Boost in martech spending is spelling doom for agencies

Martech spending is going up because brands don't trust agencies
25 September 2018 | 15 Shares

Brands are bringing digital marketing in-house, which is hurting business for agencies. Source: Shutterstock

Businesses worldwide have spent close to US$100 billion on digital marketing. Notably, in North America and the UK, brands have increased their martech budgets by 44 percent to US$52 billion, according to a recent report.

Different from just posting an online ad via agencies, digital marketing allows brands to target consumers directly through various platforms, including social media, search engine optimization (SEO), and voice assistants.

The growth in martech reflects a trend where companies are taking marketing functions in-house, after consumer goods companies Procter & Gamble and Unilever voiced concerns over fraud in online advertising.

The report, which was released by accounting firm Moore Stephens, said that in North America alone, 63 percent of martech budgets were spent in-house; last year the figure was only 44 percent.

Many companies are worried about their branding being compromised when ads appear alongside unsuitable online content. The issue of ‘brand safety’ has upset many marketers, who are now looking for better control over targeting audiences.

“Agencies stand to lose out as more brands seek to in-house martech expertise, build data science teams and reduce their reliance on the agency structure to support them in the future,” wrote Damian Ryan, Partner at Moore Stephens, in the report.

The report also highlighted that brands in the UK and North America spend nearly a quarter of their budgets on martech, a significant increase from 16 percent just a year ago.

This trend is set to continue, with one in five marketers in both regions expecting martech budgets to exceed 25 percent over the next year.

In a Reuters report, Ryan said, “Fundamentally, brands don’t like to trust agencies with data. The clear trend shows that brands are seeking to take control over marketing technology.”

Privacy concerns are compounded by the stricter enforcement of data usage rules after the GDPR came into effect.

In addition, the two biggest online advertising platforms are facing scrutiny over data practices, which forced a few players in the ad industry to either merge or downsize.

Another notable trend is the rise of marketing platforms that offer a one-stop solution for businesses.

Just this year, Adobe Systems acquired e-commerce company Magento for US$1.7 billion, and will be buying business-to-business marketing software firm Marketo for US$4.75 billion.

Having said that, Ryan also wrote in the report that brands that are spending more on marketing are still working with agencies. A bigger budget means more marketing tools are being deployed, and brands seem to have greater confidence in a combined, collaborative approach.