Big clients dont need big media agencies
In what might be a sign of a shift in the agency market, PepsiCo and AB InBev have announced they will be pooling their media buying and, speculation suggests, likely be approaching media companies directly to negotiate better rates. Based on how quickly the buying partnership expanded to encompass buying, this could be the beginning of a shift for marketers moving away from large media agencies and bringing about an open and transparent marketplace between media and clients.
Some of the initial discussion tries to downplay the financial impact on agencies, but this is may be a face-saving allowance should the model fail. If clients can manage to run media buying in-house and get the same rates as media buying groups by going direct, this movement will be hard to ignore. So in the Australian market the question is, who will be more effected more by a direct play? Will it be the media buying agencies or the marketing agencies?
According to Nielsen’s AdEx estimated media agency billings in 2009, the top 10 agencies have up to $4.74 billion at stake annually if clients buying direct becomes common. With this much money involved it is likely that a number of the large media groups and clients have already begun discussions on how they can work better directly. In the digital marketing space it has become more common for clients to deal with search engines directly to save on agency management fees, so why wouldnt this extend offline?
The downside to a direct relationship between client and supplier is that there is often less client support and possibly less integration with current and future marketing campaigns. So the question for clients is do they want to sacrifice business relationships and support networks for lower agency bills?
The media industry also faces a similar question: do they risk existing relationships with agencies by aggressively pitching direct to advertisers in the hope they can get an increase media spend with agency fees out of the equation? Just because a client will save money by booking direct and not paying agencies fees does not mean they will spend the difference.
So the question that needs to be asked is, is this the beginning of the end for media buying agencies or a race to the bottom with agencies cutting fees trying to retain clients buying budgets? Let the dice roll… come on lucky 7.