What your media agency might not be telling you

Great article, and certainly (opaquely) very true.

I firmly believe in agencies being properly remunerated.

The dive to the bottom hurts everyone.

A very interesting, obviously clearly by-no-means could be anything but hypothetical piece.

Of course none of these things are happening and ad agency holding share prices are going north in a terrible global ad market purely due to intangible market silliness not due to creative extraction.

Great article. Raises some curly questions doesn’t it?!

Hmm. You should go and talk to the CFO of XYZ agency. An even bigger one than ZYX.

As media buyers, their ENTIRE profit is actually made up by Media owners underbilling/forgetting to bill the clients. All you need is a small percentage of bookings to not receive an invoice

After all, “Sorry Mr Media Proprietor but we are waiting for your invoice” said no ad agency. Ever.

Great article. The race to the bottom has a flow on affect that hurts everyone involved. With less excess revenue for development & innovation, the whole industry slows.

Good to see this issue come into the public domain.The industry needs a massive shake up. I fear that even if clients did demand true transparancy, media agencies would simply find a new tact to weazle away hidden commissions and rebates from the media

It ** sometimes ** astounds me that clients even use a media agency. Most media owners would swim up a river of crap with their mouth open just to have direct client relationship and cut out the agency.

This whole remunerate by % of spend model supplemented by hidden extras and questionable performance bonus metrics model should have died long ago.
We should take a leaf out of the legal profession’s book – charge by the hour in six minute increments and charge for processing of every email or document – both highly transparent and highly lucrative………may also make all meetings shorter and more productive, and cut down on the amount of back and forth email correspondence…..

Very much in line with the State of the Media research TrinityP3 & MediaScope recently undertook where results and a panel discussion were presented in a session at Mumbrella360.

These are just some of the worsening ‘symptoms’ stemming from issues surrounding procurement and remuneration which is impacting everyone involved in the media value chain.

It is very good to see awareness and debate building around these major industry challenges – as it may just be the start of a cure….

As Darren (from TrinityP3) commented during the Mumbrella360 session when asked about a solution – ‘He who owns the gold makes the rules’.

Don Draper – nail : hammer : head. I have always wondered why the hell would somebody use an agency? Agencies are a waste of time, for example I am dealing with a big Qld client, spoke to their not so big agency. Agency doesn’t return emails/calls refuses meetings. I go direct to client and within 7 days a handsome 5 figure deal is done. My suggestion bypass the agency at all cost.

Don Draper – I don’t think most people would question that a media agency can add value to a client (I believe they do on most occasions) … it’s moreso that the under the table economy the agencies have forced upon the rest of the media industry had made it very challenging.

A Harsh Trifle raises a good point – however that would force clients and agencies to actually be efficient with their time and requests … a very challenging thing to do in areas with a huge lack of rigour.

Interesting – the relentless drive to the bottom in terms of costs is something that is unfortunately impacting all businesses not just the media agency.

Fantastic

Margin squeezing inevitably leads to marginally honest behaviour. If the writer would care to share contact details I’ll explain an honest way to increase profit easily – that clients will love.
toby@tobyralph.com.au

“it’s moreso that the under the table economy the agencies have forced upon the rest of the media industry had made it very challenging.”

Shurel you mean the way that clients have decided that strategic marketing decisions matter so much to them that they are willing to let procurement departments decide pitches on things like payment terms & reduced rates?

C’mon multinational media agencies.
Where are the denials?
The silence is deafening!

love it. Spot on Nic, agree with it all, especially around DSP’s – what should be an opportunity to level the playing field has now become an opportunity to gouge.

Great article. I read all 4,000 or so words.

I appreciate it that all are complicit in some ways – clients, agencies & media outlets.

But can I say that it all starts with clients who screw media agencies. I bet that they don’t operate on a 2-3% margin!

Great article thank you.

Does anyone know, hypothetically, why media/creative/comms agencies don’t advertise? I may be naive in asking, but it does seem odd they don’t practice what they preach – kinda like an accounting firm not balancing their own books?

As a media owner, this confirms why we try avoid media agencies altogether when possible. Client ROI does not seem to be a motivation for a media agency to book space for their clients, and this article would support our main fears.

Media agencies operate in a broken model and do need to focus on these other areas to make money and survive. Hence the obsessive drive to digital and blind reliance on claimed CPM of media despite really dubious ROI in many instances.

Any agency, be it real estate, personnel, IT, media, etc are filled with subject matter experts who are passionate about their industry and this expertise should simply be paid for on a head hour basis to avoid these conflict of interests. I know its a romantic thought, however it is the only way all behaviour is optimised across all the stakeholders.

Watch out xyz. Clients are getting smarter and it’s a stone’ throw away from them buying media themselves. This happened to ad agencies when they tried to creep back losses too.
Digital might be a nice earner but software is available to allow clients to bid on space themselves, self-serve.
Just like clients buying a Mac at Dick Smith and downloading Indesign to do their own art. They keep brand ads with the master agency but do the smaller stuff themselves… which adds up. Yeah their ads look ordinary but procurement is happy. They can’t tell the difference and the brand damage isn’t their department.
Media is much more tangible and easier to manage.
Be careful.

And where is the MFA providing “standards” for the industry? Silence….

Clients will always eventually reap what they sow. This is one of the best examples.

I wish I had some sympathy, but my experience of media agencies is a nightmare. I’ve never dealt with more ignorant, window licking morons. They also give all the money to their mates – the ones who take them out for drinks and nice food. And when you go over their head to the vendor marketing managers, they come back to you lying their arses off about how they’ve selected you for budget. All the time. Every agency. Absolute parasites in the media industry and yet the most powerful for so long. If they’re struggling and on their way out, then good.

wow – you went there! I think you’re pretty spot on – well researched, well written but most importantly very courageous (Minister)

@Nic Halley I actually think DSPs are the least of the problems, especially when you consider they replaced ad networks which had even higher margins and less transparency.

I also disagree with the notion that this corruption is somehow acceptable because agencies get squeezed on margins. Every business has to compete on price. Agencies have failed to communicate how clients should hold them and their rivals to account. No one has had the balls to have these difficult conversations. Instead, they have taken the money through deceipt. This corruption goes all the way to the top of some giant global companies whose CEOs should hang their head in shame.

Google are pretty much the only major publisher that are not complicit. Props to them for not bending over. If one TV network becomes dominant, will they still play ball?

Hypothetical or not???
Have worked in media agencies, have audited media agencies, have evaluated the prospect of new business RFPs, have scutinisd media agency processes/practices, have provided input into media agency contracts.

Have seen each one of these scenarios in varying degrees, across various agencies/clients across three decades.

Nic has embellished the hypothetical to write a great article that is closer to reality.

So true. the 3% comes down to the biggest boys bending over further than all to take the business, then screwing the publisher. Like Woolies and Wesfarmers. Who in AU media is comparable to these two? Can’t possibly imagine..

I have often wondered why the (edited by Mumbrella for legal reasons) seems to be the almost exclusive domain of (edited by Mumbrella for legal reasons)’s clients.

Seriously. If (edited by Mumbrella for legal reasons) are buying space in bulk from (edited by Mumbrella for legal reasons) and then selling it to their clients to pad their margins – how is that in any way ethical? It’s like a financial planner that you go to for advice. Only the advice that you get is to invest in the fund that earns the most for the financial planner.

It’s deceitful at best, and someone from the ACCC should be looking into this, as I would suggest that is a breach of the trade practices act.

I use to work in one of the biggest media agencies in Australia for 6+ years. I worked in the search side of the business but working in a big agency you work directly with digital, tv, dsp ect ect…

The thing is many of these Media Agencies who offer 2% fee on search account of 20 million account shoot them selves in the foot, because the thing is they offer poor quality service and the client then realizes what is actually happening with the account as they only have 2 people servicing a big account. They leave the agency and then look for a higher cost agency higher quality agency but then again they run into the same issues.

I have seen big agencies working on big accounts, do very well in regards to results and the clients loving to work. They account goes up for a re-pitch after 3 years. another agency gets the account because they are willing to drop the ball on comm’s and service fee’s and you loose the business.

Awesome article. Great controversy. Let’s have a heated debate

Firstly, a fool and his money
If clients don’t know what they’re buying then they deserve the fleece
Seriously any client that puts the procurement guy in charge of media like this deserves their bag of skipped ads and shit clicks. Sure they drive a deal but it comes with a dull finish

Second, too good too long
Media owners and agencies consolidated long ago. All owned by too few moguls. So too big to fail media is losing its relevance. Great. Local young risk takers still putting out good work anyway. Buy fresh

I’m afraid it’s today’s world… And every side of the media industry is guilty of creating it.
It’s the narrow sighted chase for short term growth that all businesses are looking for
Clients want to pay less agency fee’s to tell the board they saved some money,
Media want to charge more as revenues are dwindling so they will do all they can for short term share,
Agencies will do all they can to win new business for the headline and some so called ” momentum” that hopefully sees them growth in a shrinking and crowded market
It’s sad but its a sign of the times in pretty much every industry, people screwing over other people for short term gain.

Clients giggle along with their media agency friends all the while treating their ad agency like sh*t.

Who’s laughing at who?

Wow.
*This* is the sort of stuff that makes Mumbrella so good…
Top marks.

@ Media Money – I work on the digital so so its in the DSP space that I am seeing most of the skulduggery. And agree with you on the Ad networks.

So what about Creative Agency fees? Clients don’t get any disclosure on the cost. Why does a 30 second cost $500k to make? What is the true cost?

At least I know the break out commission earn from media agencies. Creative give no mark up disclosure.

Please help us understand!

As a company that specialises in ad agency audits (we are all former ad agency finance execs, so OUR audits are effective and we are able to cover all types of agency including media, creative, digital, etc), I can tell you there are a couple of “bottom line” things we always tell our (prospective) clients:
1. These days, every client has a local, regional or global agreement in place (rather than the “days of old” when everyone had the same contract, just with a different service fee). However, agency finance departments are so busy with internal reporting deadlines that, quite simply, they just don’t have the manpower to monitor compliance with EVERY client contract. So, it stands to reason that they will generally focus on those clients that audit. Interestingly, most contracts contain an Audit clause, yet only the big multi nationals seem to implement these audits. So, if you don’t audit ….why not??
2. It is extremely important to get the Contract’s wording right so that it protects all party’s interests, clearly states how the agency is to earn its income and promotes transparency

Having worked for both Media Agencies and client side, I can say that media agencies are constantly trying to cheat the client.
I’m still amazed at how Media Agencies pay big money to kids who dont even know anything about their own line of work and who are supposed to be our marketing and advertising consultants.
To top that it’s super evident how they rob us by taking our money and giving us no service in return. The only thing we have gotten so far is a broken system which we need to fix ourselves. 2 or 3%, if they couldn’t do the job, they shouldn’t have said yes.
Loved how Media Agencies tried every trick in the book to cut costs from their employees from outdated PC’s to changing the toilet paper from the good kind to the horrible kind.
all in the name of saving a few bucks.

“changing the toilet paper from the good kind to the horrible kind”

not sure if it still happens but it did a few years back.

One thing we have noticed about media agencies – more and more we are presenting our media product to a bunch of kids in their early 20s. They dress great, look sharp, yet you can hear a pin drop at the end of the preso – not one intelligent question from the lot of them – sometimes as many as ten in a meeting.

Compare this when you are challenged at every turn by the owner of the business or a direct client.

We prefer the challenge – at least we know the client is engaged, thinking about the product’s features and benefits and we are a chance of securing the business. Or at least getting a straight answer….

Not every agency, but it seems to be a disturbing trend.

Albert Einstein said ““If I were to remain silent, I’d be guilty of complicity.”

Not much response from the media owner side of the equation. Then where there have been comments, the issue raised is another facing our industry….the responsibility placed on junior personnel to make multi million dollars decisions.

….sooner or later this practice is going to up-end one of the big marcomms groups. Just wait and see

Can we get some comment from Media Agency people? Anything?

@bob is a rabbit – The media agency people aren’t saying much because they have very limited ability. Young kids who don’t ask questions just process orders, im glad they get paid accordingly.