To be more truthful with the statement: agencies never innovated. It is a business model problem. A flaw in their DNA.

Traditional agencies take a cut of the ad budget. A client spends $100 on Facebook, and the agency keeps $5 in exchange for monitoring and optimizing the campaigns.

Performance agencies charge their clients based on results. If a client is looking for leads, the agency will run a test on Google Ads, and if the cost of the lead is $5, they will charge the client $6.

If later on, they can get the lead’s cost down to $4, they will retain $2 and keep charging the client $6.

In the first model, there is no strong reason for improving or building a tech platform. At least not for their clients (all they can hope for is to make their media analysts more efficient and to increase the campaigns:analyst ratio.)

In the second model, the tech platform better has some reliable algorithms that don’t require too much additional effort from the media analysts, and are sophisticated enough to bring the acquisitions costs down, over time.

What they all do when they are struggling with costs? They let go the engineering team. Thus, they never get to innovate.

Innovation becomes a superfluous luxury that they will afford if they have big pockets clients, but with no real purpose other than economic.

BuySellAds buying Digg and Pando is a sign that there are players in the industry thinking about innovation. It is in their best interest to help their clients to make money. But they are a platform, not an agency.


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Leo Celis