How brands lost confidence in media buying

Media agency consolidation and margin pressure from procurement departments mean kickbacks take precedence over clients’ interests, while online media buying still isn’t transparent enough, says Bob Wootton, principal of Deconstruction Consulting and former ISBA director.

Media buying

In the halcyon days, business was both simpler and moved much less quickly. The concept of an agent or agency was clearly understood. It was, as per the dictionary definition, “a person or business authorised to act on another’s behalf”.

To this were added the explicit understandings, perpetrated and perpetuated by all parties, that an agency did not work for conflicting companies and always acted in the client’s best interests. Business then sped up and advertising fragmented into specialisms (notably the separation of media from creative), which consolidated under a few holding companies.

The conflict scruple went first, especially in media agencies – there are more advertisers and simply not enough suppliers for one to service each client. Even those advertisers who were historically most phobic towards conflict have had to yield to this fact of life. How happily is less clear.

READ MORE: Restoring client-agency trust requires new media auditing standards

In parallel, driven by the march of the procurement discipline, agency margins were squeezed. The agency groups reacted by consolidating their media trading functions. Thus were the media trading arms born: WPP’s Group M, Omnicom’s Opera, Dentsu Aegis’ Amplifi, Publicis’ Vivaki and Havas Media. Crucially, all the holding groups are publicly quoted and subject to the whims and vagaries of the markets.

These businesses traded volume of spend against prices and quickly became dependent on maintaining their trading volumes. The clients’ procurement people realised they could leverage this further to depress prices.

Despite consolidation, agencies ended up competing for business at absurd, unviable rates. I doubt many major media accounts are intrinsically profitable today.

There are many talented, committed people in agencies who try daily to delight their clients, but most now know they must change orientation if they aspire to management.

So they sought alternative sources of income. First was to charge incrementally for anything outside a hard-fought and unprecedentedly narrow scope of work. Second was to seek kickbacks from media owners, a longstanding practice that accelerated wildly.

This is turn started to skew their media recommendations, with budgets being swung to those media where they were falling short of their contracted volume commitments or to those which offered the highest margin.

Hence the rise of online, whose more complex value chain comprises numerous additional actors, each of which can either kick back to or even be owned by a media agency. Fortunately, online had two good stories to peddle – cheapness and return path data.

But so much for an agency operating in its clients’ best interests.

Hold online media buying to account

There are many talented, committed people in agencies who try daily to delight their clients, but most now know they must change orientation if they aspire to management.

Online media have enjoyed a meteoric rise over the last decade. Google is the only player in search and, alongside Facebook, dominates online advertising. They also have a very ‘modern’ attitude towards business:

  • They are low-cost media businesses as they create little or no content. Their millions of users do that for them.
  • They’re not alone, but they have a well-documented and very ‘international’ approach to tax. ‘Double Irish’ and ‘Dutch sandwiches’ are not treats to be enjoyed when travelling but questionable (and legal) tax treatments involving multiple jurisdictions.
  • They clung to the “hey, we’re just a pipe, man” mantra for years while torrents of unsavoury content circulated on their platforms, sometimes with reputable advertisers’ content unintentionally adjacent or within.

The Times’ recent dogged exposé brought this to a head, with many leading advertisers (over 250 at the last count) withdrawing or threatening to.

Expect to see a lot more of this kind of exposure from other media, whose lunches have all but been eaten by the big online players and who have finally woken up to how to use their albeit dwindling power to retaliate. Broadcasters are already reporting an upturn in revenues as advertisers divert from YouTube.

READ MORE: ‘Digital media is a buyer’s market, but that doesn’t make it a good deal’

The online players have until now also eschewed the scrutiny which other media channels have long submitted to. Recent events have forced them to adopt independent audits of viewability, actual viewing and brand safety. Long may this continue and spread.

Beyond online, many media are repositioning themselves as ‘programmatic’ when they are barely even automated, so that they’re seen as modern and competitive.

They risk ridicule as they forget that most advertisers use and understand what programmatic does (even if they don’t necessarily all understand precisely how it does it). There’s a lot more ‘talk’ than ‘walk’.

But none of the above speaks into one of life’s and business’ key necessities: trust.

It’s never been more important for advertisers to be firm in their dealings with agencies and the media. Some key things to consider:

  • Does my agency actually make a living out of what we pay them?
  • If not, how does it do so?
  • Are the media plans being put to me truly neutral and impartial?
  • Are all my media plans and buys supported by credible, independent metrics?

The initiative rests with advertisers. I could name a few really good people who get all this, take a keen interest, manage it to get great value, and reward performance from their partners.

It’s your company’s money. Shouldn’t you be spending it as wisely and, ideally, as if it were your own?

Bob Wootton was director of media and advertising at ISBA and is now principal of Deconstruction Consulting.