22.05.2020

It is said that programmatic advertising makes media agencies superfluous – advertisers could do the job themselves in the future. But it’s too soon to say farewell to the intermediaries, because customers often lack the appropriate data infrastructure and the necessary know-how. Still, media agencies urgently need to transform, because specialized intermediaries have long since started positioning themselves, says Nunatak partner Dr. Fabian Göbel.

Fabian, to what extent does programmatic advertising have the disruptive potential to fundamentally change the media industry?

To an enormous extent! Because fully automated trading of advertising space will at least make the media business faster and more efficient, and often more transparent as well. It streamlines value-creation chains and leads to a reassessment of media agencies, because advertisers can increasingly run the business on their own.

To what extent is this trend already evident in practice?

According to a 2019 study by the Interactive Advertising Bureau (IAB), almost one in two advertisers (48 percent) is purchasing advertising space nationally on a programmatic basis, and 89 percent of these have brought at least sub-processes into their own companies. Among them are mainly big spenders such as L’Oréal, Vodafone and Nestlé. It can be assumed that this trend will continue to gain noticeable momentum in 2020.

What are the consequences of this?

The new booking technology makes the business fundamentally simpler through automation, but in the first step it also makes it much more complex. For advertisers who want to do this in-house, it will result in numerous new challenges. 

Which challenges are you thinking about?

Programmatic advertising, for example, requires professional data management. But the integration of all data is tricky in practice for many companies, because far too often the data is stored decentralized, in individual departments of a company. In addition, DMPs are increasingly being transformed into predictive marketing platforms that can be used to make predictions about future purchases or sales. Handling such complex systems requires expert knowledge. At least this is still primarily the case in agencies.

Still, the corresponding know-how can be built up internally …

Yes, but this is anything but trivial. We’re talking about fee structures, consent management, ad verification. And the interface connection must function smoothly – especially with regard to internal data sources. In practice, however, it’s all too often a smooth connection that suffers, because the different technical systems frequently cannot be synchronized easily. For many advertisers, these are all completely new issues. And they cannot be easily integrated into existing organizations.

Why not?

Programmatic advertising is a typical case of interface competence. Marketing, IT and personnel are all equally integrated. In our experience, automated booking in real time therefore changes internal structures, processes and job descriptions in equal measure. Added to this, of course, is the shortage of skilled personnel, which is still a major issue.

All this speaks for media agencies. Why do they have to change now?

Because a key core competence – media buying – can also be carried out by advertisers. The advertisers will successively withdraw this from their service providers. But because the associated challenges remain in the first step, new consulting services are emerging for media agencies – for example, training advertisers, creating data structures for programmatic at customer sites, or assigning expert managers from within their own ranks as project managers and consultants. We can see that a new type of service provider is emerging in this area, which is in high demand both internationally and nationwide – a hybrid of media agency and management consultancy. If media agencies want to continue to play their part, they must transform themselves and adapt their service portfolio.

© 2020 The Nunatak Group