Virginia Hyland is founder of Hyland Media and a Board Director for the Media Federation of Australia. She talks with Darren on the state of media relationships and the role of programmatic, the rise of the small independent agency and the management consultants and the opportunities these provide for focusing the market attention on media value.
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Transcription:
Darren:
Welcome to Managing Marketing and today I’m having a chat with Virginia Hyland who is the founder of Hyland Media and the Board Director of the Media Federation of Australia. Welcome, Virginia.
Virginia:
Thank you, Darren; it’s great to be here.
Darren:
Virginia, you’ve had quite a career already in media, haven’t you, from many different perspectives?
Virginia:
Absolutely. It’s a fast moving industry and no two days are the same. So, it feels like quite a career whether you’ve been in it for a week or 15 or 17 years.
Darren:
From agency and media publisher you’ve seen the changes that have happened certainly in the last 10 to 15 years.
Virginia:
Absolutely. So, I started my career at Fairfax, working for the Sydney Morning Herald and I was very lucky to land in the rivers of gold in the Herald classified section when I was only 17 learning how to cold call on warehouses, brick labourers, truckies and that really gave me an insight into how they worked and made money and how the whole publishing side really funded much of the newspaper itself.
Darren:
I often get the feeling from people in agencies that they think of media sales people as selling media but my experience has been that they’re much more focused on the business success of their clients than just selling the medium.
Virginia:
Yeah, it’s interesting. I think with sales you need repeat customers and you need them to come back every single week. And when you deal, particularly with the likes of a publication they can tell very quickly the sales they were getting on the enquiry rate from the advertising they were running.
So, when you called them the next week they would give you very strong feedback on whether the ad was working or not.
Darren:
Yes, I gave you my $10,000 and I didn’t get one phone call.
Virginia:
That’s exactly how it went. And so, you rode the wave, the highs and the lows of working with clients and trying to unpick how you could make the ad work better for them because what you got to see was that some ads work extremely well for certain businesses and other ads didn’t.
It was really a matter of then helping to unpick how we could continue to get them to advertise and build success for their business.
Darren:
So, the remuneration model there for the publisher is the more successful the client the more they spend, the more money they make, which is very much like the old media commission. For the agency, the more successful the client was the more they would invest in media and so therefore the more money the agency would make.
Virginia:
Absolutely. So, with that model, on the publisher’s side no one knew what the margins were but on the media side everyone understands the margins. On the publishers’ side they really did make money when they had greater advertising going into their publication.
Darren:
But we haven’t had that since ’95, which was the end of accreditation. And all we’ve seen since then is this constant downwards pressure on not just media costs but also agency fees as well.
Virginia:
Absolutely, and we’ve all played a poor role in managing the outcomes, the pressure that’s put on the industry. It’s devalued really every part of the business from how we pressure the publishing houses to give cheaper rates to how media agencies are remunerated and then all of this focus on downwards costing pressure is really not focusing on the right thing, which is how do we build success for a client’s business.
Darren:
It’s around the same time, the late 80’s, mid 90’s that we saw the rise of the holding company as well. Suddenly there was a whole bundle of agencies bought up and they stripped out backend inefficiencies and started reporting profits to their shareholders. That sort of worked against agencies.
I know since we’ve been running Trinity P3 clients would say ‘such and such a holding company—earnings up 11%’. There was this constant reminder that holding companies are there to make a profit, not necessarily look after their clients.
Virginia:
Absolutely. That was really it; how are we going to make more money? But it wasn’t about adding services, or putting a freeze on the staff or extracting more money through. I think we all focused in the wrong direction. Having said that, in the 80’s I was a teenager and Darren’s talking about the 80’s and 90’s so just so you know.
Darren:
I’m more setting a context from my own perspective because I certainly wasn’t a teenager in the 80’s but enough water under the bridge. We find ourselves today in a situation (and I talk about remuneration because I believe this has a big impact) where the relationship between advertisers and their agency, and the media agency and the media owners is possibly the worst it’s ever been. Do you think that’s a fair statement?
Virginia:
Yes, I think it is a fair statement, Darren. We have hit rock bottom in terms of the way we have all devalued each other in the business chain. And yet, if you look at business and how businesses grow it’s because of publishing partners and the media partners they work with and the smarts the media agencies have that help them think about their business and how to position their business for market.
I think that our focus has really hurt every single part of the chain of the business proposition from the publisher through to the media agency and right through to the marketer as well.
Darren:
Do you think some of the commentary we see in the industry is exaggerating some of the issues? If you read the headlines of the trade media it’s all doom and gloom and no one can be trusted and every client is bringing media in-house because they don’t see their agencies offering value. Yet, in reality we’re not really seeing that are we?
Certainly, accounts are moving around and people call it a media palooza but they’re really just moving the business from one agency to the next aren’t they?
Virginia:
Yeah, the media, the news headlines are always the beat-up, let’s make this a scary situation and get everyone panicking. And while some businesses may panic around that, at the same time other businesses are getting on with it. They’re still trying to find their way.
From my perspective, and what I tell my team, is that people need great media people than ever before. The landscape is so much more confusing than it was even five years ago and you really need to take a client and step them through how to deliver success for their business. Marketers need media people more than ever before.
I was on a panel sitting next to the head of marketing for Airbnb and he said he needs a marketer who understands SEO, SEM, and things that a media person understands. They do need that support more than ever before. They just need to find people they can trust and have those discussions around their business and hope that that person is going to help them unlock the opportunity. That’s where the fear mongering is hurting the industry.
Darren:
The price sensitivity still seems to be in the marketplace. And we still hear about big pitches that are being decided on guaranteed discounts in media or people cutting their fees. Do you think we’ve hit rock bottom or are people still driving down the price?
Virginia:
I think that there’s not much more to be had. I know some agencies on the top line are offering 2 to 3% and some agencies are actually paying to work for the client on the top level.
Darren:
We have seen agencies offer to do the business for free and we have always advised our clients that you only get what you pay for. But the counter to that is they’ll just get paid by the media owners anyway, which is a cynical response because of this constant downwards pressure and the competitive nature of the industry.
Virginia:
Yeah, it is interesting that you’re hearing that from clients. There is a complacency around clients going ‘we don’t want to disturb the hornets’ nest or look under the bonnet; we’ll just let them do it for free and they’ll get paid in another way.
I had a conversation with a client where we were talking about their digital buy and they said as long as we hit this cost per acquisition level we don’t really care. But when you look under the bonnet you realise that they could still be hitting costs per acquisition a third of the price of what they’re really getting.
And that means that the cheap fees sitting on top of that agency are actually not cheap at all. They’re actually incredibly expensive and so I think clients don’t really want to look under the bonnet and unlock a hornets’ nest but equally it’s hurting their business. It’s a real challenge to get fair value, fair price for a fair day’s work.
Darren:
Well part of the issue is to be with a client that measures that return on media investment and there are a lot of clients who really struggle with that for any number of reasons. For them to enter into measuring value as far as what the media returns, so their default mechanism is to buy on price isn’t it?
Virginia:
Yeah, because they don’t have anything to benchmark against so that is a challenge for them. If they had someone do a parallel buy quite cleanly they could actually see what is the real benchmark without having to unlock the hornet’s nest.
They could do a little test marketing in Adelaide or a smaller market where I could compare it to what’s been bought now and see if there’s parity or not. And if there is parity, fantastic they’re working with a great agency partner. And if there isn’t then they can start to really understand how they can drive value for their business.
Because if they are clients who are looking under the bonnet and they really understand what price they should be paying they’re going to outperform their marketing competitors’ business every day of the week. And that will become an ongoing, knock-on challenge for their business long-term.
If they don’t really understand what they’re buying and how they’re buying and what the rates should be then they’re allowing their competitors to actually drive greater performance and success.
Darren:
And they are getting left behind in the process.
Virginia:
Absolutely.
Darren:
One of the issues is there is a lot of talk in the trade media about programmatic and we’ve had clients say to us things like programmatic doesn’t deliver the results and it’s a huge waste of money. And yet we’re seeing investment in programmatic increasing all the time. What’s the role of programmatic from your perspective?
Virginia:
Programmatic is very much a tangible role within a business and that is you can truly see what type of communication is working in real time with customers. So, programmatic is a technology that serves advertising in milliseconds. And what that can do is target the right type of interest about customers.
For example, if they were buying a car and they were in the market for an SUV you can know straight away and serve content in real time that actually talks to that person.
Darren:
And see if they respond.
Virginia:
Yeah, and they’re in the interest phase. Programmatic is such a powerful technology in that respect. And that’s why this band is growing and what’s tangible about those sorts of results is you can take those back to your business and say we served this programmatic messaging and it actually increased our click-throughs, our sales by X%.
Darren:
You’re talking about getting results from programmatic but we actually know of clients who still measure results in programmatic by numbers of impressions. They’re still using very traditional metrics around that, which is quite flawed isn’t it?
Virginia:
Number of impressions—do you know that someone is sitting there on their website actually seeing that ad or have they gone out to make themselves a cup of tea?
Darren:
Or did it even load or only 10% of the ad or below the fold? Fold is a print terminology but we use it for computers. Or is it a bot or even a real person? When all of that came out a few years ago I’m sure there must have been some marketers sitting there going oh my god because there were estimates of 50% or more of your programmatic spend not actually being seen by a real person.
Virginia:
Absolutely. When that all started to come out we started to track using 3rd party auditors like IAB and Moat to track the advertising and what we found was that only 30% of our ads were firing. So, it was genuinely a concern. Before that time, we just thought all those ads were firing and measuring our impressions became a minefield at that point.
Everyone’s had to smarten up in terms of the way they’re delivering advertising on their websites now and that has improved significantly but certainly impressions is a very archaic way of measuring results in this age.
Darren:
Especially if you can actually measure results; a return on investment.
Virginia:
Especially if you can serve different messages as well in a different sequential order that shows you what type of content is working better with customers. The information is incredibly valuable about the type of audience who is responding to your advertising if you start to really use the technology well. And make sure that the partners who are using the technology are using it well.
Darren:
Here’s an issue. There is disclosed and non-disclosed (programmatic or not). The interesting thing is, talking to agencies that offer programmatic, they put it this way. We can do disclosed, which tells you exactly what mark-ups, commissions and things are and fully transparent (whatever that means) or non-disclosed but we can’t really guarantee that you’ll get the lowest possible price or non-disclosed, which means we may have to do some things to get you the very best price in market but we can’t tell you how we did it.
They say the majority of clients still go for non-disclosed. Why do you think that is?
Virginia:
I think the clients are going for non-disclosed because it sounds easier. They don’t really want to have to dig and unlock and potentially have to explain to their business that they’re paying higher fees to get that work done.
However, there is a really good reason why there is undisclosed but it’s just the ease. Clients are busy. They have fewer people in their marketing teams than they ever did before and it’s just easier.
Darren:
So, I don’t want to know about it. Don’t tell me and I don’t have to deal with it.
Virginia:
As long as it works.
Darren:
And you’re guaranteeing the lowest price even though people may never see it.
Virginia:
You’ll never know what the lowest price is because it’s undisclosed.
Darren:
I won’t know until someone reports that my ad was served against something from a terrorist organisation or paedophiles or whatever.
Virginia:
Exactly. Undisclosed means easy but it’s probably not the right decision for a business in this competitive landscape.
Darren:
Well if you’re buying on the lowest possible price then you have to take the risks associated with it.
Virginia:
And the risk might be that it’s not the lowest possible price, it might be a 50% mark-up.
Darren:
Just to change direction, you founded Independent Media Agency. How long ago was that?
Virginia:
That was in 2004.
Darren:
So, 14 years. I’d have to say you’re ahead of a trend we’re only just noticing now because suddenly there are a whole lot of independent media agencies popping up like little mushrooms after the rain. What do you think’s driving that?
Virginia:
When it rains the mushrooms grow, the sun comes out and we all get to benefit from the sunshine. I think what’s driving it is the fact that they are senior people who have generally worked in global agencies who know that they can add tangible value to a client’s business.
And the fact is in this day and age when technology is available to everyone large and small they can access technology, help clients understand insights around customers, unlock different data sets and really help those customers in a way that they haven’t been able to access before.
You don’t need all the high costs and margins of a big global agency group, funding a lot of people and expensive salaries. So, I think what’s driving it is that there’s an opportunity for smart people to actually help clients in a new modern world of technology merging to unlock opportunity for clients.
Darren:
So, technology has provided the opportunity to level that playing field because it wasn’t that long ago that everyone was being told that bigger is better, which is why everyone was caught up in the RECMA report of how many millions, billions, trillions of dollars was under management because somehow the more money you had as an agency to spend the cheaper the price.
Virginia:
Absolutely, and now it’s not really about how much money you have to spend; it’s how can technology help you use biddable media to unlock the best price with the best data overlays and the best insight around your customers. It’s a real shift from where we were probably even five to ten years ago.
And the technology partners don’t mind who’s using their technology. They’re open to letting an independent or a one-man band right up to the big guys use the same technology to unlock and access the data. The more they have on their books in terms of accessing their data the more money they’re making. They’re allowing their technology to be used by the masses.
Darren:
The platform they’ve invested in building it. The more throughput there is through that platform the better.
Virginia:
Absolutely, a lot of those technologies want to be sold to the likes of Google or Amazon. So, the more they can show mass broad reach of their technology the more they’ll be able to get an amazing sell price.
Darren:
I think that everyone who works in media would say they’re there for the good of their client, that they put that first, to help my client. But the thing we find with independent agencies both media and creative is that there is still the thing about the founder, the owner who has their name on the door and they’re in the office.
There are a lot of clients (increasingly) sacrificing the big because they want that intimacy, connectedness, accountability that they find with the independent agencies. You must find that with your own clients.
Virginia:
Absolutely. It’s a really interesting time in media. They want business people to help them unlock business problems so it’s not so much about doing a media plan and buy anymore. It’s about these are my problems and the world’s changing at a million light years and how do I get help with the decisions we’re making. Whether it’s what tech do I bring in or what media, how should we communicate and who should we communicate with?
It’s an interesting time in media. It’s a great time to be a business owner and help other business owners unlock opportunities. For us we’re putting more senior people in the business because in big agencies small, medium sized clients can’t always work with the senior people in those businesses; they might see them once or twice a year. And we’re finding that’s a real opportunity if business people want to work with business people.
Darren:
You’ve got 5% of them on a retainer or 0% because the clients don’t want to pay for the CEO or MD because the only time I ever see them is when something goes wrong or they’re asking for an increase in their fee.
Virginia:
That’s right. I asked the CEO of a global agency once how often they saw their clients—the big clients, once or twice a year. So, it’s a very different story to having fewer clients working with senior people who see them every week and work with them every week to unlock opportunities. And have a vested interest. You don’t have the global agency, and the big brand and big salary sitting comfortably behind you, you’ve got to work for every dollar you make and prove yourself time and time again.
Darren:
And one of the areas that’s highly competitive is attracting talent. Is that a key area for you in managing the culture or creating the culture of your agency?
Virginia:
Attracting talent is a real challenge for our industry as a whole. There is a 6% gap between how many we need and how many we can actually employ. For our agency, what we’re finding is that when people hit their 30’s and they’ve got ten years’ experience under their belts, they’ve been through a lot of the big global agencies and they’re wanting to find a place where they feel connected, they can add value and they’re recognised for the value they add to clients.
So, when senior talent hit their 30’s they tend to want to come into the independent agency world because it’s a different proposition to working in the big globals.
Darren:
It’s one of the things we’ve noticed especially when sourcing in big multinational agencies is that they’ve flattened the structure. They’ve taken a lot of juniors and then it’s almost natural attrition because to move to the next level they go from 100 to 20 roles, and then 10, then 2, then 1.
And so, there’s this natural attrition process, depending on the culture of the agency, that will promote people with certain attributes. Now, it’s not necessarily the people who are good at what they do, it could be the people who are really good at keeping clients onside or whatever that get promoted. Are they the types of people who are really good at what they do but they want to do it in a different environment?
Virginia:
Yeah and I think also the churn of the big agencies is a real challenge. We’re seeing 40% churn in our industry. So, clients who want to work with a team who are going to be consistently on their business and commit to their business are going to be challenged when you’ve got 40% churn.
And the pressure on those talented people in those global agencies to take up the slack of all the people who are churning away beneath them means that they’re working 12-hour days and they’re not feeling the value for it or the recognition from businesses.
So, they get to a point in their life where they know they can add value to a client’s business and they want to be in a place where they feel they’re being recognised and valued back. It’s interesting how that shift from servicing a client, thinking about their business, big agency; it’s kind of unraveling the support they’re getting.
They’re getting more clients, less support so they move over into a different type of agency shop where they feel they can add value without being hammered night and day.
Darren:
Your position running Hyland Media and your role on the board of the MFA; what would you say are the three biggest challenges that need to be addressed in the next 12 months?
Virginia:
That’s an interesting question. The first one, overall from an MFA or media perspective, is explaining to clients how they add value to their businesses and proving that. The next challenge is then how do we restructure the fees in the way we work together with clients in a way that is transparent and adds value to the client.
Darren:
But also rewards the agency.
Virginia:
Absolutely. Rewards the talent in the agency to stay. Clients don’t want their talent to be gone in a year and then have to re-brief a new set every single year. It’s a matter of how do we bring marketers on that journey to make sure they’re also investing in and rewarding the talent that they desire to stay in the business. And the third one is filling that gap where we can’t even fill the jobs in our industry to deliver the service level we’re supposed to.
We’re (Hyland Media) actually launching a training programme on the programmatic side in a couple of weeks where we’re bringing in ten new people from outside the agency and giving them real skills, training them in programmatic skills and then finding them jobs within the industry.
Darren:
You’ve got your own programmatic training desk that you’ve invested in?
Virginia:
That’s right, so we have our own programmatic training desk in our consultants. Sometimes to help the industry you have to get out there and do it yourself instead of complaining about it and waiting for someone else to change it. So, we’ve decided to launch our training programmes for a very small nominal fee. Uni leavers can come in and get real hands-on training on campaigns in a programmatic space.
And then we’ll help them find jobs in the industry because we know they exist. The best way to change the industry is to build the industry you want.
Darren:
Roll up your sleeves and actually get out there and do it.
Virginia:
Absolutely. So those are our three challenges in the next 12 months. And they cause the greatest headaches for the success of the industry and the marketers who work with us.
Darren:
Those are admirable challenges. The issue we see is the ability for marketers to be able to sell internally the value of that investment. We see a lot of marketers caught up in a situation where they can’t justify investing more because they’ve not really been selling it back into the organisation on the basis of the value it delivers to the organisation.
It’s called a media or marketing budget for a reason; it’s an amount set for them to go and spend. But the first part is to help us get the marketers to think about it as an investment and then prove it internally. You can be doing a great job delivering tangible value but if they can’t get that acknowledged internally we’re all in real trouble.
Virginia:
Absolutely. And I think that’s where the consultancies have started to play. They’ve recognised that we’re not communicating our value in the work we do for marketers in the way that we should. So, there’s been a real opportunity for the big fours to come in and create a consultancy role with the CEO.
Darren:
Except, if I remember rightly, Accenture said they were going to come into the media space and charge an hourly rate, a consultancy rate, which is how media agencies typically or traditionally have charged. How does that put the focus back on value created when you’re still paying for cost of inputs? I don’t understand that.
Virginia:
It’s an interesting model that Accenture have come out with. But it’s always a pendulum swing isn’t it? Accenture on an hourly rate is probably higher than even a day, weekly or monthly rate from an agency is really going to show value but it gives media agencies the opportunity to fight back and show greater value for the fee that they charge.
The fact that the consultancies have lifted their heads above the sand is a fantastic celebration for the agency landscape.
Darren:
So, you don’t see it as a threat?
Virginia:
I see it as short-term change in the way people will work with agencies but I do see that the pendulum swing will come all the way back when people realise that agencies are actually charging us less and delivering more.
And the reality is within an agency they have real hands on experience, living and breathing audiences and results whereas consultancies potentially sit on the outside of that and have senior advisories. The people who are living and breathing it truly everyday are adding value and shifting the way that media is bought and planned and the type of message that should end in each channel.
Short-term threat, yes but also opportunity in terms of the future is bright because we’re able to prove quite competently that we know what we’re talking about.
Darren:
Let’s hope so for the sake of the industry. I hope it’s hit rock bottom because we need to move the focus away from cost to starting to frame this as a discussion around investment in businesses.
Virginia:
Absolutely; how do we add value to those businesses?
Darren:
Oh, that’ll be Black Thunders for free or first end break—isn’t that the traditional media adding value.
Virginia:
It might be the old way of adding value but now it’s the e-comm platform—that’s how we get those customers.
Darren:
Exactly, it’s results. We need to move to getting return on investment and being willing, both marketer and agency to be accountable to it.
Virginia:
To become more of a partnership than a supply chain.
Darren:
Some of the best relationships are where you work hand in glove to being accountable to delivering results to the business.
Virginia:
And they’re the most valuable relationships you can have, that fuel you every morning to get out of bed. How are we going to shift the dial today, to knock your competitor off the perch?
The more you shift back into that gear instead of we’ve got to jam 10 clients into this one person to look after because they’re not paying for us properly, the quicker we’ll drive success and really add value more than a Black Thunder for free.
Darren:
Thanks, Virginia for making the time to sit down and have a chat.
Virginia:
Thank you, Darren, it’s been a pleasure.
Darren:
But before we finish, there’s a lot of talk about rebates so which media owner gives the best rebate?
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