Direct contracts avoid markup fees
Agencies’ control of the ad-tech relationship stems from the days of linear TV and print media buying, when partnerships were much simpler and more ephemeral than those with tech partners, said John Donahue, partner at programmatic consultancy Up and to the Right. Now, giving the agency so much control would be like a food manufacturer not having deals with any of its suppliers or factories, he added.
“If you are allowing a third party to manage the totality of your raw materials, you are negligent as a client,” Donahue said.
One risk of agency-managed deals centers on the arrangements that some smaller ad-tech providers forge with agencies, whereby some agencies receive kickbacks that they don’t pass on to the client, said Mo Allibhai, senior analyst of advertising technology at Forrester.
“Agencies have relationships with DSPs. They’re able to non-transparently mark up these fees,” he said. “How much of that million [in ad spend] is going not to the media provider?”
A benefit of in-housing ad-tech contracts is owning the data processed in advertising campaigns, said Kangisser, adding that his clients signing direct deals want access to more signals upon cookie deprecation next year.
“When you own the contract, you have a direct relationship with the vendor, you can switch agency services without dissolution,” said Ana Milicevic, principal at programmatic consultancy Sparrow Advisers.
Agency partners avoid echo chambers
However, not all brands can manage the complexity of multiple ad-tech contracts, especially as tech providers often require quicker payment terms that are easier for agencies than brands to keep up with.
In a time of chaos, people want the expertise.
Mo Allibhai, senior analyst of advertising technology at Forrester
“Logistically, I can see it cause so much swirl in the system and delays,” Kangisser said, adding, “90% of what you want can be achieved by restructuring contract terms” within agency-owned contracts to give brands more transparency.
Brands can also lack the expertise in choosing the right ad-tech vendor—a particularly important decision at a time when cookie deprecation could scramble existing ad-tech stacks.
“In a time of chaos, people want the expertise,” said Allibhai.
While Lenovo is still on its in-housing journey, it’s also not ready to give up agency partners.
“I really enjoy working with our agency partners because they work across other clients,” Corteville said. “You don’t end up in the echo chamber of your own people.”
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