its own Chief Creative Officer. L’Oreal, another big spender on advertising, launched its in-house content creation unit back in 2015. Just a couple of other examples.
Organisations are not only diverting more creative and media duties internally, but are also increasingly investing in marketing and advertising technology, like the Unilever Foundry.
Pernod Ricard has diverted more day-to-day media buying operations in-house and has its own Data Management Platform (DMP). Booking.com (owned by Priceline parent Booking Holdings) has its own team of data scientists, researchers and digital media buying experts.
So I have myself been neck deep in the machinations of agencies when it comes to creative duties and media buying, and as an former ad exec, media agency exec, media auditor for massive global clients, and senior adviser now to some of the world's biggest spenders (with access to their data), I feel entitled to an informed opinion:
- Agencies can become facilitators and partners for advertisers bringing more in-house
- Consultancies like Accenture can have their cake and eat it with massively successful creative businesses like Karmarama, setting up advertisers' DMPs and facilitating in-house teams (whilst elsewhere in the Accenture business, still having a great media audits practice)
- New tech solutions will emerge to empower advertisers
- Permissioned 1st party data will become more important to advertisers
Most of the industry credits this in-house wave as a reactive measure from advertisers because they were increasingly getting concerned about advertising waste, low efficiency, lack of transparency (aka distrust) and concerns about safety. There was the Emperor's New Clothes of the digital promise - triggering front page news when Coca-Cola's stats gurus said it didn't work at the ad industry's biggest conference, and P&G called time on $20m a month of "wasted" digital spends. Perhaps true, but there's also a growing sense that advertisers can simply do it better themselves - perhaps with technology, consultants like Accenture, or indeed a new-model agency as an enabling partner.
On the surface, it always seems that in-house agencies are tasked with objectives of reducing spending and gaining control. That may well be true, but the real objective is to introduce an effective-focus, consistency, remove complexity, increasing buy-in and reducing the time required to launch a creative (with media planning behind it). For example, one of the driving forces behind bringing media buying in-house is to be able to measure and monitor performance through a consistent set of metrics across the whole organisation. These are the metrics that the organisation decides and implements. Advertisers will always care more about effectiveness than their agencies... because it's their money.
An agency, with all the honest intentions in the world, will struggle to achieve this (profitably, within their economic model) because of multiple platforms, technology vendors and reporting methodologies that it needs to wade through. What is the outcome? The clarity of thinking gets clogged in this complexity, the same is passed on to the client and the cycle continues.
In a series of findings in early 2017, Ebiquity warned that brands risk wasting 60% of their programmatic spends - through all the various links in the chain.
What was identified as one of the biggest drivers of this waste – the increasingly ‘complex’ media supply chain. In light of this, Pernod Ricard has been very forward thinking in terms of investing and creating their own DMP. But we know typically advertising buyers and media sellers have not fully integrated their Data Management Platform (DMP) or Demand-Side Platform (DSP)/ Supply-Side Platform (SSP) with other systems and tools in the trading ecosystem, and so trading is partially blind, which makes it very difficult to improve campaign performance and have accurate RoI measurement.
There is likely no stopping the in-house wave. It has started and will continue unabated and evolve significantly over time. Organisations will increasingly realise that they always had the knowledge, capability and energy to manage creative and media duties in-house. What they lacked in terms of skills, they can plug that gap by hiring industry experts (who may have been disillusioned already by the complexity they have to deal with in their agency jobs).
It looks like consultancies like Accenture will be supporting more advertisers set up in-house trading desks and broader aspects of media planning and buying in-house. This is Accenture covering all bases
And then there's a set of new-wave post-adtech businesses like Elsy (full disclosure, I'm an investor) that are empowering advertisers to (amongst other things) bring media in-house.
Collaboration is king. To be able to get their profits back agencies perhaps need to better understand what a client is looking for, which goes beyond a creative or media brief. They maybe need to work more collaboratively with in-house teams and not perceive them as a threat.
I spent my first career in advertising - I sat on the board of J. Walter Thompson and I was part of the launch team of MindShare, the first global planning/buying leviathan. We once sold an analytics business to Omnicom. I was and still am hugely convinced by the value that creative and media agencies can bring to their clients - a place in my heart will always be reserved for the agencies - but their business model likely needs to evolve.
Perhaps agencies also need to work more as ‘enablers’ and not ‘providers’. Shrinking client budgets are a perfect trigger for reactionary actions (e.g. cutting staff, reorganising internal structures and combining capabilities). None of these would actually work for an agency until the time they can reflect the new marketing and advertising thinking and philosophy of a client. When an agency can optimise their business, this new thinking, it will be able to survive in the ‘in-house’ world.
And stop press, P&G is re-pitching it's US Haircare media, wanting to, amongst other things I gather, better integrate the agency data-planning with their own. In this new more hybrid World, permissioned 1st party data will be far more important to advertisers, and their is a need for agencies and advertisers to integrate much better. Pritchard on the prowl again?
"Je me lève,
Et je te bouscule.
Tu ne te réveilles pas,
James Walker is a Partner at OC&C Strategy Consultants, and Global Head of Analytics