Commentary
The Really Guilty Party In The ANA Debate? Advertisers!
- by Maarten Albarda , Featured Contributor, June 13, 2016
And what a beneficial game it is for agency holding companies, all of which have increased their share price over the last five years. Sir Martin Sorrell has delivered such enormous growth for WPP that he has earned himself just over 70 million pounds in income and bonuses during 2015 alone. Only one third of his shareholders voted against that package; two thirds are clearly very happy with the finances of the company. As Jon Mandel, former MediaCom CEO, famously said in 2015: “Have you ever wondered why fees to agencies have gone down, and yet the declared profits to these agencies are up?”
The K2 report, delivered on behalf of the ANA, has a whole chapter devoted to what is probably the root cause of the whole problem. And that is: as much as agencies have become clever “obscurers,” marketers at the same time have let themselves become “ignoramuses.” In the report, many advertisers expressed the belief that their agencies are their partners. The reality is, of course, that agencies are in the advertising business for their shareholders and themselves. Their clients’ budgets are a means to that end.
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The investigation cites all manner of clever contract clauses and deal structures that basically obscure the flow of money and make it hard to audit an advertiser’s share in the benefits an agency receives. There are “opt-in” clauses that, if left unaddressed, give the agency the right to become a media seller to its subsidiaries and its clients. There are addendums tucked into contracts about mark-ups, especially digital mark-ups that apply as a digital ad makes its way through the myriad of middlemen and tech, many owned and operated by agencies.
Marketers could have negotiated different and better terms, but clearly did not. You could say that, apparently, marketers have treated the signing of their media agency contracts with the same degree of scrutiny given to the conditions we approve when we download apps or join social media platforms. That is to say: zero.
Which is terrible. It is literally in marketers’ interest to own the contract development process from negotiations to, ultimately, signing. Ensure that your procurement partners know and understand at least the basics of marketing, agencies, media and digital, so you can truly operate as complementary partners. Marketers must know what they are signing up for, and that includes the small print, the addendums and the implications of the contract terms.
If all you want is “cheap,” you might have to allow less transparency. If you want quality, you may have to pay more.
One thing is certain: The days of the frequently mentioned noble advertising partnership between marketers and agencies are officially history. We’re in business now.
Very true, Maarten. I have said on many occasions that top management at most advertisers regards the media function as boring and not all that important, so long as the CFO's keep a close tab on fees and the resident "client" media director pushes the agencies into buying the usual media as efficiently as possible. Until that attitude changes and something resembling the claimed "partnership" relationship materializes, there will be more and more "surprises" and carping.
Recommend times every account in the world.
Ed, so often the client side "Media Director" does not really exist on the advertisers' side. With apparent trust in either their Procurement Manager (who's goals are based on savings and efficiencies on both the agency fee and the media CPM) and their "agency media partner" CFO's and CMOs are only too relieved to turn a blind eye to media oversight.
When advertisers hire seasoned Media Directors that focus their energy across media operations, media strategy, media buying, agency management and fees, then advertisers will be in the best position to invest their media with brand and consumer as the priority. Until then, agencies and clientside procurement will take advantage of the complexity of media planning and negotiations, and brand marketers will never know what they don't know!
Maarten, many of the major branding advertisers have an internal media department but its main function is to police the company's media buys, not to meddle in the brand groups' media mix decisions or many other aspects of media planning.
I have seen and still see this separation of powers, whereby the media planning function at the advertiser level is merely an advisory one---operating on a when asked basis--- to assist the brands on basic media matters. If the media people intrude onto the brands' turf they risk their necks---even if they are right and the brands are wrong. This is why media, at the agency client level, should report to top management, not to the senior marketing person who, in reality, is a super brand manager and biased in their favor. Until that change is made and top management takes media more seriously as a strategic asset, not merely as a tactical one dealing almost exclusively with buying execution, little will change.
Ad agencies could start charging by the hour for the media, traffic and accounting deparments services. Over the years, I have worked on some accounts which required dozens of changes for a variety of reasons - change in strategy, change in budget, creative wasn't ready in time, etc. The fees they paid were a bargain compared to amount of work that the agency did.
Perhaps, if clients knew realistically how much time was spent on planning, buying, maintaining and reconciling a media campaign, they would see why they need to pay fees.
I look forward to their report on procurement departments/agencies.
Some global CPG companies have a 150-day payment period clause. The media generally has a 30-day payment regimen, and traditionally the agency has 45-day client payment conditions.
A 150-day payment clause in the media agency contract would effectively mean that the media agency is acting as a bank for the client. While come global agencies MAY be able to cover this overhead in a low or zero-interest rate period, if/when interest rates return to historical levels, the industry would soon be out of business.
Of course I would assume that such CPG companies would, in the interest of fairness and equality, accept that consumers could take their products home from the supermarket without on-the-spot payment and trust that the consumer would send a cheque in five months time.
Plenty of blame to go around on this one. Advertisers claim naivete, because they decide to commoditize all media. They charge agencies with buying as cheaply as possible, and ding them when they don't use programmatic, trading desks, or any stratagem to achieve that end. They also look to pay agencies as little as possible to achieve this goal. Large advertisers should know better, while agencies look to make money wherever possible given the charge by advertisers. But, no one looks at the end game, and whether the advertising is effectively placed, appropriate to context or user behavior.
Until it doesn't work.
Now all of a sudden it's the agencies' fault because they tried to make money in non-transparent ways, which is somehow against the unspoken agreement that agencies will always work on clients' behalf. The publishing ecosystem is complicit because they seek to sell off inventory as commodity and play into both the agency and advertiser directives.
Still, no one is talking about paying a valued price for effective media, and the expertise to find, place and monitor it.