As advertising budgets tighten, advertising agencies are naturally placing a larger emphasis on making their profit in the margins. The past year has been littered with stories of more traditional advertising agencies making strategic moves into the world of online distribution. After all, if they can develop cutting-edge creative, the business of serving those ads should be a snap! The savings they would realize from simply bringing distribution in-house could be sent directly to the company's bottom line -- a clear win-win.
From this perspective, it would seem that there is a natural tension between agencies and online ad networks. In truth, there really need not be any tension at all, so long as both parties remain true to their strengths and continue to seek value-added benefits for advertisers.
While the desire to bring operational resources under one roof is certainly understandable, I believe that agencies are overlooking the complexities of online ad networks and the value they bring to the table. Agencies overlook both the art and science of the ad networks' abilities to maintain (and optimize) relationships with thousands of online publishers at one time.
Even in a world where agencies begin the process of building their own technologies and marketplaces, or purchase midsize or small ad networks, it would be rather difficult for them to compete with one another in the distribution space without running into some potential conflicts of interest.
An agency that ran its own ad network (or other distribution arm), for example, may well have to choose between either forcing a client's campaign into a less-than-optimized run on its own network, or giving part of a campaign over to a rival agency. It is fair to say that the specter of allowing competitor agencies to service their clients could persuade an agency to lean -- perhaps more heavily than it should -- on its own abilities.
One could easily imagine a scenario where a brand is looking to reach males between the ages of 18 and 30 years of age. The brand's agency might better cater to an older female audience of mothers. The agency may have a talented creative shop that can produce a cutting-edge ad campaign. Unfortunately, it may not have the ability, or the correct relationships in place, to reach its client's correct target demographic. Thus, the agency must either target a less-than-efficient demographic, or else offer the distribution to another agency or network and run the risk of losing the client. Agencies should be free to service their clients' brands without this potential conflict of interest.
On the flip-side, it should be noted that some agency executives may fear that online ad networks could decide to turn their strengths at creating high-conversion campaign ads for their direct-response clients toward the development of an agency division. While I cannot speak for all online ad networks, my position on this is similar to my philosophy on agencies looking to enter the distribution side: Companies should focus on their core competencies.
Maybe there will always be a tension between production and distribution. Each may always believe that their skill is more substantive than the other. But, rather than each side seeing the other as a drag on potential profits, the bottom line is that the final result will always be best served if the two work together to create a seamless process.
As the battle for pieces of tightening advertising budgets increase, I believe that the online advertising space will be best served by the mutual realization of the new ways in which agencies and ad networks can work together.
Michael Seiman is founder and CEO of CPX Interactive.
