Nearly 10 years ago, I read a paper that fundamentally changed my point-of-view on what a successful agency would need to become in the future.
Written by Forrester, it spoke about how the advertising industry of 2008 was at a crossroads. While we had not yet seen the emergence of companies that are now widely viewed as the disruptors of their respective sectors—companies like Uber, Netflix and Tubemogul—we were in a business whose output was becoming less valuable to clients and ignored by consumers. The future for agencies could only be turned around if marketers formed real connections between clients and consumers. Or as Forrester posited, move from "orchestrating campaigns to facilitating conversations."
Much has changed in our industry since then, but this line of thinking stuck with me. In fact, it inspired me to rethink and reshape the way Carat, the media agency I lead in the US, approached its work. Since then, we've restructured both our agency and invested in research capabilities that provide us with insight into how we can better understand our clients' most valuable audience(s) in the context of the broader culture. And we've never looked back.
We do however, look forward. Once again, our industry is at a crossroads, as media continues to evolve at an ever-quickening pace, and technology brings new capabilities and challenges to our door. The predictions made by Forrester in 2008 were certainly prescient, and we are now largely living in that reality. In fact, a recent Harvard Business Review study revealed that the media would be the industry most disrupted by the digital economy in the next 12 months. So what's next?
From cost-out to value-in
The media agency of the future will not be defined (primarily) by its ability to extract cost from a marketers' P&L, as has been the case for the past several decades. Sure, pricing will always be a byproduct of any bought media engagement to deliver increased cost efficiencies. More importantly though, an agency's value will be measured by its ability to add top-line value. As data and analytic capabilities grow and we have increased visibility into the actual performance of our decisions, media agencies will need to face up to greater accountability. This means embracing the fact that we'll have to show direct ties between media strategies and overall business performance—a difficult task, but an imperative one.
An audience agency, not a media agency
Media agencies will become "audience agencies." With a continued investment in data and technology, we will command a superior understanding of not only people's actual behaviors, but also their attitudes, values and motivation; both the what as well as the why. We will develop new agency operating systems or "data labs" that bring together disparate and, increasingly, unstructured data from first, second and third party partners. The audience knowledge enabled through this will sit at the center of the agency, powering all aspects of a client's strategy, messaging, content creation and media activation. A new breed of analysts will emerge that combine traditional research and digital analytics skill sets.
The emergence of universal IDs
Data overload is a problem almost every modern marketer faces. With data coming from first, second and third parties, overcoming the disparities in this data and honing in on a single view of your customers or prospects is a huge challenge. Fortunately, new technologies are coming that will allow marketers to marry the data in a way that allows them to develop their own universal IDs and smooth out these disparities. This brings about an opportunity for agencies, who will be able to create their own universal IDs, based on valuable information marketers may not already have. This information, culled from a combination of pure play data companies and media owners, will become the currency that ultimately powers and differentiates media agencies.
A new agency value proposition
Marketers usually build their data pools from information gleaned from "hand-raisers," or those already actively engaged with the brand. That kind of data has value, but it's limited. In order to steal market share or grow household penetration, brands really need to know about their competitors' customers or those who can help them expand in their category. This is where an agency can help. In the same way marketers look to second and third party data providers now, they will soon look to their agencies to provide data that can enhance their own data pool, as well as combine all the information and pull valuable insights out of it.
One important point agencies need to keep in mind as our business model transforms is the danger of conflicts when managing large amounts of data for different, sometimes competing clients. Some agencies build their data pools on the back of the client's own data, using information gained during campaign activations. Centralizing this data across clients is easy and can create massive scale very quickly. However, it also raises the question of who owns said data—client or agency. Instead, we need to seek out relevant partnerships or even acquisitions that provide insight into audiences beyond those to which a client may have access.
Just as the advertising industry moved into a model that placed people and connections at its core, data and measurement are now taking center stage as the crucial components that will drive the work of the media agencies of the future. But far from replacing the focus on people and our connection to them, it will help us to strengthen that bond between brands and consumers, and create lasting new relationships for clients.
Doug Ray (@DougRayPOV) is CEO, Carat USA.