The media industry is undergoing the biggest shift in the dynamic between media owners, advertisers and agencies since the emergence of digital marketing in the early 2000s. But weirdly, some people don’t seem to care...
Accelerated by lockdowns, but reflecting the longer-term expansion in consumer preference for transacting online in traditionally in-person categories, we are seeing the rapid emergence of new advertising categories, the restructuring of media owners to attract them, and a radical shift in the resulting service and purpose required by media agencies if they are to remain relevant in this new world.
Used car sales, fast grocery deliveries, finance, property sales and direct-to-consumer products – from mattresses and fitness equipment to craft beer – are some of the categories driving advertising spend growth.
Naturally this new breed of advertisers spend the bulk of their budgets online, and often build their businesses around an in-house performance capability that maximises their customer databases.
This bakes sales growth through marketing into their company structures, and perhaps explains why an increasing proportion of these new advertisers are choosing to engage with media owners directly, even for broadcast media buys, which have traditionally required specialist agency help.
Of course there has always been a vibrant market for direct sales by media owners. The geographical targeting of out-of-home has always benefited from direct advertisers, as has the local sales teams of TV and radio.
But focusing on TV, in particular, it seems that the pandemic has reversed years of declining share of adspend – according to Nielsen, down from 42% in 2017 to 37% in 2019, but back up to 42% in 2020… and this is continuing into 2021, with ITV reporting record ad revenue in June at its most recent results in a market forecast to grow by 23% this year.
Where did the growth come from? Not from the media agencies, with all but one of the top 15 agencies reporting declining TV spend in 2020, and with most agencies declining by double figures.
By contrast, spend from “direct (in-house) advertising” grew by 3% in 2020 (despite the pandemic).
The TV sales houses have been doing a good job of incentivising new brands on to TV – 709 of them in 2020 – through technology, structure and trading strategy.
Sky Adsmart led the way with offering an ad-served service that was always going to be attractive to new and local advertisers looking to test-and-learn on TV, and the Comcast-owned sales house has accelerated this with an expansion of its direct sales team.
Before Covid hit, 4Sales announced a tripling of its direct sales headcount, hiring Clare Peters from Manning Gottlieb OMD last April to push direct sales. In October 2019, Channel 4's Jonathan Allan was wanting 4Sales to get "closer" to advertising clients and understand "their business challenges" and to sell "the benefits of TV" directly to them, rather than relying solely on agencies to act on the broadcaster’s behalf.
And now ITV has also bolstered its client sales function, has created an investment team that will take equity or a profit share in a brand in return for TV advertising, and is offering Planet V as a wholly self-service solution that enables clients to optimise and monitor their campaigns in real time, without agency support. This represents a major shift in sales focus.
Significant shift in TV trading
Ad-served TV is much easier for clients to buy direct than linear TV, which requires access to expensive Barb overnight data – ITV’s VOD revenue was up 55% in H1.
Traditional barriers to direct trading like AB (advanced booking) deadlines have been relaxed or removed, and there is a clear shift in trading approach towards rewarding brand count, rather than budget.
For years, network agencies have been moving budgets out of TV and into more commercially rewarding digital channels while still demanding volume and share-driven price reductions without generating any real growth in terms of attracting new brands to TV or increasing share of spend into TV.
Great though the 4Sales team is, there is no doubt that some of Channel 4’s incredible growth in September this year (c.46% vs a market up 29%) was fuelled by network agency traders having to rebalance share books after overinvesting in ITV during the Euros.
Only some of Channel 4’s September growth will be sustainable and unique to Channel 4, coming from brands new to TV.
Nevertheless, it is this real growth that all the TV sales houses have now finally started rewarding with value and service. This is a significant shift in trading strategy.
What does this mean for media agencies? The big networks would no doubt shrug their shoulders and point to models designed to serve high-billing international clients horizontally, selling as many holding company capabilities as possible under a single integrated group banner, delivered through a highly centralised and cost-efficient model staffed by junior teams.
The continued centralisation of services such as investment, data and performance media, plus the shedding of chunky property costs as employees WFH, is improving margins. Shareholders are happy with single-digit or low double-digit growth.
Campaign also continues to rank agency performance, even creative agency performance, by billings in the new business tables and annual School Reports.
There is no room in this model for (initially) low-billing, fast-growth clients looking to scale up through broadcast media.
The networks are happy to let them book direct or leave them to modern, fast-expanding media agencies such as Walk-In Media (other enlightened agencies are available), which are happy to slot into whatever shape of service the clients need across brand and performance, to invest senior resource to advise across all channels, and to offer the full range of integrated and progressive marcoms capabilities – reserved for only the biggest clients by the networks – on an agile and flexible basis.
The networks can shrug their shoulders for now. But little clients sometimes become big clients. The holding company price advantage is rapidly disappearing. Media owner attention has switched from rewarding scale to incentivising actual growth. And there is a new generation of marketeers with a “buy-it-yourself” attitude.
Fast-shifting dynamics that only the truly arrogant will continue to ignore.
Simon Davis is the founder and chief executive of Walk-In Media