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Saturday, February 6, 2016

Will Big Data Kill Advertising Agencies?

On December 1, 2015, I put up a post on this blog entitled “THE BIG DEAL ABOUT BIG DATA.” It generated a significant amount of response. Criticism tended to come from principals at small and medium sized ad agencies who, to a person, tended to downplay its influence in the coming years. As you might expect, I politely differ with that conclusion.

The appeal of Big Data to any marketer is quite simple. Using it, one now has more information about customers and prospects than ever before. How can you argue with that? Well, some critics say that there is too much reliance on data. Big Data users increasingly, in their view, look at short term sales and ignore the long term impact of what is happening with the brand. I have some sympathy with the later point as most people still do not understand that conventional advertising takes time to work as you need several impressions for a campaign to “register” with the target audience.

The other point that both proponents and critics wisely bring up is that the mountains of data currently available to many companies is only as useful as the skill of the people analyzing it. You need talented analysts who can separate the wheat from the chaff. Sadly, far too many agency types continue to say that a creative breakthrough remains the decisive key to success even in our brave new world of Big Data.

In writing and speaking with a number of people both agency and corporate, a few key issues popped up. Here are a few of the best verbatim comments:

Former mid-sized agency executive who is now a corporate marketing chief--“As a virtual agency brat who grew up in the business, I was skeptical of Big Data. My boss, a hard nosed guy with a maniacal focus loves ROI metrics because they make marketing expenditures accountable. His sole focus seems to be to drive cost of acquisition lower. We are getting better at it. So much so, that the old tightwad hired a brilliant young woman and later a young guy to work our data harder. Their modeling may seem crude relative to the retail giants but our performance is getting sharper each quarter and our cost of acquisition keeps dropping. Our agency keeps wanting to look under the hood at what we are doing but he keeps them at arm's length and cuts back their budget. Sales are up and so are our internal bonuses. The agency is getting testy. The only reason we keep them is that we are not a $100 million account. The CEO feels we would get lousy service at a giant. He is intrigued at what the holding companies may know from dealing with the world’s best companies but wants to matter with whomever he uses.”

Corporate Marketing Executive--“The smaller agencies just do not get it. More and more of us are moving our data analyses in-house. We are seeing trends in our business and sometimes even little things that make up the trends. Agencies are way too superficial and charge way too much for the little that they deliver. We will cut back their involvement, especially with the share of the marketing budget, for the foreseeable future.”

Soon to Retire agency owner--“I do not know what to do. We simply cannot compete. I cannot afford a system that can handle the needs of some prospects nor can I pay the people we would need to do the job correctly. The future of agencies is going to revolve around agility. How can we respond quickly if we cannot afford to tool up or staff up for the job? My younger partners are still dreaming of winning Clios. I am so glad that I married a wealthy woman.”

Consulting Firm Executive On Big Data--“When I joined these guys a while back, they told me that they could turn data into profits for clients and also provide brand driven insights. I said to myself Brand Driven Insights! What malarkey. Well, they are doing it and I am learning so much. The advertising agency model is broken. Other than the holding companies, most need to start from scratch. Media buying services may have to change the most.”

Is Big Data going to kill creative? No, but creativity must be wed with Big Data to maximize results.  And the in-house threat mentioned above should send a chill up the spine of every mid-sized or small ad agency CEO.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

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