The report draws upon quantitative and qualitative research from 327 in-house marketing professionals and marketing agency leaders, examining existential challenges to agencies, says the duo. 

Funnel and Ravn have found that marketing agencies are facing a triple threat; pressure from regulators and Big Tech, shortages of advanced analytical skills and changing perceptions about the value of agencies themselves, with AI and automation replacing human work in some instances.

AI is Becoming More Prominent in Marketing

Many in-house marketers say AI will invariably affect their agency relationships, says the duo.

According to the duo, key findings of the report include the following:

  • 43% of marketers say AI will make their company less dependent on agencies.
  • Agencies are largely unphased; two-thirds of agency professionals expect their financial condition to improve over the next year, with AI having a net positive impact on their business.
  • Less than a quarter view increased in-housing of marketing functions, partially resulting from AI adoption, as a major threat to their business. 

AI is beginning to affect the marketing and advertising industry but is not expected to replace human and agency work any time soon, add Funnel and Ravn.  

Agencies Facing Mistrust From Clients

With the future of marketing dependent on sophisticated measurement models and vast amounts of data needing to be shared between clients and agencies, closer partnerships are required for success.

Yet, Funnel's report indicates a general mistrust in agencies and a frustration with repetitive processes on the clients' side.

According to the duo, the key findings from surveying in-house marketers comprise the following:

  • More than half of in-house marketers do not trust their agency partnerships, particularly when controlling costs and delivering tailored and innovative solutions.
  • 75% claim that their company's outsourcing rates to agencies will fall or remain flat over the next year.
  • Additionally, only 40% of marketers say their agencies are invested in the long-term growth and success of their company; just 47% believe their agencies are communicating well on measurable outcomes. 

Marketers did note, however, that agencies were better at sharing honest feedback and setting realistic expectations, says the duo. 

"Our agency is in the business of making sense of data analysis, AI, machine learning, language models and more," says Benjamin Keller, chapter lead data and business intelligence at Sunlab. "What can be difficult is presenting it in a way that clients can understand and synthesise."

Agencies' Golden Opportunity for Value-Add

As the last-click attribution method used for measuring marketing impact is slowly eroded by regulatory and Big Tech data limitations, many marketers now face uphill battles to evolve to advanced analytics and rely less on third-party data, says the duo. 

According to Funnel and Ravn, innovations in advanced analytics, used in marketing, come in three forms: 

  1. Marketing Mix Modelling (MMM) uses statistical models to measure the impact of marketing activities on business outcomes such as sales and ROI.
  2. Incrementality testing estimates the additional impact of a specific campaign or activity by comparing the results of a test group exposed to the campaign with a control group that was not.
  3. Multi-touch attribution deploys user-level and micro-level tracking to assess user journeys and the impacts of individual touchpoints.  

According to the duo, the key findings on advanced analytics usage and proficiency consist of the following:

  • Teams generally do not have an advanced analytics expert to inform decision-making; for example, 69% of marketers surveyed say they have no clear, documented roadmap to adapt to the deprecation of third-party cookies.
  • Since their clients do not have experts or roadmaps to track performance, most agencies (66%) believe that offering advanced analytics is a major opportunity for their organisation.
  • Approximately 60% of marketers are already using some kind of data analytics to measure performance.
  • But very few are using the most advanced probabilistic forms, such as MMM (26%) and incrementality testing (26%).
  • Few marketers (15%) have plans to outsource additional advanced analytics services in the coming 12 to 18 months, leaving the majority with reduced visibility on the impact of marketing spend. 

While many in-house marketing teams require help from agency partners to pull new strategies off, agencies themselves can spread the costs of domain experts across multiple clients, explain methodologies behind their recommendations and guide clients through the complex marketing landscape, says the duo. 

"This report comes at a critical crossroads for the industry," says Con Cirillo, head of marketing in the United States at Funnel. "With AI on the rise, cross-device and web tracking falling and marketing teams reassessing their budgets, it is important to examine the relationship between in-house marketers and agency partners."

"We have unearthed significant findings alongside Ravn Research, particularly concerning confidence in agencies and emerging technologies, as well as a lack of preparedness for advanced analytics among marketing teams. Both sides need to innovate and, thankfully, there are higher quality tools available than ever to achieve this," adds Cirillo. 

"Through our qualitative and quantitative research, surveying and interviewing over three hundred in-house marketing and agency professionals globally, we have highlighted the unique challenges facing agencies and captured the general mood of the sector at present," says Clare McDermott, founder of Ravn Research. 

"This represented a wide range of countries, company sizes, industries and roles, providing strong indications that the industry is undergoing significant changes," concludes McDermott. 

Individuals are encouraged to view the full report here. 

For more information, visit www.funnel.io. You can also follow Funnel on LinkedIn. 

*Image courtesy of LinkedIn