Agencies to Reposition Services to Stave Off Ad-Tech Competitors

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Tra­di­tion­al media com­pa­nies have been strug­gling to rein­vent them­selves and adapt their rev­enue streams since the dawn of the dig­i­tal adagencycompeteage. Now, adver­tis­ing agen­cies are find­ing them­selves in a bat­tle to main­tain clients.  The pres­sure is com­ing from ad tech com­pa­nies that are seek­ing out direct rela­tion­ships with ad agency clients and this chal­lenge is forc­ing agen­cies to change strate­gies.

The growth of the ad tech mar­ket is direct­ly cor­re­lat­ed to the shift to dig­i­tal adver­tis­ing and mar­keter inter­est in big data. Over the past cou­ple of years, there have been over 100 deals in the ad tech indus­try, rang­ing from IPOs to big merg­ers and acqui­si­tions. The val­ue of these deals approached $5 bil­lion. The inter­est in this sec­tor has con­tin­ued with RocketFuel’s suc­cess­ful IPO last month which val­ued the Google com­peti­tor at over $2 bil­lion though it has  only about $100 mil­lion in annu­al rev­enue.

Writ­ing for Ad Age, Alexan­dra Bru­ell and Tim Peter­son sum­ma­rized the changes in this indus­try. Agen­cies have been part­ner­ing with tech firms to car­ry out dig­i­tal media buys. In some cas­es, they’ve also been acquir­ing these firms. How­ev­er, the new breed of ad tech firms are using ‘aggres­sive tac­tics’ to work direct­ly with mar­keters to place dig­i­tal adver­tis­ing and in some cas­es are cut­ting out the agen­cies.  Drew Kurth, CEO of digital-marketing plat­forms at Pub­li­cis Groupe agency Razor­fish notes that ad tech com­pa­nies are "not inter­est­ed in prof­its, just in gain­ing ground." Agen­cies are pay­ing close atten­tion to this grow­ing com­pe­ti­tion. The strat­e­gy of ad-tech com­pa­nies is sim­i­lar to the one used by Ama­zon to achieve mar­ket dom­i­nance in online retail­ing. In order to suc­ceed, agen­cies will have to offer their clients some­thing that ad tech can­not.

Ana­lysts believe that agen­cies will need to prove the val­ue of their ser­vices, espe­cial­ly the cre­ative part. They can also try to nego­ti­ate deals with ad tech oper­a­tors, empha­siz­ing the strengths they can bring to a rela­tion­ship with a mar­keter who wants to increase and auto­mate online ad buy­ing.

If you're an agency, have you encoun­tered increas­ing com­pe­ti­tion from ad tech oper­a­tors? Are you chang­ing strate­gies to improve your posi­tion in the mar­ket­place?

[Sources: Dig­i­tal Media. Jan. 2013. coad​y​diemar​.com. Web. 22 Oct. 2013; Das, Avik. Ad tech provider Rock­et Fuel. Reuters​.com. Sep. 2013. Web. 22 Oct. 2013; Buell and Peter­son. Adland’s Bat­tle Royale. Adage​.com. 13 Oct. 2013. Web. 22 Oct. 2013]
Kathy Crosett
Kathy is the Vice Pres­i­dent of Research for Sales­Fu­el. She holds a Mas­ters in Busi­ness Admin­is­tra­tion from the Uni­ver­si­ty of Ver­mont and over­sees a staff of researchers, writ­ers and con­tent providers for Sales­Fu­el. Pre­vi­ous­ly, she was co-owner of sev­er­al small busi­ness­es in the health care ser­vices sec­tor.