The examples are multiplying, as, recently, many indie agencies are winning large pieces of business — such as PMG winning an account with Nike, Known becoming the agency of record for AMC Networks and Gale winning Dropbox. The list goes on.

“There’s nothing quite like a great underdog story, and in the advertising business, that looks like an independent agency beating out a larger holding company for an account,” said David Otis, vice president of independent U.S. agencies, Seedtag

Understanding this shift starts with understanding the overall media landscape, from media planning and buying to changes in how brands evaluate their agency partners.

Consolidation and competition in the advertising industry

Media investment services is the term generally used to describe the process of delivering a message created by an advertising agency via the media.

There are two aspects to this. Media planning involves deciding where (on which TV or digital channels, etc.) the advertisement should be placed to achieve the best impact on its intended audience. Then there is media buying, the process of negotiating with individual media owners (such as broadcasters or publishers) over availability and price.

Although some advertising agencies (usually standalone full-service ones) still offer in-house media services, most spun out their media departments during the late 1990s or early 2000s as separate businesses alongside the main creative agency.

In simple terms, this means that clients pay separately for the creation of advertising and the booking of media space. On the planning side, this encourages media neutrality so that advertising is placed in the medium best suited to the client’s marketing message, not just the one that earns the most money for the agency. On the buying side, it allows for economies of scale. The media agency can negotiate the best possible rates because it is buying ad space in bulk for many clients simultaneously.

As a result of consolidation, this area of the market is now dominated by global networks, such as Mindshare, OMD or Spark/Foundry. Like the advertising agency networks, these are all owned by the major or mid-size holding companies, each operating through 100 or more local offices worldwide. Many standalone media agencies remain — mainly independently owned — and now represent an increasingly more significant part of the overall market.

Feeling the pressure from margins

Despite their size and scale, the major media networks are under increasing pressure from their clients on one side and the media outlets in which they buy space on the other. This has led to an implacable squeeze on margins.

Theoretically, media networks are paid commissions on the advertising space they purchase. Agencies traditionally took a cut of the media space they bought as their fee. However, competition and negotiation have significantly reduced this percentage, particularly with large clients. In many cases, media agencies might agree to take a …read more

Source:: Digiday

Author: Aaron