• by Martin Brown , Op-Ed Contributor, April 17, 2016

The traditional media agency model is rapidly evolving due to the unstoppable rise of automated advertising. According to eMarketer, U.S. programmatic expenditure will reach $26 billion next year. The ANA found that 79% of marketers used programmatic in 2015, compared to 35% a year earlier.

This phenomenon has caused an irrevocable shift in the function, purpose and structure of traditional media agencies. It calls for an updated business model, especially considering last year’s unprecedented wave of global agency reviews by the world’s largest advertisers.

Forty percent of marketers say a lack of analytics is the single biggest deficiency among the agencies they partner with today, according to eMarketer. Procter & Gamble shifted its multimillion-dollar media spend to a rival agency group in December 2015 in an attempt to achieve better real-time planning and buying. Proficiency and even expertise in programmatic and analytics has become an increasingly pressing request from clients all over the globe.

Some large brands are taking programmatic in-house due to concerns about the transparency and data usage of traditional agency trading desk partners. WPP’s Sir Martin Sorrell declared in March that brands are finding it challenging to invest in the right technology and retain the appropriate talent to make in-house work; advertisers such as Unilever and Netflix are doing so anyway. But even when handling smaller budgets than Unilever’s, today’s new data-driven media ecosystem remains challenging for both brands and independent mid-tier agencies.

The perfect storm that’s squeezing mid-tier agencies

The impetus is on mid-tier agencies to evolve their businesses to integrate programmatic. By offering in-house service, agencies can innovate, compete and future-proof their business to protect themselves against what seems to be a ticking programmatic technology time bomb.

The way forward doesn’t have to involve in-house agency trading desks, however. Agency mastery of programmatic is geared mostly toward fuller ownership of the tech provided by a programmatic platform—which would then become a white-labeled software provider, rather than a client-facing partner.

The relationship between client, agency and platform would need to be renegotiated, with the roles of agency and platform playing more to each other’s respective strengths.

In the programmatic mastery model, the agency defines its client-value proposition assertively, resulting in a "stickier" client-agency bond. The platform steps back to focus on what it does best: developing industry-changing technology that it licenses out to power users.

For mid-tier agencies ready to make this shift, the benefits are clear. In-house platforms allow agencies to manage all elements of a digital media buy in-house, from planning to optimizing and reporting. It also equips agencies with the ability to offer the in-depth analytics clients want. Programmatic in-house activities drive incremental revenue thanks to cost-effectiveness as well.  Agencies can save up to 69% of their digital media buying costs by bringing a platform in-house.

A big leap for the right agency

Realistically, the in-house move won’t be right for every agency. It requires the right investments to ensure teams are well-schooled in the art of data analysis. Planners and buyers alike must be able to quickly interpret and act on real-time insights to ensure they form part of strategic campaign pillars.

Completing the move to in-house takes time and effort, but potential rewards are great. Once a platform is in place with the right staff and expertise to support it, agencies can focus on growing their business and thriving in the digital age without worrying about larger agencies—or clients cutting ties or bringing programmatic in-house on their own.