It’s all about scale! Have traditional media agencies reached critical MaaS?

With the globalization of the e-marketplace, media agencies must have a wider geographic spread to maintain consistency of messaging

Updated: Jan 30, 2015 08:41:43 AM UTC

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The relentless growth in e-commerce has translated into the exponential growth of online advertising with Forrester Research predicting that around 25% of the estimated $400bn advertising spend in 2017 will be on online advertising. For advertisers and media agencies, this poses a singular challenge – the challenge of scale.

Traditionally, advertising (print, television, and online) was handled by niche local media agencies to cater to the needs of local markets and cultures. However, with the globalization of the e-marketplace, media agencies must have a wider geographic spread to maintain consistency of messaging. Therefore, agencies must scale – in terms of their geographic spread, breadth of online advertising services, and importantly, their economies of scale.

A new business model has emerged to address this challenge of scale. Known as consolidators, these are organizations that stitch together the myriad components and agencies involved to deliver Marketing-as-a-Service or MaaS. Consolidators are able to provide the all-important governance and coordination between the online advertising ecosystem players who are as diverse as creative agencies, translation partners, localization firms, search engines, publishers, etc. to provide advertisers with complete Marketing-as–a-Service. They act as an umbrella organization that manages the scale of the digital media operations for advertisers. That said it brings us to three important questions - who are these consolidators? What services do they provide? What value do they bring to the table?

The answers to these are evolving but there are some clear trends:

Who? Larger media agencies are expanding their geographic reach and breadth of services mostly through alliances to provide scale and consolidate services. However, the more promising player in the ecosystem are large business process management (BPM) or ITES firms which are setting up Marketing-as-a-Service practices to consolidate online operations in a global hub-and-spoke model, integrate and govern the various partners in the digital ecosystem, and provide the benefits of economies of scale through both traditional labor arbitrage and consolidation of operations.

These online consolidators are like fourth-party logistics companies that take care of the coordination and governance needs of a multi-player digital ecosystem. BPM or ITES firms leverage their strong capabilities in managing processes to provide additional digital services such as content coordination and creation, roll-out of email and web campaigns, SEM and SEO services, besides managing digital assets (DAM) and providing an analytics backbone to improve ROI on the digital spend. With a strong heritage in consulting, technology and process, these ITES firms are able to provide a more holistic solution.

Consolidators have traditionally provided value by achieving economies of scale. However, in the case of BPM or ITES firms, the added value is the increase in the effectiveness of an advertiser’s digital presence. While this could begin at the bottom of the pyramid with labor arbitrage, the greater benefits come from leveraging technology and consulting expertise to increase online conversions / sales, reduce web campaign cycle times, increase web traffic (through search and display ads), and lower TCO for the online marketing budget.

Does this mean that media agencies have lost the online advertising race? Not really. Media agencies will re-align themselves to manage the challenge of scale. Few of them will continue to focus on print and TV advertising, leaving open the online advertising space for more internet-savvy operators. A bulk of them will partner with BPM / ITES firms to offer a holistic Marketing-as-a-Service solution to their clients. What this will do is fundamentally alter the advertising landscape with the birth of a new type of service provider with critical MaaS – the next-gen ITES / BPM agency!

- By Shyam Rao, Client Services, Infosys BPO Sales and Fulfillment Practice – EMEA

The thoughts and opinions shared here are of the author.

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