Why you should keep your tech partner close and your agency closer

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As the lines between agency and technology partner grow ever blurrier, the risks of transparency issues grow, writes the president of SourceKnowledge.

Performance advertising has been gathering momentum, particularly in Japan, as a way to increase transparency in the industry. After all, if advertisers can see exactly how much revenue, how many downloads or how many leads they’re generating from each campaign, then they’ll know exactly how well their agencies and technology partners are doing, right?

Not exactly. It seems that when it comes to performance, it’s a bumpy road regarding measurement. This issue is highlighted by Dentsu’s scandal where they overcharged Toyota—and hundreds of other clients —for performance-based ads. Whether by way of misunderstanding or by design, it seems that not everyone measures performance the same way, and as a result, confidence in agencies like Dentsu is faltering. 

In the Dentsu/Toyota case, the agency uncovered more than 600 cases that impacted 111 advertisers, including among other errors, 14 examples where fees were charged for placements that were never made. Dentsu has since agreed to reimburse Toyota more than $20 million.

The relationship between the two companies spans more than 40 years, and while Dentsu handled Toyota’s digital performance campaigns, they seem to lack the sophistication of many of its western rivals. Apparently many of the transactions in question were performed manually, and apart from the ads that were never placed, errors occurred in ROI calculations and invoicing. 

One advertising consultant speculated that many of Dentsu’s clients "often don't understand how their money is being spent." With agency relationships in Japan that frequently span decades, why would clients even speculate on such topics? In our part of the world, agency relationships rarely last that long. That’s partly because the agency landscape here is so much more competitive. Let’s face it: There’s no one agency that dominates for long. Agencies know this is a dog-eat-dog business, and to stay competitive, they have to evolve.

In recent decades, agencies learned that they had to go digital—and do it quickly—to attract clients. The agencies that survived that evolution are learning that they have to do more. Digital in the age of programmatic has grown infinitely more complex and more accountable. Agencies that thrive in this environment need to be experts in automation and the skilled use of data. They’ll need to build or white label—and then master—the best programmatic technology. And they’ll need to be accountable and own their results, warts and all.

That’s a tall order, particularly for the larger agencies with multinational legacy clients. In the world of programmatic, it’s much harder to blame failures on a lack of trained ad ops people or accounting errors. More likely, those errors came from anemic investments in automation technology.

Some of the big agencies are getting it, though. Last year, Omnicom launched its Hearts & Science agency. This smaller shop was the result of some internal re-shuffling and the addition of some new resources, resulting in a data-first, integrated agency. In its first four months in business, it nabbed both Procter & Gamble and AT&T from rival agencies.

With in-house creative, programmatic and a data team, Omnicom seems to have concocted the perfect recipe for "the agency of the future." One of the smartest moves the holding company continues to make—despite its ownership of programmatic shop Accuen—is seeking out third-party data and analytics partners to monitor the success of their client campaigns. In an agency principal’s own words, "If you’re providing a service, you can’t grade your own homework."

As the lines between agency and technology partner grow ever blurrier, the ricks of transparency issues increase. Separation of church and state, as it were, becomes necessary: You need that third-party analytics and attribution partner to keep everybody honest and accountable.

In addition to maintaining transparency, agencies must embrace technology and the talent to manage that technology. This is particularly critical today as brand marketing teams continue to consider the possibility of bypassing agencies altogether, forging relationships with DSPs and other technology partners directly. While this was a big challenge for those brave brand marketers just a few years back, that’s now become less of a problem.

So what does all this mean for agencies moving forward? It means that if technology and talent are going to be differentiators, you’re going to have to invest to ensure you’ve got the best of both. It won’t be enough to offer just creative or just media. You’ll have to have the talent in-house—whether you hire or train them yourself—to understand how to analyze and activate data, how to design stunning creative that’s been informed by that data and how to execute those campaigns programmatically, in a way that meets or exceeds client expectations.

It sounds like a tall order, but a lot of agencies are already working toward this and finding success.

—Patrick Hopf is the president and co-founder of performance advertising technology company SourceKnowledge.

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