The multitude of benefits brought by digital advertising continue to drive its growth. However, marketing budgets are shifting, with spend on social taking share from spend on search. In addition, larger digital-first brands are increasingly bringing elements of digital marketing inhouse. Tabitha Elwes and Luke Rowell from strategic consultancy CIL on how agencies need to evolve to remain relevant.
Drivers of digital advertising growth
Digital advertising continues to grow rapidly, accounting for nearly half of US and UK ad spend in 2018, with share forecast to rise to 58% by 2021. This growth has been driven in part by the growth in online consumption of entertainment and information and the shift to digital retail. Digital rose from ~15% of total media consumption in 2010 to nearly 40% in 2018. However, other attributes have also catalysed digital advertising growth.
These dynamics make digital marketing more resilient than other advertising mediums during economic downturns. However, it is worth flagging that traditional channels, such as television, are increasingly investing in the technology to deliver more of these digital attributes.
Changes in digital spend
There are three primary types of digital advertising – search, social and display (which is typically sold programmatically). Agency value-add varies by type of advertising.
Search: search can be segmented into organic or paid. Search engine optimisation allows companies to move up page rankings organically to increase clickthrough rates (CTR). Agencies help with website audits, link building and key word research. Paid search allows organisations to appear at the top of a search by paying per click (PPC). Agencies help raise quality scores to increase ad-ranking and optimise pricing for their clients.
Social: right-hand side or in-line social media ads can be bought on a cost-per-click (CPC) or costper-thousand (CPM) basis. Agencies help ensure that content, placement and micro-targeting are optimised to reach the required user impressions in budget and on time.
Display: display or programmatic advertising allows real-time bidding for profiles that ‘track’ the user journey. Agencies help define target audience profiles and simplify ad-buying to reduce margin erosion by cutting out intermediaries.
To date, digital advertising has been dominated by search. Google alone accounted for nearly 40% of US digital ad spend in 2016. However, video is quickly changing the advertising landscape. Cisco predicts that video will account for 80% of consumer internet traffic by the end of 2019.
Videos are particularly well received on social media, engaging consumers through easily shareable, ‘snackable’ and highly relatable content. As a result, CIL forecasts that social’s share of digital spend will overtake paid search by 2021.
Evolving agency dynamics
How organisations use digital media agencies typically depends on the size of the business. Smaller companies tend to buy digital inventory directly, medium-sized business are most likely to rely on agencies, while larger, digital-first businesses may in-source part or all of their digital media buying.
The move by larger brands to in-house digital marketing is driven by the desire to increase control of marketing processes and customer insight data. The shift to inhousing is growing particularly in the US but increasingly in the UK and Europe.
However, even large brands remain open to using agencies for specific requirements. This is leading to the emergence of hybrid in-house / agency models. Inhouse teams can use agency services and technology to support both planning and execution. The examples below show how the value-add provided by digital agencies can vary:
One example of dynamic production is Japan Airlines’ “Fly once, fly always” 2019 video campaign which leverages 3,000 unique assets to deliver a hyperpersonalised consumer experience. The content depends on the viewer’s language, location and persona among many other categories. While each of the videos differ in personal content to suit each audience member, the core message remains the same.
To invest or not to invest?
Despite positive underlying drivers, backing a digital agency is not without its challenges. Remaining relevant to digital-first brands increasingly requires specialist capabilities. However, defensible agency USPs can take multiple forms:
These specialisms may be found in groups with broader capabilities or could form key elements of a buy and build growth strategy.