So many forces are bearing down on global media agencies that many of them will be unrecognisable in five years.
Transparency has been the most immediate challenge. Too many media agencies boosted margins from opaque and undisclosed practices. But they have been found out, following last year’s report by the Association of National Advertisers into "non-transparent" practices in the US.
Agency leaders know the truth. "Transparency is the first thing every client wants to talk about," says one in London. "It’s been an absolute nightmare," says another in New York. A slowdown in revenues at many agency holding companies over the summer suggests that questions over transparency have started to bite and share prices have tumbled.
Technology is a bigger disruptive force and it is undermining media agencies in many ways. Just keeping pace with the latest tech is a challenge. Then there’s the problem of dealing with Google and Facebook, which are smarter, richer and miles ahead when it comes to data and innovation.
Self-serve technology has made it easy for advertisers to plan and buy digital media themselves. Indeed, it can make sense to take greater control when they might be creating ads and content in-house and worrying about data and transparency in the media supply chain.
Crucially, trading scale matters much less in a world of biddable media, where ads can be bought, served and optimised in real time. The old ways of securing the best prices through volume and share deals that worked in traditional media don’t cut it when buying is automated through artificial intelligence.
Digital disruption is already having a disproportionate impact on the agencies’ biggest clients, the fast-moving consumer goods giants, which have cut media spend and agency fees as they struggle to cope with ecommerce rivals.
But there’s an important flipside. There is now a parallel universe of new advertisers that were born in the digital age. They look after marketing, data and customer relationship management themselves so feel less reliant on agencies.
Media agencies must develop new capabilities if they are to be more relevant in the new universe because the old one is shrinking and commoditised. Offering cut-price fees is not a long-term route for survival.
Agencies do have a tremendous capacity to reinvent themselves. It’s in their DNA. But they are now in an arms race against management consulting firms and software giants.
Accenture and Deloitte talk about helping brands with every aspect of the digital customer experience and are moving rapidly into practically every area of marketing services except media.
The consultants are wary because they see media as executional rather than strategic. But they know it’s where the big money is and where the direction of travel is ultimately taking them. "All of the consulting firms are going to think about media last," one consultant says.
Software companies such as SAP, IBM and Oracle could move into media sooner because they have the skills to manage data at scale and the client base. And when industries collide, expect M&A to follow.
The future of media agencies matters because they have been the profit engine of agency groups and change has huge implications for media owners too.
Brands will always need help orchestrating their media activity. But we are at the start of a new era when media agencies aren’t guaranteed to lead the orchestra.
Gideon Spanier is head of media at Campaign in the UK.