Should Agencies Build Performance Tech?

I had an interesting conversation recently with two C-level execs from a performance agency. The call was meant to be a quick check-in following their decision to bring their performance initiatives in-house.

What made it especially intriguing was the timing. We had just launched a breakthrough version of our machine learning optimization technology, which had been delivering incredible results for their clients. Our track record with them had been stellar across the board, consistently delivering results well above client expectations and target KPIs.

As I walked through the performance data — like how our ML optimization model was driving a $33 CPA compared to the $120 CPA delivered manually — they largely brushed it off. Their focus, they said, was on “agency differentiation.”

“Everyone uses TTD. None of them are different. If other agencies can use tvScientific, we’re vulnerable to the same issue. We need to stand out through our own martech and publisher-direct CTV relationships.”

That really gave me pause.

It reminded me of when the New York Times invested in building their own ad server. They thought it would help them differentiate, but it was a multi-year money pit. They struggled to keep up with market innovation and ultimately moved to Google DFP, making the whole effort an expensive detour. The core issue was a lack of clarity on what business they were really in. 

Were they in the ad tech business? Or in content and advertising? And if both, where was their unique advantage? It certainly wasn’t in trying to keep pace with the hyper-evolving world of ad tech.

The same logic applies to performance agencies. What business are they truly in? Is it managing CTV publisher relationships? Building proprietary martech? Or is it delivering on client performance objectives using the best tools available?

There’s a meaningful difference between being a tool builder and being an expert user of best-in-class tools.

Take Delta Airlines as an example. They’re consistently rated a top airline, have a deeply loyal customer base, and their stock has performed incredibly well. But do they build their own airplanes? No. They focus on operating at an elite level, delivering superior outcomes and an exceptional experience using the best tools and platforms available to them. That’s where their advantage lies. 

When I asked the performance agency execs which mattered more — performance or differentiation — they said, without hesitation: differentiation.

Here’s my take.

Performance agencies are in the business of delivering outcomes. Full stop. The tech stack is important, but it’s a means to an end. There’s a massive ecosystem of dedicated ad tech innovators whose entire business is building better tools. Agencies, on the other hand, excel at client service, strategy, and activation. Trying to do both — build cutting-edge tech and deliver exceptional client results — is a nearly impossible balancing act.

That’s a lesson the NYT learned the hard way.

Agencies should be expert evaluators and users of best-in-class technology, continuously evolving to meet client needs. The tools will change because the pace of innovation is relentless, but the mission remains the same: deliver superior outcomes.

Bottom line: Know what business you’re in. 

For performance agencies, that’s client service and using tools to deliver better marketing outcomes. Technology is a critical input, but not the end goal. Trying to be both a tech company and a service business is a recipe for subpar results on both fronts. Instead, invest in identifying cutting-edge technology, use it better than your competitors, and deliver both superior results and client service. That’s the path to agency differentiation.