Will mainstream agencies survive the onslaught of big tech companies?
An Agency of Record (AOR) is commonly defined as an advertising agency authorised by an advertiser to buy advertising space and/or time on its behalf (businessdictionary.com). While this is still relevant from a media buying perspective, the adaptation of this concept in the creative, strategy and execution space may not be so intuitive in a digitally-driven, highly fragmented communications environment.
The relevance of an offering (AOR or any other relationship) depends on what the customer (advertiser) needs. The traditional agency model was a strategic partner relationship with the advertiser to manage their brand communications providing strategic planning, creative idea generation, production, execution and media planning and buying.
The AOR has been a prerogative of multinationals and large national clients. In Pakistan, multinationals adopt brand strategies developed at the global or regional level, with an aligned AOR. Major thematic campaigns are beginning to move in a similar direction, where the trend is towards global and regional creative.
"CMTs are part strategists, part creative directors, part technology leaders and part teachers; they champion greater experimentation and more agile management of that function’s capabilities.”
So the selection of AOR agencies by multinational clients is based on regional or global agency alignment. The local agency affiliate is more execution or tactical focused. It is unlikely that this will change in the near future as multinationals are able to better synchronise and manage cost with globally or regionally aligned AORs.
Very few local advertisers invest in strategic planning and the focus tends to be more on execution. In many cases, large local advertisers appoint AORs, but the selection is often driven by price or triggered by new decision-makers in the marketing department. They also tend to maintain flexibility by keeping a roster of execution agencies.
In Pakistan, similar to the rest of the world, media planning and buying has become a specialised area thanks to the advent of media buying houses. Whether an advertiser selects a full-service agency or a media buying house to plan or buy media, economies of scale support the consolidation of media buying to a single or few entities. Hence the support for AOR in case of media, continues to stand for now.
The likes of Google and Facebook have changed the traditional advertising model. Google has consolidated the majority of website content publishers and Facebook provides a platform for user-generated content to be monetised as media.
However, some media buying houses are offering creative services, particularly in the content area, by partnering with content producers or smaller creative agencies. While they act as a single AOR for the advertiser, they are forward integrating with smaller entities and freelancers.
There are different permutations of AORs when dealing with specialist areas such as mass media versus digital, versus PR, versus activation. The decision is driven by the advertiser’s legacy system, the organisational structure and capabilities, the agency’s offering in the marketplace (full-service versus specialisation) and the cost structures of the industry.
Although in the short term, the AOR model seems to be working in Pakistan with different variations, the debate brewing globally is will the concept of AOR continue as digital’s share of advertising grows? The answer depends on several factors.
Digital savvy advertisers are developing their own online assets that can be managed internally, or by the agency which either comes up with the idea, or is best equipped for it: AOI (Agency of Idea) versus AOR (Agency of Record).
In the good old days, the agency was perceived as the expert on consumer behaviour, a reservoir of creativity and the shrewd negotiator making deals with different media owners on behalf of their clients. A centralised role was important to synergise at least parts of the advertising value chain.
Currently, it seems agencies, at least in developed countries, are going through a midlife crisis experimenting with various business models and flirting with technology companies, while soul-searching to identify who they are. What is causing this?
The likes of Google and Facebook have changed the traditional advertising model. Google has consolidated the majority of website content publishers and Facebook provides a platform for user-generated content to be monetised as media.
The inherent advantages the big technology companies have is their ability to provide the following: centralise negotiations and serve ads through their networks despite the exponential increase in content publishers; seamless content integration through the likes of YouTube or Facebook fan pages; designated representatives to work with large global agencies and advertisers and offer direct advisory services in local markets to better plan their media spends with them; improved customer insights through unprecedented data on users, which they can crunch in real-time and deliver to advertisers and agencies through user-friendly interfaces and predictive capabilities, deploying algorithms to target and engage consumers.
While AORs are common in traditional advertising, they are not necessarily the dominant arrangement in digital. Digital savvy advertisers are developing their own online assets that can be managed internally, or by the agency which either comes up with the idea, or is best equipped for it: AOI (Agency of Idea) versus AOR (Agency of Record).
The global debate on AOR is less likely to impact Pakistan given the dominance of traditional media. However, in an increasingly digital world, global trends are likely to disrupt the local scenario.
The impact of digital is also evident on the advertiser side with ‘The Rise of the Chief Marketing Technologist’ (source: Harvard Business Review, Jul-Aug 2014).
According to the article, “CMTs are part strategists, part creative directors, part technology leaders and part teachers; they champion greater experimentation and more agile management of that function’s capabilities.”
Is the AOR relevant in the fast-paced digital, ideas-driven world? If media planning and buying is being simplified at the tail-end of the communications value chain and a CMT is in place on the advertiser’s front, what services will the agency of the future provide?
Global communications groups are hedging their bets by investing in technology-driven companies with different areas, including data analytics and insight, digital creative agencies, ad serving networks and content platforms, including e-commerce sites.
WPP’s recent investment in AppNexus and Publicis’s interest in Criteo are evidence of their foray into data and technology to provide alternatives to Google and Facebook’s ad serving capabilities.
Which of the bets by the global communications will pan out is the billion dollar question. Whether the ad agency networks will be successful in maintaining AOR status quo in the digital age through its acquisition of technology companies is uncertain.
In the short-term at least, the global debate on AOR is less likely to impact Pakistan given the dominance of traditional media. However, in an increasingly digital world, global trends are likely to disrupt the local scenario.
Article excerpted from ‘Of the record or of the idea?’, published in the November-December 2014 edition of Aurora.
Amin Rammal is Director, Firebolt63, The Brand Crew and APR. amin.rammal@firebolt63.com
First published in THE DAWN OF ADVERTISING IN PAKISTAN (1947-2017), a Special Report published by DAWN on March 31, 2018.
Comments (0) Closed