Advertisers are getting taken for a media agency ride
Never until now have I been part of a review team for an advertiser on media agency terms of business.
I have now - for several advertisers.
I have found a bundle of nonsense where the media agencies have wrapped up deals that exploit the inexperience of the advertiser for their considerable advantage.
Try these three for size
I have now - for several advertisers.
I have found a bundle of nonsense where the media agencies have wrapped up deals that exploit the inexperience of the advertiser for their considerable advantage.
Try these three for size
- First, is an agency, remunerated on the size of the discount delivered versus a norm. Sounds all right at first glance. But the norm is a variable feast that bears random relationship to an absolute price. So right now with media prices deflating, the agency is buying a higher discount and getting paid more, even though the client has had to cut the budget
- Second, is an advertiser deal (stuck in a time warp of media inflation) that has failed to keep up with the changing times. The agency performance related fee (PRF) is based on media price changes year over year. So right now, with that media deflation, the agency is raking in the dosh. And for what?
- Third, is an advertiser whose media prices have shown significant increase over and above any prevailing trends. Upon investigation the media agency is paid a flat planning fee and a media buying commission. The flat fee continues despite budget cuts and the buying fee has no PRF quotient. Looks like the agency is using this advertiser's budget to help finance better deals for other clients who remunerate the media agency more favorably
You suggest that value should be measured against a complete not partial market norm, yet pioneered the opposite. Advertisers were encouraged to believe that the value of media should be measured in pure price terms. Worse still that a sample of agency prices to make a 'pool' is the right comparison to perform against. This has led to advertisers believing that price performance against a partial pool (which doesn't have constant factors of stability) is the measure of success. This method of measurement was then leveraged into other media where the model is even more flawed.
Advertisers will only benefit when the easiest method of measurement, used for ease and for profit by so many is changed for a model that shows the true value of what they are buying.
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Thanks for the comment. Yes advertisers should benchmark their media performance in absolute terms in preference to relative terms. The problem is that no one knows what are the absolute prices charged by media owners. They keep that information private. Furthermore media owners have a vested interest in keeping all media buyers happy. So don't expect the seller to see things from a buyer's perspective. The only available alternative is data pooling of actual buys and then interpreting that data with both caution and sensitivity to give advertisers insight on prices qualities and a lot more besides. Yes we had to use samples. No apology for that. But we have tried to make those samples both large and robust and as representative as possible. Did we get it right always? No of course not. But we always made available information on the size scale and nature of the pool so that buyers and agencies are better informed on not only relative but also absolute performance. Media evaluation techniques are not perfect but are a lot better than the alternatives of media owner "partiality" and agencies "marking their own exam papers"
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