PHD on the Future of the Media Agency
June 25, 2009
-By Mark Holden
Making predictions for what’s going to happen in media next week is hard, let alone undergo the ambitious challenge of trying to second guess the next five years. However, we believe our vision, which is based on rigorous research, conversations with key influencers and the collation of pertinent data and statistics, is not far-fetched. In fact, most of the predictions we make are grounded in today’s reality; we are building the foundations now for a future-proof media agency in five years. So, take a trip into the future with us, use your imagination and tell us what you think.
Fast-Forward to the Future
It’s 2014. You’re walking into a global media agency that you last visited five years ago. The first thing you notice is that it does not appear to be organized too differently from how you remember it, apart from the fact that much of the buying process now looks like it is automated. There are client teams scattered around the agency, composed of a range of different specialists: a couple of TV buyers, a radio buyer, an online buyer and duo of planners. So far, so similar. However, on closer inspection you realize that there are some key differences. For a start, the TV buyers no longer call themselves TV buyers but instead are AV (audiovisual) buyers and their remit covers TV and online. They also seem to be talking about targeting and consumer behavior data much more than they did in the past.
You overhear a client-planning meeting and you realize that most planners aren’t even called planners anymore. They’re MIMs — marketing investment managers. It looks like their role is now to advise the client on all aspects of his marketing strategy, from whether the brand should change its packaging to whether he should launch a new variant or product. Their role has clearly evolved significantly over the last five years. They seem to be much more multi-skilled and referring to a host of different research experts in the brainstorming meetings from consumer psychologists to neuroexperts to social anthropologists to new product development managers.
Some client teams appear to be populated by product placement specialists, who are on the lookout for opportunities in events and linear broadcast content, as well as ad-funded games and ad-funded widgets. There are a couple of software developers too, who are creating ad-funded applications and experiences on social networking sites. Other teams also have creatives from a sister creative agency, who now work beside the planners and buyers. All these specialists work in the agency’s content creation department. It’s much, much bigger than it was in 2009 and has become a mini quasi-creative agency in itself.
Other client teams have mobile planners and buyers and there’s a new breed of digital marketer. They are calling themselves DRM’s, or digital relationship managers, and are in the business of building and maintaining huge databases of consumers. Apparently they’re a great source of ideas for planners, and clients even ask to audit these databases as part of the pitch process.
Long gone are the days when all the media agency did was plan and buy a campaign.
How Did We Get Here?
First, we thought hard about how the consumer will be using technology in five years. After all, technology is the biggest driver of change in the evolution of the media landscape. If we can accurately predict what technology will catch on with consumers, then this will lead us to what the media agency will look like in the future.
Expect a technological infrastructure at home that will enable consumers to instantaneously download several types of content simultaneously in high definition with no lag time. We predict that in five years mainstream audiences in most developed markets will be able to download 100+ Mbps per second. To put this in context, in 2008 a typical home-achieved download speed was between 0.8 – 3.5 Mbps. Consequently, consumers will be streaming instead of broadcasting content. And they will be able to access multiple channels, games and applications on one screen simultaneously. Similarly, there will be huge advancements in storage technology, which will enable consumers to store much more content for access at their convenience. Connectivity speeds and bandwidth capacity will also have advanced beyond recognition. Already we are seeing improvements in this arena with the investment of companies such as Verizon and AT&T in fiber optic networks.
The home will be more connected to the consumer than ever before. Through handheld devices like the mobile phone, consumers will be able to link to their hard drive at home, which in turn will link to home appliances and their car.
On the Move
We can safely say by 2014 that there will be seismic advances in battery power and storage capacity of handheld devices. Already we are seeing vast improvements in these areas. Wireless Internet access will also have improved beyond recognition. In five years it will no longer be about 3G but 4G, otherwise known as WiMax or WiFi on steroids. Not only will this be eight times faster than 3G, but it will also be considerably cheaper.
We’ll keep seeing our handheld devices getting smaller, thinner and lighter. There will be a sharp increase in the amount of HIP’s, or highly intuitive products, that will incorporate the latest advancements in voice recognition, electronic ink and scroll-out displays, touch screens, image recognition (augmented reality) and correlation-based software.
For example, in five years mobile phones will have satellite navigation and correlation-based information so users know where they are and what’s around them, enabling them to search for anything relevant. And search will be much more dynamic too; results will be tailored to our exact needs with, for instance, information presented as videos, tables, charts, animations and databases. Early examples of this can be seen with MSN’s Bing and Google Squared.
Which Technology Will ‘Liberate’ the Consumer?
Predicting what technology will really captivate consumers and change the media market is not always easy. While technologists love complex technology with all the bells and whistles, consumers just want apps that make their lives easier. Whether consumers know it or not, they are on a quest to be everywhere, with everyone, with everything, at every moment. Any piece of technology that has ever been successful has, in some way, moved the consumer one step further on this journey.
The surprise success of SMS texting technology is a prime example of this. Technologists rubbished the primitive, limited, text-only technology, but consumers couldn’t move their fingers quick enough around their mobile keypads, rapidly inventing a text short-hand language.
Why did this basic black-and-white messaging system of only 160 characters resonate so strongly with the consumer? Because it offered them a quantum leap in communication: near-instantaneous, non-verbal communication on the move. You could say that SMS text messaging liberated consumers. We believe the level of success of a technology is directly related to the level to which it liberates the consumer.
But which technologies will prove most liberating in five years’ time? If we can answer this question, we can determine what the media landscape will look like in 2014. In our opinion, the most liberating technologies will be those that blur traditional boundaries, such as the mobile phone and the PC or the TV and the Internet. The most successful media and media technology will be those that reflect the fluidity of human nature, which is not fixed into separate compartments.
‘Blurs’ and What They Mean for the Media Agency of the Future
We’ve identified five “blurs” that will shape the media landscape in 2014. Beside each one we’ve explained how the merging of traditional boundaries will affect how a media agency operates.
Blur 1: TV and Online
By 2014, a high percentage of homes in developed markets will be watching content streamed over the Internet, as opposed to being broadcast over the airwaves. We’ll also reach the tipping point when all major TV channels, and production houses, stream and make all their content available online. It’s happening already in major markets, particularly America. Just look at Hulu.com (the Internet content system created by NBC and Fox and other networks and studios). And even the stalwarts are playing – ABC has embraced the merging of TV and online and even launched its own branded news channel on YouTube in May (www.youtube.com/ABCNews).
With sites like YouTube uploading thousands of new videos every day, consumers are getting used to consuming broadcast content online and soon – when the TV and the computer finally merge in the living room – they will be able to sit at home using TV-based search to find the content they want, when they want. This will be driven forward by the convergence that we are about to witness within the TV market: the replacement for the plasma screen you bought last year will incorporate a hard-drive (an Intel chip) and an Ethernet cable. And we will be able to stream content directly into the TV or over the top of broadcast content in the form of applications that enhance the viewing experience. Imagine sports stats, wiki-information about the program, actors, place or even on-the-fly blogging about the content. It is coming.
What Does This Mean for the Media Agency?
Naturally, this will lead to a merging of TV and online buying and measurement. This is already happening. Nielsen launched its TV/Internet Convergence Panel in late 2008.
Media agencies will have to merge TV buying with online buying to create an AV (audiovisual) buying department – or simply expand their online departments and shrink, and ultimately close, their TV buying departments. Traditional TV buyers will see their roles change and remits widen. This movement to streaming content will give marketers the opportunity to achieve an unprecedented level of interaction with consumers. This will mean that TV buyers will play a much more important role in targeting, ad serving and ongoing campaign management. Expect to see behavioral targeting TV planning. This will allow for an even more advanced form of targeting and interaction than we are currently seeing with cable-based addressable TV.
Blur 2: Mobile Phones and the PC
Think for a minute about the iPhone. It seems to have slipped from a future decade into ours, seamlessly bringing a host of applications we are more used to seeing on our PC to our handheld device. But by 2014, the mainstream audience will be using mobile devices with intuitive, touch-based controls, paper-effect or e-ink screens, image recognition (augmented reality), high-definition resolution and a constant connection to the Internet. We’re already seeing other players like Sony Ericsson, LG and Samsung launching touch phones, and the technology will only continue to improve – rapidly.
By 2014, the development of mobile phone applications will also be revolutionary. Software for mobile phones like the now-fledgling Google Android and other new entrants will, in five years’ time, be commonplace. Android is open source, which means that anyone can create mobile applications for it. For example, developers can come up with new ideas based on the latest innovations to make functions like texting, using the camera or making calls a richer experience for users. Google Wave — a new platform that converges e-mail, instant messenger, wiki-software and microblogging – will dramatically reorganize how we communicate. This will enable other companies to build their own software from this platform. By 2014, it is highly likely that brands will create their own versions that will be free – de-positioning Microsoft Outlook. Consumers will be able to create a phone tailored exactly to their interests and needs. They will also be able to make use of location-based services such as Google’s Latitude, which will be much more sophisticated in five years. As a result, users will be able to, for instance, be alerted when their friends are in the vicinity — or their favorite brands. All these new applications will provide a wealth of new advertising and ad-funded opportunities.
What Does This Mean for the Media Agency?
Mobile marketing will go from being a niche media channel to being a high-reach and high-segmentation channel. We know that mobile phone users typically choose ad-funded content in favor of content they have to pay for, which bodes well for advertiser opportunities. Although there will naturally be some crossover between mobile and fixed-line Internet, the different opportunities on mobile, such as geo-targeting, will lead to mobile specialists working within media agencies. At the very least, we will see one or two digital planners/buyers who specialize in mobile planning and buying. At the very most, we will see the launch of independent specialist media agencies that do nothing else except plan and buy mobile marketing campaigns.
Blur 3: Entertainment and Advertising
With the increase in the number of TV stations around the world, we have witnessed a huge surge in the amount of advertising inventory available. This has placed, and will continue to place, growing pressure on the creative industries for quality content. But, with the explosion in the number of channels and the resulting drop in audience figures, many production teams have seen their budgets slashed as TV stations grapple with falling advertising revenues. This is where advertisers have a perfect opportunity to step in and lend a helping hand, both by creating more quality content, through branded content, and driving up program makers’ revenues, through product placement. In many markets, regulators are continuing to relax the current rules on product placement, which will only serve to increase this channel’s importance.
Online and on interactive TV platforms we have also seen a growth in marketing campaigns which bring brands to life through applications such as games. The early forays into this area have seen an increased level of engagement, resulting in dramatic increases in brand preference scores, albeit for smaller audiences. Internet gaming enables games to reach much larger audiences, but to date the cost has been prohibitive. However, this is set to change with some of the major games producers starting to embrace the ad-funded model. For example, in January 2008 Electronic Arts was able to launch its first free online video game, Battle Heroes, due to ad-funding. The major tipping point for advertising within games is predicted to arrive between late 2009 and early 2010, when a new streaming high-definition gaming site launches called OnLive. OnLive is set to dramatically reorganize the gaming sector by allowing users to play the highest quality games without buying. And because it is live, advertisers will be able to place ads into games by region with as much ease as placing an online banner campaign. We are also expecting to see game designers no longer hard-coding in cars and other products and instead having them as caching opportunities. Thus, Mercedes can insert different models by region, even after the game has been launched. So, by 2014 ad-funded gaming will be commonplace.
Another major growth area is ad-funded apps — an app being tech-speak for an online application that can be downloaded onto a social networking site. Ad-funded apps have already been created on social networking sites like Facebook and mobile platforms such as the iPhone. We believe it will not be long before we see widgets become brands in their own right. There are signs of this happening now. One example is RadicalBuy, a classified sales site on Facebook where users can buy and sell items from/to their friends, as well as selling their friends’ items for commission.
What Does This Mean for the Media Agency?
Creating content will become a much bigger and more important part of a media agency’s remit. At present, all of the major networks have content creation departments but, by 2014, these will be sizeable revenue generators. In fact, these departments will grow to become mini quasi-creative agencies, taking on more creative tasks and working alongside or even in competition with creative agencies. Media agencies will offer their clients a channel-led, full-service approach.
They will be staffed by a vast array of specialists, from product placement experts to software developers. The latter will be tasked with creating innovative digital assets and have close relationships with third-party software houses, working with them to create ad-funded applications. Software was heralded as “the new media” at the 2008 Consumer Electronics Show. By 2014 this will no longer be a “new” concept, but rather an accepted part of the media mix. Pioneering media agencies will also be seeking to share in the value created from these new branded products.
Blur 4: Consumer and Publisher
It is now hackneyed to say that the consumer is the new journalist. There are now approximately 20 million independent Weblogs, and most Google searches list user-generated content (UGC) on the first page. Bloggers are increasingly becoming media owners in their own right with a growing number influencing the influencers: a recent survey of 5,000 journalists found that 75 percent used blogs for research and many newspapers actually referencing blogs in copy. This has huge implications for brands, which can be damaged or boosted by the opinions of the satisfied or disgruntled.
Over the next five years blogs will become increasingly sophisticated with higher quality content, links to other sites, RSS feeds, online applications, video and images. Some blogs are already doing this, such as http://www.eventful.com, which combines an RSS feed of forthcoming gigs overlaid onto Google Maps and then integrated with free music downloads from other sites. And sites such as Stumble and Digg index the high-ranking blogs. The influence of these blogging opinion formers will continue and those most active in the blogging sphere – teenagers – will also be a key consumer group in terms of spending in five years’ time. This represents an opportunity and a threat for advertisers.
By 2014, bloggers will also increasingly be looking to profit from their opinions. It is easy to imagine a situation whereby pioneering bloggers create their content, embed it with Google AdWords and post it as an RSS feed, receiving advertising revenue from the resulting clicks on ads. This will lead to the advent of “super influencers” – high-quality bloggers whose content is liberated and propagated by many. Understanding this ecosystem is going to become more and more important, particularly for high-value product categories where consumers undergo significant research before making a decision about, for example, cars and holidays.
What Does This Mean for the Media Agency?
Understanding how to influence the influencers will be crucial. As the IPA Future Foundation Report predicted in its study on agency requirements in 2016, communications agencies will have to become adept at online reputation management. For example, if a hotel client receives negative reviews on a hotel recommendation site, such as TripAdvisor.com, it will be the agency’s role to first alert the brand to this criticism and then advise on appropriate action to regain credibility. This could, for instance, be a posting from the CEO apologizing for any mistakes made and pledging to correct them as soon as possible. This has predominantly been the domain of the PR agencies, but there is no reason why media agencies cannot deliver this skill set.
Blur 5: Online and Real-Life Experience
Over the next five years we will see the “Y Generation” (the 16-30-year-olds of 2014) increasingly blur their online identities with their offline social lives. This age group is completely at ease with creating identities online, whether it is via an avatar, blog or social networking site. For younger kids, it is all they have known, with sites such as Webkinz and Disney’s Club Penguin currently proving popular. These social networking sites will continue to link to mobile phones in the future, tapping into the benefits of location-based data and opening up a whole new world where users can see where contacts are on a map of their area while interfacing with them through an avatar.
What Does This Mean for the Media Agency?
The implications will be similar to those outlined in Blur 3 and again expand the creative remit of media agencies. Agencies will employ software developers that understand these communities and can create engaging branded experiences for them. There are a few new consultancies starting to offer these services, but this will become mainstream by 2014.
Can we make any other predictions about what the media agency of 2014 will be like? Yes, we certainly can.
Prediction 1: By 2014, clients can expect the same level of control, accountability and transparency that they currently enjoy for direct media, for all media.
We can confidently say that clients will continue to challenge agencies to demonstrate the ROI of all communications. By 2014, clients can expect to see improved software systems that provide a similar level of control, accountability and transparency as they currently enjoy for direct media. This process will be accelerated by new players that offer clients total accountability of their marketing spend, such as Google TV, which not only serves relevant ads to viewers but can track every penny of an ad campaign. Over the next five years, agencies will follow Google’s lead and will have successfully developed models that allow clients to see the payback of all media. Debate is currently raging about how to do this effectively, but everyone agrees that well-maintained customer data is vital to any solution.
Prediction 2: The media agency will take the lead in driving forward this new age of accountability and transparency.
Media agencies are in a prime position to take the lead because they have vast databases storing historical learnings from thousands of previous campaigns spanning a vast range of media channels, from which predictive models can be created. Expect to see powerful channel planning systems in place in five years’ time. But why, you might ask, are media agencies in a better position than their creative, digital or direct counterparts to spearhead this specialism? Because media agencies tend to have longer and more senior relationships with clients and, so, a bigger bank of primary data from which they can build these databases and build connections. Also, more than any other type of agency, media agencies have had to transform and modernize for the changing media environment: they couldn’t differentiate themselves by creative work so they were forced to up their game in other areas — data being a key area. Additionally, they are the only type of agency that can truly claim to be channel-neutral in their approach.
Prediction 3: Econometric modelling will be cheaper and more widely available to clients.
Savvy media agencies continue to build the infrastructure to capture data because they know that this gives them the power to understand what drives consumers. Increasingly, agencies will combine all of their network learnings into dynamic software systems in order to create predictive models that can be updated with real-time information. Through economies of scale, this will lead to agencies reducing the price for econometric modelling (currently expensive) and running more tactical and cheaper models that can be made available to more clients.
Prediction 4: Agencies will automate wherever possible.
More and more of what media agencies do will become streamlined, optimized and automated by better software. Media agencies will do what Google already does and create automated media planning and buying software. Clients will have the option of operating this software themselves. In fact, PHD has already launched a first stage version of this software called “Director,” which allows the client to “direct” direct response campaigns. However, we predict that most clients will have no interest in operating this software and continue to handover the task of planning and buying campaigns to their agencies. Automation will also have an effect on digital, where the pressure to keep down costs will be relieved through more automated systems for campaign management.
What automation will mean for planning/strategy
The role of planning/strategy in five years’ time deserves special attention because we believe this function will undergo the biggest transformation. With all of this automation, strategists and planners will be freed up to deliver a much more sophisticated and evolved form of planning. This is just as well because, in five years’ time, planners will be faced with an even greater number of potential channels and ways of influencing a target audience.
In 2014, planners/strategists will be seen as “marketing investment managers” (MIMs). They will be valuable resources that clients can tap for ideas on all aspects of their business. Clients will ask planners/strategists questions such as: Should we spend more or less on advertising? Should we change our packaging? Should we create a new variant? Should we enter a partnership? Should we launch a new product?
It’s true that media agencies before now have not invested enough in strategy. This is why small strategy shops sprung up in the late 1990s and early 2000s. However, investing in strategy-supporting resources is now a priority for global networks. In five years’ time, we believe there will be a number of new resources to support planners/strategists so they can fulfill this wider role, such as:
* Psychological-based research: to better understand how communications affect cognition. PHD is already a big investor in fMRI scanning, which we have invested in since 2005 with the launch of our global planning product, Neuroplanning. Other players have made similar investments. By 2014, leading communications agencies will have neuroexperts and consumer psychologists working in-house.
* Marketing investment planning software: This tool will be created by combining analysis of historical client activity with secondary source research such as TGI and MRI, providing a powerful new channel-planning tool. Omnicom Media Group’s BrandScience has already started doing this.
* Scenario planning tools based on computational marketing (also known as game theory): This takes into account how a host of factors affect a market (such as distribution, climate and word of mouth) and derive planning insights that are not evident from traditional planning techniques. Weather forecasters, for example, are currently using similar approaches. This will enable clients to scenario plan different strategies and see the effects on sales. This will give clients that invest in them an unrivalled competitive advantage. PHD is already working with Fleetwell Analytics to develop this area.
* NPD resources: Agencies such as Bartle Bogle Hegarty have already launched NPD departments, but these will be much more common by 2014. They will be hubs where new marketing ideas can be explored.
* Digital relationship managers (DRMs): These managers will be found in the digital department and will prove an invaluable resource to planners. They will build and maintain databases of consumers who can be tapped into for new ideas and who can be used to gauge the influence of a brand. These consumers will contribute ideas and feedback in return for exclusive information and free products and will be segmented according to their interests. DRMs will provide such a competitive advantage that clients will ask to audit agencies’ databases as part of the pitch process.
That is our vision of the media agency in 2014. We believe technology will play the central role in shaping the media landscape in five years’ time, particularly technology that blurs the lines between traditional boundaries. And we will continue to monitor technology and seek to understand the next-step effects for media. Above all, the consumer and how he or she chooses to use technology will drive us.
Nevertheless, whatever happens, we believe that the media agency must be at the center of any change, taking the lead in driving forward this new age of accountability, creativity and strategy.
At PHD we urge you to stay ahead of the curve — the view’s a little different there.
Mark Holden is one of PHD Worldwide’s thought leaders and managing partner of PHD Australia, an Omnicom Group company.