It wasn’t so long ago that there was a veritable arms race by agencies to develop their own DMPs. Data was the new oil, programmatic technologies were revolutionising the buy side, and whomever managed the most data and successfully integrated it with their ‘trade desk’ was perceived to be the best placed serve clients.
Fast forward a few years and the market has changed significantly. So much so that the value of an agency side DMP is now far less clear cut. In fact, I’d go as far to say that unless the agency side DMP goes through some significant change, then it’s quite possible they will go the way of the dinosaurs and die out. Dramatic? Exaggerated? Naive? Ignorant? Maybe, but before everyone starts waving their pitchforks, here are six thoughts to ponder:
1. Conflict of Interest
The most important and challenging point. The inherent conflict of interest an agency creates if it has any financial interest in the media supply chain. If an agency recommends any audience targeting that is delivered through an owned and operated DMP, and they profit from that recommendation, then the independence and legitimacy of that recommendation will always be questioned. If media agencies are ever going to move beyond the transparency debate then the products and services they offer clients need to support a trusted marketplace.
2. Clients want control of their customer data
No surprise here. Increased regulation, ongoing privacy concerns and the obvious competitive advantage high quality customer data presents means clients are far less likely to plug their customer data into a DMP that’s owned by an external partner. This position is tangentially supported by the consumer, with over 80% of people feeling comfortable with brands using information they share directly to personalise messaging and experience. Assuming the value of an agency DMP drops in proportion to the quality of accessible data, then lack of explicit customer data means a pretty hefty devaluation.
3. Increased regulation and scrutiny around consumer data
GDPR is a game changer for anyone collecting and processing data. It’s why 79% of CMOs in Europe have some level of concern around how their partners are managing data created and collected on their brands behalf. From an agency POV, the governance required to manage consent, correction, erasure and portability is significant and, in many cases, restricts the practices they have historically applied to create value in their DMP. Although GDPR isn’t the force locally, as it is in Europe, 70% of the worlds C-Suite are still expecting GDPR like regulation to roll out beyond the EU. When regulation tightens in Australia then the way an agency uses its digital media investment to feed its DMP may be irreversibly challenged.
4. Clients centralising technology contracts
The promise of an integrated technology solution that can serve all parts of the customer journey is finally being realised. Adobe, Salesforce, Oracle et al have all made massive strides in connecting customer data, audience, creative, paid, owned and earned media channels together, creating a reality where truly personalised marketing can be achieved. It’s why a quarter of CMO’s see owning the marketing technology strategy as a key part of their role and why almost 40% see the smarter use of customer data as a point of brand differentiation and ongoing competitive advantage. As clients continue to explore and centralise technology contracts, the need for or value of an agency side DMP naturally decreases.
5. Declining Market Opportunity
As a result of more clients centralising technology contracts, the market opportunity for agency side DMPs is receding. Operating or investing in a declining market is fraught with danger and as a result the segment requires a long hard look by agency agenda setters. No one wants to be caught on the wrong end of a trend after all.
6. Barrier / cost of entry
The operational costs of managing a DMP are significant. Yes, efficiencies can be found through scale but paying the licence / instance fee plus input / output costs adds up fast. In fact, the cost of managing an agency DMP is the number one challenge cited by agency leaders around the world, with 40% stating that agency DMPs are too expensive.
The high operational cost of an agency DMP means on-selling to clients can be price prohibitive. In many cases, it means a large proportion of an agency’s client base are priced out of using their DMP. Many of those that are left probably either have or are looking at onboarding their own DMP meaning the obtainable market is tiny.
So, does the above mean the agency side DMP will die? No one can know for sure. As covered at the start, it wasn’t that long ago that there was a veritable agency arms race to build and offer clients access to a DMP. Like most things in this wonderful industry we call media, the backdrop of the agency DMP is changing. The agencies that can adapt to this change will continue to build value in their data led products and services, those that don’t may end up writing off a pretty significant investment.