'Disruption only happens to those that are unprepared': Media agencies are increasingly taking a page out of consulting firms' playbook

• Media agencies are under fire from a number of fronts, but they aren't taking the existential threats to their model lying down.
• Many of the largest media agencies, including UM, Zenith, Havas and Mindshare are working to ramp up new offerings for marketers, redefine their roles and propel themselves forward.
• They are investing in everything from building business intelligence to digital transformation capabilities to data and analytics as well as proprietary tech stacks.
• But these channels still need to be adopted more widely and are still ancillary, warned ad analyst Brian Wieser.

• Marketers continue to complain about a lack of ad buying transparency from their agencies.
• At the same time, brands are increasingly taking media-buying in-house.
• Deep-pocketed consulting firms are creeping in on agencies' turfs.
• And just yesterday, ad agencies were reportedly hit with subpoenas as part of an emerging federal investigation.

But some big media agencies aren't taking these existential threats lying down. In fact, they are vowing to fight off disruption - often by building out new services and divisions that go beyond just buying lots of ad space.

Indeed, recognizing that bulk ad buying power is no longer enough of a differentiator, many of the largest media agencies, including UM, Zenith, Havas and Mindshare are working furiously to increase what they can offer to marketers, while also redefine their roles and ensuring their futures.

They are investing in everything from business intelligence to data and analytics as well as proprietary tech stacks. In other words, media agencies are trying to become a lot more like consulting firms.

"We realize that the industry is changing and that we need to be prepared for the future," Joe Maceda, chief instigation officer at Mindshare told Business Insider. "Disruption only happens to those that are unprepared."

If you can't beat consulting firms, imitate them

One of the biggest threats today to agencies at large comes from consulting firms like Accenture, Deloitte and IBM who have been encroaching on agencies' turf by setting up digital, media and creative divisions of their own.

But just as the consultancies are beefing up on their creative chops, media agencies have started to take a page out of the consulting playbook to bring more value, strategy and transparency to the table. Agencies, including UM and Mindshare, have set up business intelligence groups and agile development teams, to help clients tackle broader business problems.

UM, for instance, has established a team with over 500 people globally whose primary job is to analyze data and apply it to clients' media plans, according to global CEO Daryl Lee.

The agency frequently organizes what it refers to as "scrum workshops" to cull together people from strategy, product development, creative and even outside media vendors to brainstorm together on certain clients such as Spotify.

In the case of Spotify, the group often moves so fast that it's not unusual for the members to come up with ideas in as little as 48 hours and execute them as quickly as the following week. This approach has led to an average of three artist campaigns per week, said Lee.

Apart from becoming more agile, by bringing the various players in from the start, the agency says it is able to be more efficient by eliminating some cumbersome processes.

"Media has typically played a role at the top of the funnel," said Lee. "But what we're doing is shifting that horizontal mode to vertical, in order to create media experiences throughout the consumer journey."

Media agencies are bolstering their data and analytics capabilities

Agencies have also started investing more in their data analytics and business intelligence capabilities, trying to help clients with not just buying media space but developing products.

Havas Media, for example, has developed a tool in conjunction with IBM artificial intelligence called Arcadia, which allows the agency to carry out ethnography surveys at scale.

"It helps us combine AI with real human insight and get deep insights at scale," said Greg James, global chief strategy officer at Havas Media. "The implication of that is not just what ads should we make and how to target those ads, but also inform product strategy."

Havas has been using Arcadia for projects with existing clients such as Keurig, as well as in new business pitches.

They are also taking their services more upstream

Media agencies are trying to offer marketers tools, services and consulting before they decide how and where to advertise - and not just handling the execution phase of media buying

To that end, Zenith has set up a "Growth Audit," a structured questionnaire framework through which it does a deep-dive into the company's assets. It uses the audit to understand the client's organizational design and then works with clients to create new capabilities or make recommendations on who it could partner with to fill in the potential gaps.

"Our business has to move more upstream in a more consultative space for the simple reason that clients are facing the risk of disintermediation and every business is potential at risk," said Vittorio Bonori, Zenith's global brand president. "This system forces both clients and agencies to focus on the business."

The agency is also pumping money into machine learning and artificial intelligence to help clients like insurance provider Aviva figure out where best to spend their ad budgets and which ads are driving sales and leads.

In Coty's case, for example Zenith developed a "Fragrance Finder," an AI-powered product recommendation engine on the website of British retailer Boots.

The product makes fragrance recommendations to consumers based on their answers to a series of questions, using machine learning to learn the tastes and preferences of the consumer to make better recommendations.

The brand saw clickthrough rates of as much as 30% through the engine. Meanwhile Zenith's digital transformation practice is growing 5 times as much as other areas, according to Bonori.

"We're moving into a new space, and that is opening up new revenue streams for us apart from the core business," he said.

But not everyone is convinced that agencies can move beyond their core quickly

All these investments in data and analytics, automation and artificial intelligence and business transformation are all well and good, but are ultimately ancillary to the way that media agencies make money and always have - that is media planning and buying - according to Pivotal analyst Brian Wieser.

"If you were to look at their revenue functions, it doesn't look very different from what it did 10 years ago," he told Business Insider. "If it weren't for those functions, marketers wouldn't really be engaging with them."

Very few agencies have truly evolved their businesses, said Wieser, pointing at R/GA and Wunderman as examples.

For media agencies to truly transform what they are, investments need to be made at the holding company or sub-holding company level, he said.

"While they are trying to add more value to clients than their core media planning and buying functions, these efforts are still very much at the margins," he said.

In the meantime, agencies are trying to help their clients bracing themselves for the future

Apart from getting up to speed with the latest capabilities in data and technology, agencies are also ensuring they are prepared for the future.

Mindshare, for instance, has an internal Black Mirror-inspired program called "Media Dystopia," where it explores potential dystopian futures for media based on today's developments with its clients, and comes up with potential ways to survive them.

One of these programs explored the future of commerce on voice assistants, and what it means when consumers buy things from what is essentially a "voice shelf."

To respond to such a voice-based future, the agency developed the "Mindshare Discovery Risk Index," classifying which brands are likely to be most negatively affected by voice-based purchasing. It then used that worst-case scenario to come up with an Amazon Prime Day hack for a large consumer packaged goods client.

The hack was based on the insight that Amazon Alexa is only likely to recommend two brands in a category when a consumer is looking to shop. To ensure that the CPG brand (Mindshare declined to name the brand) would be one of the brands recommended, Mindshare ran an offer for consumers of the brand on Amazon in the day leading up to Prime Day so that its search results would peak, and Alexa would be more likely to recommend it when someone searched for it using voice.

"By playing out current media trends to their most disruptive ending, we're able to remain ahead of the curve," Mindshare's chief instigation officer Maceda.