Brands Look to Take Back Some Digital Control From Ad Agencies – Wall Street Journal (subscription)
For more than a decade, marketers have outsourced tasks related to the planning and buying of their digital ad campaigns to media agencies, which have grown into powerful profit centers within advertising holding companies.
But there are signs some marketers are increasingly bringing aspects of their digital media activity in-house as they look to wrest back control from their agencies.
Marketers have been stepping up changes to their digital media governance practices in the past 12 months, or plan to, according to a poll of 35 multinational companies with a total annual marketing spend of more than $30 billion. The poll was conducted by the World Federation of Advertisers (WFA) trade body in May.
In the past year, 38% of marketers polled added clauses to their agency contracts that stipulate how much ownership they have over their data and to have more say in the technologies used on their behalf, for example. Nearly one-third of respondents said they were already doing this, while 24% said they plan to.
In addition, 41% of marketers surveyed said they plan to take greater control of their spending on programmatic advertising, where online ads are bought using automated systems. Around one-fifth said they had started doing this in the past 12 months, while 24% said they had starting doing this more than a year ago.
It’s all part of a broader effort by brands to be more accountable for their digital ad spending. As spending on digital platforms surpasses television, many marketing departments are employing more in-house specialists, undertaking internal training programs and forming more direct relationships with online vendors to ensure they have an appropriate level of digital advertising expertise.
“Advertisers are taking back control of something which is critically important for the company, which before they delegated without fully understanding,” WFA CEO Stephan Loerke said. “When you do that, one becomes complacent,” he added.
Brands are also scrutinizing their contracts — including specifications on rebates and who has ownership of data — after a number of recent events gave marketers pause about how and where their digital budgets are being spent.
More than half (53%) of marketers surveyed by the WFA said they had added “audit right” clauses to their contracts over the past year. The same amount said they had added clauses related to media rebates.
In June of last year, the Association of National Advertisers, a U.S.-based trade body, released a bombshell report alleging non-transparent practices — such as agencies taking rebates from media owners and not passing them back to clients — were “pervasive” in the media-buying business. Part of the report homed in on improper practices in digital media-buying, including undisclosed markups of online ad inventory. Though agencies have broadly denied wrongdoing, the report still raised suspicions among ad clients.
Brands such as Procter & Gamble and Unilever have been vocal about the need to clean up issues within the digital advertising ecosystem, which range from bots to ad fraud and viewability — a measure of whether an ad had the chance to be seen by a human.
Antonia McCahon, Pernod Ricard’s global digital acceleration director, said the alcohol company has “revved up significantly” the amount of digital media spend it handles in-house over the past six to 12 months. Now, about 25% of its digital ad buying is through the Pernod Ricard Media Hub, which has been in existence for around 18 months.
“Having an internal resource helps our understanding of the landscape, what should and could be done, where the hidden margins were,” Ms. McCahon said.
Intel built an in-house trading desk to manage its digital media spending almost a year ago, according to the company’s chief marketing officer, Steve Fund. That followed the launch of its internal creative and content agency, Agency Inside, in 2014.
“[There are] many benefits to building in-house, both in terms of the ability to make better decisions, to prioritize, and there is an efficiency,” Mr. Fund said.
The brand still works and is happy with its external agencies, but “if we think we can do it as good as or better in-house we will,” Mr. Fund said.
The in-housing trend isn’t having a big impact on agencies, however, according to Marla Kaplowitz, CEO of the American Association of Advertising Agencies.
“As the industry continues to evolve and become more complex, it’s natural and smart for marketers to look at their investments with a keen eye toward data to inform their approaches,” Ms. Kaplowitz said. “That said, we’re still seeing the majority of marketers…rely heavily on their agency partners, whether in the form of data ownership and analysis, creative or media buying services.”
Deutsche Telekom AG launched an internal initiative called “Project Tetris” this year to better align how the telecommunications giant, which controls T-Mobile US, works with its media agencies, ad tech firms and data companies. Part of the shake-up is designed to reduce the telecom company’s reliance on third parties and suppliers.
Gerhard Louw, Deutsche Telekom’s senior manager of international media management and digital transformation, said the goal is to ensure it has the people and processes internally who “really know what goes on in the engine room” when it comes to how programmatic advertising works, how ad tech stacks are put together, what type of margins suppliers take and whether those are justified.
Ultimately, all the players across the entire industry need to invest in building trust within the digital ecosystem, according to Luis di Como, executive vice president of global media at Unilever.
“This is important because the lack of transparency across the digital ecosystem has resulted in consumers receiving poor and disruptive digital ad experiences, leading to an erosion of trust and the proliferation of ad blocking,” Mr. di Como said.
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