Time for media to escape from the commodity trap
The oft-quoted business maxim, "change before you have to" is widely attributed to Jack Welch, the former chairman and CEO of General Electric (GE) between 1981 and 2001. Once the poster-boy for organisational and corporate change in the USA, Welch (whose grandparents were Irish) transformed the company he joined in 1960 as a young engineer from a sleepy giant that had lost its way into a global powerhouse that straddles numerous industries.
Changing before they have to - or are forced to - would appear to be the maxim du jour for most media agencies at the moment. Faced with the seemingly never-ending commoditisation of media and advertising, where margins can be slim, clients continue to look for cheaper, better, faster and where audiences and channels continue to fragment, many media agencies are, quite rightly, trying to reinvent themselves.
This is one of the main reasons why the WPP-owned media agencies Maxus and MEC decided to walk up the aisle recently and seal their nuptials by giving birth to a new agency called Wavemaker. Wavemaker's global CEO Tim Castree told me during a flying visit to Dublin to speak at an IAB Ireland gig: "The industry needs to change. For far too long it has been a price-driven game that became commoditised along the way. We needed to change before we had to."
Seasoned observers of the media industry can be forgiven for scoffing at this frank and honest admission. After all, media agencies - often at the behest of clients - are the ones that have been frantically jockeying for position in what became a price-driven race to the bottom. While many will be slow to openly admit it, others will privately confess that they have played more than a leading role in the creation of the sink-hole economics that have not only undermined their own business models but those of many media companies co-habiting the fragile media ecosystem.
Clients too have expressed their exasperation at the complexity of the media ecosystem that has been created. While burning issues like ad fraud, wastage, ad viewability have topped their agendas over the past few years, they have since been joined by issues like transparency and accountability.
Now the game is up and, as Castree pointed out, change is now being forced upon them.
Recognising that the ongoing commoditisation of media buying is no longer in their best interest, many media agencies are now moving up the value chain by trying to get their foot in the boardroom door in the same way that their newer rivals like Accenture, Deloitte and PwC have managed to do.
As the big agency groups try to unravel some of the complexities and streamline their business models, there will almost certainly be mergers along the lines of the recent Maxus and MEC tie-up. Most, however, will continue to develop newer and more value-added services in areas like data, content, performance-driven marketing and whatever shiny new thing like artificial intelligence that comes along. But the growth in programmatic advertising, meanwhile, will almost certainly hasten the commoditisation of media even further.
Where it will all end up is anybody's guess.
But if media has become commoditised to within an inch of its life, savvy players operating in the fragile but functioning ecosystem will know that, like all commodities - whether it's beef, corn or indeed media - there will be opportunities for those who seek to turn them into something more worthwhile and valuable.
The most obvious beneficiaries will be media companies - both traditional and digital - which have been the big losers in the race to the bottom over the past few years.
Media companies have three very powerful weapons in their armoury: audiences, the channels of distribution and content. Add to this list a palpable sense of innovation, a greater desire to take ownership of their own destination and indeed ownership of the all-important advertiser relationship and the stage is set for what could be an interesting few years.
Indeed, it is somewhat ironic that one of several value-added services that agencies are now pinning their hopes on is branded content, some of which ends up on channels owned by media companies. So it should come as no surprise that many media Irish media companies like INM, which owns the Sunday Independent, RTÉ and the Irish Times, are seizing this content opportunity with gusto while at the same time forging stronger relationships with advertisers - often without the involvement of a media agency.
As a way of escaping from the commoditisation trap in the future, media organisations will almost certainly collaborate in areas like digital advertising, branded content creation and distribution and maybe even the reader data and analytics that will be needed to underpin any combined proposition that will be put on front of advertisers.
It may not be how they did business in the past, but as Jack Welch might say, change will come. It's just a question of when and how.
Sunday Indo Business