The pathway to programmatic ad buying goes through a series of layers in order to connect the advertisers to the end consumer. On the buy side, advertisers are represented by agencies which are owned by the major holding companies. Today’s topic is to breakdown of the ad industry structure, and to understand different functionalities of agencies.
Holding Companies
At the very top of the industry pyramid lies the holding companies. The most established holding companies are WPP, Omnicom, Publicis Groupe, Interpublic, and Dentsu. The vast majority of ad spend is governed by these 5 major holding companies. Although smaller holding companies and independent agencies also remain, they are now as prominent as they used to be.
Ad Agencies
Ad agencies traditionally operate by delivering ads through above-the-line marketing, which is categorized as television, print, radio, and outdoor. However, digital media, which has always been referred to as a below-the-line marketing channel, has been gaining exponentially more traction. There are three types of traditional advertising agencies:
- Global networks: These networks operate in offices all over the world, with the purpose to serve major multinational client companies such as McDonald’s or Ford, who wish to provide a consistent marketing message across all the countries in which they operate.
- Micro-networks: Operate fewer offices, usually in key regional centers.
- Standalone agency: Independent agencies that generally act as full service agencies, but are becoming increasingly rare. This is because many of the successful ones are eventually acquired by the larger holding companies.
Media Agencies
Media agencies are responsible for the entire process of delivery the message created by advertising agencies via media. This includes both media planning and media buying. Generally, agencies are paid through one of several ways: a commission based model, a negotiated-fee based arrangement, or a payscale based on performance.
Media Planning
This involves planning where the advertisements will take place.
Media Buying
This involves the negotiation and actual purchasing of the planned advertisement slots. A strategy that the major holding companies have been implementing is to bulk-buy the media space required by their individual media networks. This way, they will be able to receive lower fees by bulk-buying media slots.
Sources
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