Media agency remuneration: It’s the smaller nimbler agencies which will thrive
As huge changes blow through the Australian media agency landscape Nikki Retallick argues the smaller more collaborative companies will be the ones to thrive.
It’s a great time to be in the Australian ad industry. The winds of change are blowing. With the recent launch of Department212 and the success of earlier start-ups such as Bohemia, there’s some real momentum towards the rise of the independent, performance-based media agency.
The big agencies are starting to follow suit, having seen the ‘race to the bottom on price’ hit their bottom line. It’s all about delivering measurable value now and being able to move the dial on the clients’ business.
Last year, IPG Mediabrands announced they’d be moving half their clients to some form of performance-based metric as part of their remuneration model, with global CEO Matt Seiler saying “it’s time for someone to take responsibility for clients’ total business outcomes.”
Nice piece. And she will always be Nikki Retallick to me.
Nice article! Interested to see how these changes will impact the publisher/network side of digital. Also, I see a lot of agencies quoting that they have hired analytics specialists, mathematicians and ‘NASA’ qualified staff for their programmatic…. this is purely a marketing play to clients as the grunt work in data/programmatic will come from the RTB/DSP platforms themselves. Agencies will have to add value by getting back to basics and adding value to clients… and I believe this would include minimising volume deals and being open-minded to new technologies and solutions in market.
“with the advent of automation, potentially any buyer can access the same pools of inventory as the media-buying powerhouses.” perhaps, but at what PRICE Nikki??
The basic business principles around volume and its relationship to price, won’t disappear just because of automation of the transaction process, or the increased visibility of inventory.
If you think “Scale itself is no longer the differentiator” then what you are saying is Woolworths can’t buy a media spot cheaper than my local pool shop.
I humbly disagree.
Unfortunately, no proof points are offered to support any assertions. And I wish contributors would stop insisting clients are the smartest people in the room (“Clients are increasingly demanding agencies be agile, data-driven and creative.”) 98% aren’t, so how “clients” who have no internal data-driven strategy themselves or are light years for agile principals, can then insist on such requirements from agency partners is fantasy.
Hmmm, the ‘at what price’ would largely depend on whether the deal was done over an open exchange, a private exchange or a private marketplace – the beauty of programmatic trading is that it allows for all and any of these ways to buy and sell to be actioned. To your point, for sure those operations which can leverage scale will have preferential deals set up which continue to enable them to buy at better rates as well as reaping other benefits – I think we all know how it works. My point is that programmatic allows for a greater deal of efficiency and transparency around pricing and just like search did back in the late nineties, it will create enormous change in the way media is traded. Whether you personally or your organisation choose to embrace this change or not does not mean it’s not happening.
Richard Dirth – I still believe the smartest people in the room should be the agency and its partners and I also believe it is their job to educate the client as part of the service they offer. If as you say 98% of brands continue to lag behind, whose responsibility is it to create change?
Great article, and I totally agree with the direction you see the media industry going. I wonder whether smaller agencies have the tools, products and expertise to cope. Bohemia have done well, but they are backed by STW, so not independent.
Great article Nik
Agree totally with the fact this is the way the media industry is changing. Australia lags greatly behind the likes of the UK & US for embracing this change. I imagine for smart media planners it is scary and would expect that they are anxious about how they will fit into the buying piece of the puzzle in the future. For the not so smart ones this consideration hasn’t even crossed their minds. Its time to catch up, embrace the changing landscape and offer value to clients that isn’t price based. Agency groups that talk only in “price” terms will have a race to the bottom, agency groups that can turn the conversations with clients into “value” terms will reap the benefits through demonstrating it.