Media specialists being held hostage by commodity cycle

I’m told by those in the know that Starcom has been put on notice by its biggest, and arguably most loyal, client Procter & Gamble. Before going further, let’s make something clear. Being put on notice (usually 90 days) falls well short of being forced to repitch, still less being fired. It’s a means of signalling severe displeasure on the part of the client.

There are concrete grounds for suspecting agency and client have not been getting on swimmingly in the recent past. Little noted over here was the “China affair”, which broke midway through last year. P&G is reputed to be China’s largest advertiser, spending over $1bn a year; and it was Starcom’s biggest client on the mainland, accounting for tens of millions of dollars in fees. In May 2009, P&G abruptly announced that associate director of media for Greater China J “Pon” De Dios (immensely experienced, the Bernard Balderston of China you might say) was leaving after 14 years without a job to go to. Shortly after, P&G upended media buying in China by taking all negotiation in-house (no light undertaking for a client, however sophisticated, and all the more surprising given the departure of its main man). It also stripped Starcom of its non-TV planning and buying duties (about one-third of Starcom’s P&G China business) and reassigned them to Mediacom. No wonder Publicis Groupe (which owns Starcom) has been underperforming in China recently.

At least one commentator has claimed that P&G’s shake-up was instigated by “legal matters rather than the performance of the agency”. This controversial theory is not inconsistent with another one – that P&G, along with other major clients, has been squeezing its media agencies until the pips squeak.

There’s certainly plenty of evidence of a cost-cutting drive, despite the resilient dynamism of Asian economies. Here’s Mohit Anand, P&G Philippines marketing director, explaining – at about the same time – why he felt compelled to award his buying agency, Mediacom, additional planning responsibilities (which were previously handled by Carat):

“This change is consistent with our global P&G thrust to drive simplification and scale in our operations. Beyond this move, we will be evolving our current dual-agency set-up whereby separate agencies handle media planning and media buying, respectively.”

There’s nothing wrong with that, you may object. Why shouldn’t clients pass on some of the economic misery to their agencies? Well, this process, which goes under the euphemism of “agency consolidation”, is eating into the marrow of the media agency business to the extent that it has become counter-productive for clients themselves. Value is being confused with price, and that price is going down all the time as roster concentration and ever-slimmer fees take their toll.

It’s not too far-fetched to draw a parallel here with the full-service agency of 35 years ago. Then too, media was seen as a commodity. The media director was regarded as a lowly specimen in the agency hierarchy – the “gorilla with the calculator”, to be wheeled out once the suits and creatives had sealed the deal with the new client.

The advent of digital technology, or more specifically multichannel television, changed all that. Only gradually did it become apparent that the media director held the key to understanding this unfolding landscape; and that media planning was going to be at least as important a component of future revenue streams as account planning.

Quite a lot of media business disappeared into the hands of specialists such as Carat, Chris Ingram, John Ayling, Mike Yershon and John Billett – who were smart enough to merchandise their skills independently – before the penny finally dropped (at Saatchi & Saatchi) that full-service agencies would have to do some unbundling of their own if they were to maintain any kind of grip over the media element of their revenue stream. Hence the birth of Zenith Media in 1987, a “media dependant” whose template was adopted near universally by other agencies over the next few years.

As full-service agencies insensibly dwindled into “creative” agencies, so media agencies began to inherit much of the communications thought-leadership formerly associated with “full service”. It was they who successfully branched out into TV sponsorship, branded entertainment, consumer insight and the like, adding value to their core planning, buying and negotiating skills.

The nemesis of this media-specialist golden age has been procurement, a phenomenon that predates the rigours of the present recession by some years. Nowadays, a Dutch auction is the name of the game, with the lowest bidder hauling off the biggest prize. The largest media pitches seem to be won on price, rather than any mental acuity agency personnel can bring to bear on a client’s business.

Inevitably disappointment is the result, guarantees are breached, corners cut and the whole process descends into a vicious circle, with another round of pitches, more “consolidation” and more discounting.

Is that really cost-effective? Certainly not for the agencies concerned. Beyond the obvious problem of loss of revenue, there are the high expenses associated with running a pitch, and moving business from one agency to another. There’s also the intangible impact of staff demoralisation to consider.

But this game of churn, or beggar-my-agency’s-neighbour, does little to help the client either. It consumes a lot of management time, but returns little by way of consistent service or insight. In the end, everyone’s a loser.