The Future of….The Ad Business
– by Sam Tomlinson, Partner, PwC
No advertiser wants to buy media.
This obvious truth is easily forgotten, particularly when relaxing over your third glass of rosé at Cannes Lions, the ‘festival of creativity’. The assembled masses here are absolutely convinced that every brand – be it automotive, FMCG, retail, financial services, etc. – is absolutely crying out to spend millions on a creative agency’s brilliant idea that can then be executed across multiple media types.
But that’s palpably untrue.
What an advertiser really wants is to buy performance – to buy an outcome – to buy an improvement in brand awareness, an uptick in brand trust, more sales, greater profit. Sadly, short of selling their soul to the devil, there’s no guarantees of these outcomes, so instead they settle for buying media.
At a minimum, most advertisers would like to move from buying media, to buying an audience. The eyeballs reading the newspaper, or watching the TV, or reading the poster – or indeed, the ears listening to the radio – are far more interesting than the medium itself.
At the other end of the ad business model, there’s a media owner, who wants to sell that audience. They want to answer the basic questions that underpin any campaign – ‘How many people will see my ad? How often? Who are they?’
Sadly for the media owner, their knowledge of their own audience is frequently weak – either because their content is now being distributed via Facebook, or because they can’t track consumers across multiple channels and devices, or just because culturally their heritage was broadcast media (via television or radio or newsstand sales) rather than direct audience engagement.
This lack of audience insight – lack of first-party data, to use industry jargon – is one of the main reasons underpinning the question many media owners are now asking themselves: ‘If content is king, why is 50% of my revenue leaking between what the advertiser pays, and what I receive?’
And in the middle, between the performance-seeking advertiser and the audience-rich-but-data-poor media owner, is the media agency. Actually, there’s not just a media agency – there’s probably an agency trading desk, a DSP, an exchange, an SSP, an ad impression delivery service, and a host of other incomprehensible ad tech middlemen – but let’s stick with the agency for now.
The agency wants to sell their expertise in delivering great ad campaigns, built up over years of developing media plans and analysing results, resulting in an intuitive sense of what works, and what doesn’t.
So – buyers want performance, sellers want to deliver an engaged audience, and agencies know how to bring the two together. That’s the theory…
….instead, what we find is an advertiser’s procurement function, determined to drive the media agency’s margin to 1-2% to prove they (procurement) are delivering value; a media owner with insufficient audience insight to prove value, so instead settle for offering rebates; and an agency stuck in the middle on an unsustainably low margin.
This ad business model is broken.
If Cannes Lions showed me one thing this year, it’s that there needs to be a radical shift from buying media to buying performance.
Performance needs to be defined broadly – not as click-throughs, but as real value – as trust in a brand. That performance needs to be tracked meticulously and independently, and the media owner needs to provide an engaged, attentive audience.
And if an agency successfully uses its expertise to deliver a great campaign based on strong media owner first party data, that delivers real value – real, measurable performance – then they should be well-remunerated for that.
Procurement need to allow the discussion to move from pricing to performance.
That must be the future of the ad business model.
– with thanks to the author, Sam Tomlinson, a partner at PwC, writing in a personal capacity
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