Have media rebates and kick-backs killed media neutral planning?

This post is by Stephen Wright, Business Director at TrinityP3. Stephen recently returned to TrinityP3 to head up Media Consulting calling on his experience across all areas of the industry to provide guidance to clients on how they can best benefit from the new media landscape.

With the increasing choice of media channels available to marketers, there has been a growing necessity to obtain media-neutral advice on the most effective way to select and buy access to the media channels. There is also a need to be able to balance the sometimes-conflicting requirements for managing owned, earned and paid media.

But there are changes happening, often beneath the surface that is making the concept of media neutrality increasingly more difficult to achieve.

These include:

  1. Traditional agency remuneration
  2. Media agency trading desks
  3. Media rebates, commissions and incentives
  4. Media agencies as media owners
Without media transparency, trust is compromised and from there the relationship spirals downwards.

Without media transparency, trust is compromised and from there the relationship spirals downwards.

Lets look at these individually. But first lets review the process we currently use.

The media process

At the simplest level there are three basic stages – strategy, planning and trading for all media.

The strategy stage is about drawing on research, data and insights to choose the channels and the investment level required to deliver the objectives.

Planning is about implementing the strategy with the choice of specific media environment that will become the basis of the media trading.

The final stage is the negotiation and the actual transaction, be that manual or automated through programmatic buying.

For many marketers these services are provided by a media agency, while others have separated strategy from the planning and trading. But we have recently seen a trend back to a single-agency solution for a number of reasons including:

  1. Convenience of managing a single media agency
  2. Consolidation to reduce media agency costs
  3. The need to have strategy informed by trading opportunities

Therefore the end-to-end media agency appears to be the prevailing model.

Traditional agency remuneration

We have written previously about the race to zero in agency remuneration and the continuing downward pressure on agency costs. But in media specifically, the media agency is remunerated not based on the value of the media investment or the value created, but the resource cost of providing these service.

Simply paying the agency for their resources removes the incentive to automate and become more efficient and means that revenue growth comes from simply doing more rather than generating greater value.

If the agency is to generate greater revenue from their client they need to either encourage greater spend through promoting media owner opportunities and the bigger the better or taking on more of the responsibilities of other agencies.

Both are increasingly common. But becoming an effective sales representative for the media owner is counter to media neutrality.

Media agency trading desks

Trading desks and demand side platforms have been discussed extensively previously, but there is a concern held by many advertisers about the lack of transparency and the lack of suitable benchmarking.

The other concern is that the increased use of programmatic buying is not delivering the efficiency savings to the advertiser and it is increasingly difficult to ensure accountability in the placement and delivery of the advertising.

This perceived lack of transparency and accountability leaves many advertisers concerned it is impacting on the impartiality of the process of selecting and buying media properties.

Media rebates, commissions and incentives

All of this is exacerbated by the reported trend of media agencies effectively subsiding their fees by obtaining income from the media owners in the form of rebates, commissions and incentives. This was first highlighted by the article in Mumbrella by deputy editor Nic Christensen and in my subsequent post on the topic.

The relationship between the media agency and the media owner has become commercialised in a way that acts in conflict with media neutrality. The agencies participating in this behaviour have financial incentives to influence the media spend to favour the media owners offering the largest incentives or to meet pre-agreed commitments.

And this is not an arrangement that can be identified with a financial audit.

Media agencies as media owners

With the announcement of the merger between Publicis and Ominicom last year, there was much discussion about the benefits and implications. One that was highlighted was that the size of the merged entity gave them the mass to either create or acquire major media holding or create media platforms in the digital space.

If agency holding companies become media owners, this significantly compromises their media neutrality.

Achieving media neutrality

The first question you need to consider is if media neutrality is important to you? What do you see as the specific benefits of achieving media neutrality? It could be that having the media trading, planning and strategy combined is delivering opportunistic advantages to your media and comms. This could be through the delivery of money-can’t-buy sponsorships or integrated media solutions.

But if you do want to achieve media neutrality, the first step is to separate channel planning and media strategy from media planning and buying. The media strategy is developed to deliver specific objectives using any and all available data and analytics. It is also important that the strategy development is separated from the implementation in all financial aspects. And it is also important to remunerate the strategy development based on performance or value and not cost.

To ensure media neutrality is delivered without compromising the trading opportunities in the market you then need to have the media strategy agency manage and oversee the media implementation planning and the trading as well.

The media planning and trading agency is incentivised on buying efficiency and the strategy agency is paid on media effectiveness. In this way the two work in cooperation with the emphasis and focus on effectiveness and then the implementation optimised to be as efficient as possible.

In this way you deliver media neutrality in the strategy and channel selection, without compromising the efficiencies of the dynamic trading market.

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About Stephen Wright

Stephen has enjoyed management roles as Media Director at Saatchi & Saatchi and M&C Saatchi, as well as a Media Planning Specialist at The Campaign Palace, has lectured in media at The University of Technology Sydney and worked on the media owner side as Director of Advertising & Communications at Fairfax. Stephen has returned to head Media Consulting for TrinityP3, after a brief 2 year sojourn as New Business Director for Starcom Mediavest. Read Stephen's bio here.
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