Bharad Ramesh

We, the media agency folks, are so caught up in the trenches of the media agency business, responding to daily fires and client requests that we forget to pause and take the time to stand & stare. If we did take a few moments to think about our business & its future, we would come up with this list:

Here’s what the media agency in our region will be like in 5 years time.

1. Large: Agencies today have high billings & no profits. Media agencies will continue to grow at all costs. A lot of this is being driven by the quasi-monopolistic nature of media owners. In most markets, there’s probably just one TV network or a print owner worth investing in. Going up against them for the benefit of clients requires agencies to have the clout. Also, Being #1 brings bragging rights and prestige in what’s essentially a commoditized service. This brings us to…

2. Cheap: Most advertisers see media agencies as a consolidator of volumes to reduce their media costs. Very few see media agencies as their investment managers who can help build market share for their brands. Hence, the media agency service is commoditized. And predictably, media agency revenues are shrinking. Additionally, media agencies are now contractually bound to return the rebates generated from their client’s media investments. Yup, the ice-berg is melting.

3. Analytical: As all media go digital, with return-path & interactive capabilities, mass media will become addressable media. Advertisers will increasingly move to one-to-one conversations as they drive conversion from awareness to sales. All of this requires a central repository of knowledge and an ad-serving system with a deep understanding of consumers. This’s currently the domain of market-research & CRM agencies. But media agencies, with their control over much-larger budgets will muscle into this space.

4. Creative: All this leads the media agencies into a new, relatively lucrative turf – that of the creative agency. Media agencies already have vast amount of consumer data that are not available to creative agencies. Data that help define the target consumer. This will help the media agencies drive the comms planning, hitherto the domain of the creative-agency. There are increasing signs of media agencies working with the in-house creative teams of the media owners to develop campaigns for their clients. Not to forget, the media agencies are already well-entrenched the realm of branded entertainment & event management. This will happen very quickly in digital/social, where the creative, the content, & the media placement lines are crossed.

5. Efficient: Media agencies have a high culture of accountability. They live in numbers day-in & day-out, and constantly negotiate better prices on behalf of their clients. It can be safely said that any service they offer to clients will be more efficient than the alternatives, with a spreadsheet to prove so. Why pay a creative agency 7% when the media agency can get it done for 2%? Why work with a Big Five consulting firm for a ROI project that costs 10% of your media budget when a media agency is offering it for 1.0%? In five years, media agencies will be looked upon to not just reduce costs in media, but through-out the chain of marketing communications.

The challenge for media agencies today is migration. Success or failure will be determined by how they move towards the future while still continuing to manage the legacy business? Scaling up capabilities across new areas requires heavy upfront investment in terms of time, energy, people & money. In a business where billings are recognized before profits, are the media agencies in a position to future-proof themselves?