What is Disintermediation?
Where the ‘middleman’ or intermediary used to exist conveniently between client and third party, there is now a new gap-filler that’s changing advertising agency businesses. The internet is the main proponent of this disintermediation, as people become aware of and do go to direct sources for services or products online. When I buy a single from iTunes, or book Marrakech from Flybe Loading... , or book my own insurance…that’s what disintermediation looks like.
Disintermediation in Agencies
Image courtesy of sxc.hu user abbyyy
The ad agency response to this shift is translated as increased efforts in marketing campaigns that involve and work closely with media, production and creative talents, to reach customers in new ways. Media companies realize they have to peddle faster to avoid disintermediation, their ad agency-esque services are becoming increasingly subverted as businesses discover going straight to content producers themselves provide deeper content integration. Even creative development itself is finding itself re-identifying itself under the umbrella of internet disintermediation.
Ad agencies – Adapting too slowly?
Ad agencies are facing some serious challenges:
- Being bypassed by a process that’s considered faster, cheaper and more efficient.
- Risking losing client relationships as more and more partners migrate on to online marketing.
- Finding themselves falling behind the digital capacity to keep up with those ‘disintermediating’, with 48% of senior marketers saying they are hiring specialized digital marketing solution to drive new marketing strategies in 2012 that are social, mobile and interactive.
- 47% plan to build internal capabilities, which would eliminate entirely any need to retain ad agency support.
What’s resounding here is that from a senior marketer’s viewpoint, ad agencies are fast becoming irrelevant as they struggle to be current, innovative and transitional with this new ‘business model’, with 29% saying they don’t see agencies as fully integrating their digital marketing capabilities.
Solutions? It’s not that there aren’t any, far from it. In fact, ad agencies are being disintermediated currently by technology used directly by brands. But, according to this Adexchanger article, agencies haven’t seemed to fully caught on to how technology can affect their futures, while networks such as Advertising.com and SpecificMedia become the new middlemen trafficking large shares of online content and media. SpecificMedia, for example, are reported to provide clients with the same things that were previously provided by different contacts: data, analysis and delivery.
The impression is that marketing consultancies, brand consultancies and research firms are floating ‘upstream’, while media firms and production houses, frankly, are not, and the area between soft marketing (brand awareness activities) and hard marketing (pricing, distribution) is where digital tech providers have the capacity to measure metrics and action insight on customers’ experience, at all points of contact with the brand.
While we’ve said some will start looking into developing in-house managers to make up for the creative ad agency, many are doing well in connecting themselves straight to technology that does the job. In this respect, agencies could partner with tech providers, or launch them themselves if possible, as is the case with WPP Group, who acquired 24/7 Real Media’s search engine technology for campaigns across 50 countries, and even launched its own mobile application with a fully searchable directory.
Still, it’s not yet curtain call for ad agencies. While disintermediation is brought about by the internet, agencies still possess the know-how when it comes to actioning big ideas around television, radio and even print, formats that are still alive and kicking. Agencies ‘must learn to embrace their new role as curater every bit as much as creator’, and with partnering up with tech companies that can facilitate content curation, the solution becomes a lot clearer.
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