HIRO Media, CMO, Oded Napchi shares why agencies, in order to survive and thrive in a world of programmatic, must provide high-quality and value over quantity

Agency media buying departments have faced perhaps the most turmoil in 2017.  A large number of brands have brought their media buying in-house, as research on advertiser perception claims that 32% of marketers are about to insource digital media buys, marking a tectonic shift in our industry.

This is not a trivial trend when you consider that media buying, more often than not, accounts for the majority of an advertising holding group’s revenues and profits.

What Happened?

Media planning and buying are respected disciplines that often require sophistication and creativity. The move to digital has magnified the need for hiring specialized media people. Those who can handle and make sense of the complex data sets, targeting parameters and other cutting-edge technologies are critical members of the team.

In simple terms, the online environment and shift to programmatic have specifically presented the dream of the media agency exec – a huge barrier to entry for anyone who tries to compete with the established holding groups media agencies.

But then came Facebook and Google who completely transformed the equation. Both Facebook and Google succeeded in trivializing and commoditizing ad operations and media planning.  Uploading a highly targeted campaign and choosing its relevant media is a practice that takes only a few minutes on Facebook and few hours to do so programmatically. This is not an evolution, but rather a 180° shift in the essence of media planning and buying.

The reason for this could be explained by “the practice of the least effort.” We as humans often sacrifice quality for convenience. The following iPod analogy will explain it. When the iPod was first introduced by Apple in 2001, it delivered lousy music quality (i.e. 128 kbps vs 440 kbps via CD) but was far more convenient and comfortable to use than the prevailing compact disc player. The iPod won. Music quality be damned!

It is the convenience factor of Facebook and Google which presents a real threat to the holding companies. Marketers see Facebook buy as simple enough to in-source it. Hence, an increasing number of brands will (and already have) bring their media planning and buying in-house.

In this sense, every time an agency buys media for its clients through Facebook, CMO’s have yet another reason to bring media buying in-house and cut the agency fee of 25-30%.

What Are We to Do

As always, the first step in solving a problem is understanding that there is a problem, to begin with. Agencies should remember that to survive they too need to choose how they’ll provide quality over convenience.

Agencies must continually serve as experts and strategists. In fact, programmatic is exactly where media agencies can excel . It is a complicated algorithmic method that requires smart and knowledgeable people to guide initiatives.

Ad ops people should remember that it is their interest to specialize in programmatic and push its usage rather than try to convince the payer to shift buy to social. Furthermore, holding groups should buy programmatic companies and expert. Just take a look at the M&A activity over the past year – it was creative-focused, not media focused.

Which leads to the question…How Can You Compete with Facebook?

The immediate question is how can we claim that Facebook and Google are not “quality” enough and that programmatic is better. Let’s look at the fact – there is no doubt that Facebook’s data and its brand value are unparalleled. I will not try to challenge this fact. But – and there is here a big but here – Facebook and Google do have a problem with their offerings.

They do not commit to price and volume and do not allow you to track them independently.

When you buy a campaign on Facebook you will never know how much your campaign will cost you by its end, you will not know in advance what is the CPM, you will not know how many views you will get, and you cannot use 3rd party auditing to validate or verify that they delivered the volume to the people they guaranteed. As we all know, such discrepancies have been found.

In addition, with Facebook, users do not know what the fraud levels are and connect protect themselves using protective measures.

Conclusion

The media industry faces a challenging problem – Facebook and Google present a convenient alternative to programmatic advertising thanks to their ease of use. The risk is evident – buying media on these platforms is easy, leading to more brands bringing media buying in-house and diminishing the value of a media agency

It’s important for advertisers to understand the risks in buying only social and the benefit of the open web and develop their own programmatic expertise.

Originally published in: MARTECH ADVISOR