marketing trends, in-housing, in-house agency, marketing automation, transparency

The debate about the transparency issues in the advertising industry has been gaining momentum recently, and it all started with Jon Mandel’s 2015 speech at the Association of National Advertisers’ (ANA) annual media conference. The following year, an independent research was conducted by K2 Intelligence LLC (“K2”) which showed that numerous non-transparent business practices, such as rebates and problematic principal transactions, had been taking place on a regular basis across the whole media spectrum. Numerous evidence suggested that some advertising agencies had taken advantage of their position failing to act in the best interests of the advertisers. The incident took an unprecedented turn in 2018 when the FBI had to intervene and ask the ANA and its members for cooperation. At this point, there is nothing conclusive yet, no accusations or charges have been put forward, but the FBI assumes there may be numerous potential financial fraud victims and wants them to assist in such a massive investigation, which might reveal offences far more serious than financial fraud like conspiracy and even racketeering.

Such a scandal couldn’t go by unnoticed and very naturally caused some revolutionary changes in advertising industry, so companies started to take action. One of the world’s biggest advertisers, Procter & Gamble, launched a new marketing strategy aimed at reducing spendings and enhancing the effectiveness of advertising.  The company was planning to reduce the number of the agencies it works with by 50% from 2,500 agencies to 1,250. According to P&G’s Chief Financial Officer Jon Moeller, the company managed to reduce ad agency and production costs by $750 million over the last year and is expected to save $400 million more by implementing new advertising and media agency models.

And the most notable of them is a standalone agency consisting of top creative employees from Publicis Groupe’s Saatchi & Saatchi; WPP’s Grey; and Omnicom’s Marina Maher Communications and Hearts & Science, who will work together in dedicated offices in P&G’s headquarters in New York and Cincinnati. The company’s Chief Brand Officer Marc Pritchard describes this initiative as "X Factor talent". The new agency is called "People First," and it will cater for P&G’s North American fabric care brands, including Tide, Downy and Gain. Gathering creative people from different agencies to work together should positively influence their creativity and inspire the generation of new ideas, since work in new environment with new teams will challenge them and inspire original ideas. Such in-house teams might even become the new hotshops.
Another model includes fixed and flow arrangements, which combines an agency-of-record on retainer for most creative work, with some other regular projects handed out to other agencies.

And the third model concerns digital media planning as well as buying and distribution, that P&G is going to automate by bringing them in-house. The company used to outsource all work to an agency, from planning to buying through bill pay, and this new model is aimed not only at saving money, but also at giving the company brands more control over their campaigns. This decision is consistent with last year’s initiative to support more efficient ways of production. Under this model P&G is trying to improve advertising targeting and ROI by using machine learning. Turns out a massive amount of online ads is just a waste of money because it’s seen not by people but by by bots, which results in about $7 billion worth of fraud each year. And due to wrong  targeting, ads don’t reach a desired consumer group, which can be addressed by implementing machine learning that analyses online behaviour patterns and makes targeting more accurate.

Machine learning and BigData was also used in this Case Study of Modeling a Bank’s Media Mix with CheckMedia Solution by Adopto Media. Among other things a forecasting model was developed as well as ad budget for 2017 was optimised through optimum allocation of budget between different media channels, which resulted in 15% ROMI increase due to elimination of inefficient ad channels.