Advertising dates back to ancient civilizations, when the Egyptians used papyrus to write sales messages. But it wasn’t until the 1800s that the advertising agency as we know it was started by Volney B. Palmer and expanded by several others in subsequent years, including Albert D. Lasker, widely known as the father of modern advertising.
More than a century later, advertising agencies continue to thrive. As long as humans consume content, on the internet or elsewhere, we can assume that advertising will exist, and so will agencies.
The future of the agency model, however, is being challenged by a changing industry and the increased use of technologies, including AI.
From competing in the attention economy to managing the impending cookie-free world, as well as increasingly stringent privacy and data usage regulations such as GDPR, PDPA Thailand and PDPA Singapore, agencies today face pressure to change.
This shift is compounded when data becomes the primary currency and is susceptible to new regulations and other market restrictions, meaning marketers who want that one-to-one connection with consumers will increasingly rely on their own first-party data to market their products. directly. In fact, every industry that leverages data for insights to inform business decisions will eventually see sweeping changes in how they collect and leverage data in the future, if they haven’t already.
The housing boom
With data playing such a vital role in the future of advertising, it’s only natural that brand marketers who want more control over their digital strategies should start thinking about internal advertising.
The UK advertising market, for example, has already seen an increase in inhousing. Lloyds Banking Group, Marks & Spencer and PepsiCo are among a growing number of brands that have integrated in-house advertising or marketing departments.
Recently, Australia saw the launch of the In-House Agency Council, started by a handful of Australia’s biggest brands including Australia Post, Optus, Sportsbet, etc., to help marketers develop this capability and share best practices with their internal teams. .
According to a recent report by the World Federation of Advertisers (WFA) and the International Observatory, the growth of digital opportunities has led to a global increase in in-house agencies, with 74% of in-house agency teams having been created in the last five year. The report also found that marketers seek in-house for predictable reasons, such as profitability (30%), better onboarding (64%) and better brand awareness (59%).
While the trend towards insourcing is already taking hold in Europe and Oceania, it is only a matter of time before these new ways of working start to catch on in Asia.
What future for agencies?
The bread and butter of any agency (advertising or otherwise creative) has always relied on its ability to serve marketers well. Having worked in an agency before, I had first-hand experience of how hard an agency works for their clients and how often the exchange of value can’t be equal.
Even the agency’s business model is under threat; brands increasingly prefer a value-based pricing approach rather than being charged by the hour.
At present, the Asian labor market is still relatively profitable (compared to other parts of the world) and has a high percentage of younger workforce, so the agency model can still survive, thrive and evolve here. But how?
1) Agencies need to value their value
Agencies need to understand the value they can provide and hold marketers accountable for paying for it.
Demonstrating the value an agency can deliver today, given the necessary data points, makes it a Herculean effort for many seasoned agencies. Many marketers today operate in a world of austerity, with zero-based budgeting, so it’s not always an easy conversation to have. And often, agencies are pressured to overdeliver and undercharge, just to keep a client on the books.
To that end, agencies need to demonstrate what they can bring to the table and not be afraid to charge accordingly, or risk running a crippling, underappreciated and unprofitable business.
Marc Pritchard of Procter & Gamble has championed a fairer and more transparent media ecosystem that would allow agencies to charge fairly for the value they bring to the table.
2) Agencies need to connect planning and media buying
In programmatic advertising, companies leverage data to identify the most relevant audiences, finding those audiences through impressions available on an ad exchange. In this environment, the legacy agency model, where planning is separated from activation, is under threat. The more these two processes are aligned, the better agencies can quickly leverage real-time data and make rapid changes to a campaign, to better optimize it.
Agencies should leverage platforms to create interactive tools that help them, marketers (clients) and their media planners understand nuanced audiences and how to use the differences to help improve ROI (KING).
Ditching third-party cookies only accelerates this need for agencies to use the right platforms. There’s also a lot of disruption with the proliferation of data, the acceleration of computing technology, and the algorithms to harness that data and connectivity, all of which are converging in adtech today.
By using adtech platforms capable of creating data linking media planning to activation, agencies can drive real-time ROI benefits for clients, help secure more client relationships, and navigate a rapidly changing consumer landscape.
Where do the agencies go from here?
From my perspective, there is little replacement for agencies in the new digital world. But to stay relevant and add value to tomorrow’s digital marketers, they’ll need to build more robust processes and frameworks, as well as understand how to use data to drive better engagement with their clients’ audiences. This can be done either organically at a cost to the agency or through partnerships with adtech companies that can provide the innovation they need.
Agencies with multiple partnerships can offer a richer perspective on technology, data usage, and best practices than an in-house agency, and that’s something marketers should remember when looking for the best result for their advertising investment.
Sonal Patel is Managing Director for Southeast Asia at Quantcast.