This post is by Darren Woolley, Founder of TrinityP3. With his background as analytical scientist and creative problem solver, Darren brings unique insights and learnings to the marketing process. He is considered a global thought leader on agency remuneration, search and selection and relationship optimisation.
In the past 12 months there have been some very thought-provoking articles published on the State of the Media industry in Australia. Many of these have appeared in Mumbrella and were largely kicked off by a cleverly conceived and well received ‘fictional’ piece by Mumbrella Deputy Editor, Nic Christensen.
More interesting is the number of comments these articles generated. We have selected some of these comments to reproduce below. But they represent just a small sample of the people working in the media industry, be it advertiser, media agency or media sales and owner.
Just like Mumbrella, your comments and thoughts will be anonymous. So why not have your say and add your voice to those below?
Read the comments below and decide if you agree, or disagree or have an alternative point of view. Then come and have your say with the second Annual “State of the Media” survey run by TrinityP3 and MediaScope.
Certainly (opaquely) very true. I firmly believe in agencies being properly remunerated. The dive to the bottom hurts everyone.
A very interesting, obviously clearly by-no-means could be anything but hypothetical piece. Of course none of these things are happening and ad agency holding share prices are going north in a terrible global ad market purely due to intangible market silliness not due to creative extraction.
You should go and talk to the CFO of XYZ agency. An even bigger one than ZYX. As media buyers, their ENTIRE profit is actually made up by Media owners under billing/forgetting to bill the clients. All you need is a small percentage of bookings to not receive an invoice. After all, “Sorry Mr Media Proprietor but we are waiting for your invoice” said no ad agency. Ever.
Good to see this issue come into the public domain. The industry needs a massive shake up. I fear that even if clients did demand true transparency, media agencies would simply find a new tact to weasel away hidden commissions and rebates from the media
His whole remunerate by % of spend model supplemented by hidden extras and questionable performance bonus metrics model should have died long ago.
We should take a leaf out of the legal profession’s book – charge by the hour in six minute increments and charge for processing of every email or document – both highly transparent and highly lucrative…may also make all meetings shorter and more productive, and cut down on the amount of back and forth email correspondence…
Margin squeezing inevitably leads to marginally honest behaviour. If the writer would care to share contact details I’ll explain an honest way to increase profit easily – that clients will love.
C’mon multinational media agencies.
Where are the denials?
The silence is deafening!
I appreciate it that all are complicit in some ways – clients, agencies & media outlets.
But can I say that it all starts with clients who screw media agencies. I bet that they don’t operate on a 2-3% margin!
As a media owner, this confirms why we try avoid media agencies altogether when possible. Client ROI does not seem to be a motivation for a media agency to book space for their clients, and this article would support our main fears.
Clients will always eventually reap what they sow. This is one of the best examples.
I wish I had some sympathy, but my experience of media agencies is a nightmare. I’ve never dealt with more ignorant, window licking morons. They also give all the money to their mates – the ones who take them out for drinks and nice food. And when you go over their head to the vendor marketing managers, they come back to you lying their arses off about how they’ve selected you for budget. All the time. Every agency. Absolute parasites in the media industry and yet the most powerful for so long. If they’re struggling and on their way out, then good.
I also disagree with the notion that this corruption is somehow acceptable because agencies get squeezed on margins. Every business has to compete on price. Agencies have failed to communicate how clients should hold them and their rivals to account. No one has had the balls to have these difficult conversations. Instead, they have taken the money through deceit. This corruption goes all the way to the top of some giant global companies who are CEOs should hang their head in shame.
The thing is many of these Media Agencies who offer 2% fee on search account of 20 million accounts shoot them selves in the foot, because the thing is they offer poor quality service and the client then realizes what is actually happening with the account as they only have 2 people servicing a big account. They leave the agency and then look for a higher cost agency higher quality agency but then again they run into the same issues.
I’m afraid it’s today’s world… And every side of the media industry is guilty of creating it.
It’s the narrow sighted chase for short term growth that all businesses are looking for
Clients want to pay less agency fee’s to tell the board they saved some money,
Media want to charge more as revenues are dwindling so they will do all they can for short term share, Agencies will do all they can to win new business for the headline and some so called ” momentum” that hopefully sees them growth in a shrinking and crowded market. It’s sad but its a sign of the times in pretty much every industry, people screwing over other people for short term gain.
Having worked for both Media Agencies and client side, I can say that media agencies are constantly trying to cheat the client.
One thing we have noticed about media agencies – more and more we are presenting our media product to a bunch of kids in their early 20s. They dress great, look sharp, yet you can hear a pin drop at the end of the preso – not one intelligent question from the lot of them – sometimes as many as ten in a meeting.
There is a massive assumption here that media agencies do not work in the best interests of their clients. You are implying media agencies push solutions onto clients that derive more revenue at the expense of client goals. This is offensive to all the good people trying to forever deliver more value to clients with less remuneration year on year.
As an employee of a media agency I can tell you this view is just hogwash.
When competitors in an industry are for all intents and purposes the same – same tools, same data, same suppliers – it will always drive down the price to unsustainable levels, which will force these companies to find other, less value adding, means to survive.
The assumption media agencies do not act in the best interest of their clients is not ‘massive’ but rational. If the big agencies out there dedicated as much strategic nous and creativity to their clients’ campaigns as they do to thinking up ways to gouge money from them while scoring vendor kickbacks our industry would be the envy of all others.
Two things to add here:
* A lot of the need to make deals with media owners is in order to get the ridiculous year on year savings clients demand. Media neutrality is fine until we have to get 20 off TV – how can you do that unless you pick a couple, or even just one supplier?
* If clients were happy to pay fairly for the services they receive there would be less pressure to monetise elsewhere.
Probably naive, but I don’t think that stops it being true.
Maybe there are some naïve clients out there in some agencies who blindly sign off on anything a media agency recommends to them. Perhaps in that situation there is a potential for agencies to “push” particular media. But I think you will find most clients are a lot smarter than what you think.
As an online media network owner, I constantly hear from agencies that they can’t allocate budget to anyone outside of the top two as they are behind their spend commitments and therefore they need to allocate as much budget in order to achieve their annual kick backs.
I appreciate this may not be the case for all agencies but it is very obvious to anyone that operates in this space that these rebates drive planning decisions, not what is right for the client.
There are some big question marks over the way agencies supplement their explicit financial relationships with clients and vendors.
This may not be an important factor in day-to-day client servicing, and it probably makes a lot of jobs easier, however longer term it erodes the ability for an agency to be trusted to represent the clients interests above their own in the media marketplace.
The issue is not about the transparent 10% but the other rebates and commissions beyond that received by the Agency or Agency group. These aren’t necessarily client specific, which is why they will never be picked up by an external audit, but rest assured they do exist.
One crucial thing I think you underestimate is the general lack of courage and, particularly, ability, of marketers in Australia. It may be the case in other countries, not sure. With a few high-profile exceptions (who I think are already moving down the paths you refer to), they do not have the vision nor the power within their organisations to pull this off.
Not sure that clients won’t need Media agencies per se but agree there is strong amount of repositioning and retraining required. In my humble opinion the current agency remuneration models are out-dated and don’t factor in the amount of wasted time we invest for sake of a relationship which is already drifting further apart. A switch to performance incentives will help keep clients and their agencies focussed whilst looking for the best collaborations to deliver a combination of skillsets beyond the agency’s existing expertise.
Lets face it; Media agencies cannot quantify the effectiveness (aka ROI) of what they deliver to clients. ROI = incremental lift in some behavioural measure as a result of media expenditure. Media agencies purport to be experts in connecting brands to consumers, but cannot actually demonstrate if or how they’ve delivered this. The traditional media agency model is on borrowed time and redundancies are imminent. Reality is that they are ill prepared and ill equipped to meet the needs of today’s business world.
Almost without exception the media agencies I’ve dealt with recently still have an appalling understanding of even the most basic digital analytics (and in some cases basic maths). It doesn’t bode well for their futures …