Why media agencies need to change

Give a group of executives from media agencies the right forum and it seems inevitable that they will come round to the subject of their status and role with clients. They should be “strategic leaders”; they should be “consultants to the marketing directors”; and some even talk, naively and somewhat arrogantly, of “owning the relationship”.

 The subject was debated at the Venice Festival of Media this year and it’s sure to come up in one form or another next year too. I understand this – sort of. Having started my first media agency in 1972, when the fight for recognition of media’s importance was just beginning, I’m happy to compare the chips on my shoulder with anyone’s. But that fight has long been over.

It is surely irrefutable that, when it comes to traditional advertising (paid- for ads between editorial written by paid individuals), then the media agency is still best placed to answer the important “Who, when, where and how often?” at the outset of planning a campaign. And yet, there are five good reasons why, good and successful as they undoubtedly are, today’s media agencies are unlikely to sit at the client’s right hand.

1. Procurement: The reality is that most media agency chiefs are worn down by procurement people. If clients were anywhere near properly valuing their strategic input, they wouldn’t let their procurement department have their media agency by the cojones.

2. Resource: On paper, the big media agencies have incredible resources, but they are really extremely lean organisations. And in this climate they are going to be leaner. The integrated, cross-platform campaigns that should now be the norm are not, because they are extremely time-consuming to bring together properly.

3. Inclination: The agency world is staggeringly reactionary and has been for at least 50 years. It has been remarkably slow to accept every new development: commercial TV; satellite; freesheets; commercial radio; the internet; and, of course, media agencies. With only one exception (Saatchi/Zenith), the big groups took 18 years (yup!) to get it. And despite their history, media agencies themselves are reactionary.

During Dell’s giant review last autumn, Ad Age quoted Casey Jones, vice-president of marketing: “Agencies give no more than lip service to wanting to be partners. If I have a marketing problem and say ‘What do I do?’ an ad agency says ‘Advertise’, a PR agency says ‘PR’.” I’ve been hearing that for so long it’s depressing.

4. Incentive: It may seem controversial, but it is incontrovertible that with so much revenue coming to the majority of media agencies on the basis of surcommissions (opaque incentives from media owners to attract volumes of business), it is extremely difficult to offer the true objectivity that the client would expect from a consultant sitting at his right hand. If the client paid a fair price for the media service maybe this problem wouldn’t exist. But they don’t and the vast majority probably never will.

5. Talent: While there are undoubtedly talented people in the media sector, there is no strategy or commitment to consistently attract the best young talent and push it through the organisation. I’m not a blind fan of MBAs, but MBAs who’ve had the edges knocked off – and preferably tasted failure too – can make a real difference to an organisation. And if the industry still says they can’t afford them, then they shouldn’t whinge about their own absence from the top table.

However, the message here is not intended to be one of doom and gloom: the message is “Get real and play to your strengths”. So here’s my advice: as huge trading businesses you are not going to be really at the top table as consultants. Don’t waste your time.

And as huge trading businesses, you’re not going to be free from procurement departments – forget it! In fact, although it may not seem possible, in this recession the pressure is going to get worse.

Yes, clients are happy to receive your advice as long as it’s free or heavily under-priced, but they will rarely bring themselves to pay properly while you are making money from them for buying their media.

However, there is an alternative business model and that is to develop your own revenue streams and become much more independent of clients. One route is to create or acquire your own content – marketable content. Most of the major media agencies are experimenting in this area.

There are no signs yet that these experiments are producing truly significant revenue streams and several of the claimed successes have in reality been developed by the media owner. However, there are spin-off benefits in know-how and insights and it’s still too early to judge if this is the right route.

When it comes to examining new business models for media agencies, the possibility of media broking should surely be considered. There has been a huge escalation in the supply of media time and space. This has led to a dramatic reduction in the average unit cost of media so that it is often disproportionately expensive to sell it – and (say it quietly) unprofitable to buy it. The recession we are sliding into will only exaggerate this.

In such conditions, the traditional resistance would surely crumble. Isn’t it time for one of the big media agencies to revolutionise the market? Your unpopularity would be guaranteed, but maybe the resulting profits – and independence – would justify it.

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