As professional services eye the media and digital agency business, media agencies are now looking in their direction to find new ways of making revenue and building different kinds of relationships with clients.
Omnicom Media Group last week moved to strengthen its consulting arm, Annalect, with the appointment of two joint CEOs, Jeremy Bolt and Des Odell. The pair, who previously ran OMG’s search business, Resolution, and came from Deloitte, will lead the group of five businesses, including Airwave (mobile), Accuen (programmatic), Annalect Consulting (data and tech), Annalect Solutions (market mix modelling and analytics) and Resolution Media (digital).
It's part of a necessary reinvention that media agenices are facing to take full advantage of digital consulting opportunities in an increasingly competitive market. It involves clearly defining what agencies should offer in the scope of normal media contracts and shifting mindsets across the business to promote consulting as an add-on rather than a free sweetener to win business.
“There’s no doubt media agencies have to find a way to provide higher margin services,” Odell said. “The second, even more strategic consideration is that creative agencies, media agencies, digital agencies and management consultants are all fighting for the same thing – to own their clients’ digital media spend. Who’s going to win?”
IPG Mediabrands CEO, Danny Bass, also raised the same issue earlier this week and argued that agencies aren't properly remunerated for out of scope work due to pressure to win and retain business. He told AdNews that consultancies are "masters of charging for the work they do" but that agencies give too much away for free.
Danny Bass is speaking at the AdNews Media Summit. Have you got your tickets yet?
Media agencies have an advantage, according to Bolt and Odell, because they have access to much more extensive media data than rivals and “depth of expertise from people who are actually buying”.
Some of the consulting services Annalect offers include digital marketing transformation, change management to evolve traditional marketer mindsets so they are aligned with digital and technology consulting around a marketing technology stack that is often hidden to most CMOs.
In essence, it’s about using data to provide CMOs and the C-suite with insights that will help them get a higher return on investment, rather than a bottom-up approach.
“It has been a challenge for us and obviously understanding there’s a media contract and often what we provide is external to that, not
sitting within that contract,” Bolt said. “In most cases clients are hiring consultants anyway so their spend is sitting there.”
Odell adds the biggest ongoing discussion Annalect leaders have with media agencies partners is defining whether services such as strategy should be within the remit of agency teams or left to digital consulting teams.
“It’s a discussion that comes up often because media agencies are under massive threat in terms of margin,” he said.
“You can’t just keep giving away everything and not charge for it."
Behind the news
Media agencies looking to provide consulting services is hardly a new concept, but it’s an important step to future-proof these businesses. There are several factors driving the shift.
Firstly, media agency margins are eroding and the scrap to win and retain business is intensifying, with agencies promising a whole range of add-ons to try and counter pressure on price.
Traditional media buying and planning, in particular print and to a lesser degree TV, is slowly subsiding, being replaced by digital.
Exacerbating this is more companies using owned and earned media rather than just paid. Finally, digital offers opportunities to new market entrants, such as consulting firms, providing more competition.
Annalect joint CEOs Jeremy Bolt and Des Odell understand this transition better than most – both originally come from the auditing and management consulting firm Deloitte.
Traditional audit firms now make most of their revenue through consulting services as pressure on audit fees have eroded margins and forced them to branch out into more lucrative services.
In fact, during the lean global financial crisis years it was not unheard of for auditing pitches to be used as a loss leader to win more lucrative consulting add-ons.
The media consulting space is still relatively fragmented, with a mixture of digital agencies, smaller boutique firms and large consultancies scrambling for a piece of the pie.
The opportunity is there for media agencies to plant their flags and or risk being squeezed to unsustainable levels in a matter of years.
Cashed-up global consulting firms are circling merger opportunities in this space and media agencies that cannot future-proof will become a prime target.
Have something to say on this? Share your views in the comments section below. Or if you have a news story or tip-off, drop us a line at firstname.lastname@example.org