Tiptoeing Back into Deep Water

Brace yourselves! It’s time to tiptoe back into the murky waters of media buying, following my earlier post focussing on the let’s just say ‘misguided’ move made by Xaxis into becoming both a buyer and a seller of digital space, a topic I’ll be returning to.

As an equal opportunity dispenser of criticism, this time the Cog Blog’s all-seeing eye is drawn to a comment from ZenithOptimedia, whose Neil Ascher (US Managing Director and President of Diversified Services) responded to a piece by John Billett in MediaPost on agencies allegedly not passing media owner rebates back to their clients with the following:

“….advertisers have no one to blame but themselves. Procurement departments with little understanding of what their marketing colleagues actually require of their agency have squeezed so hard on compensation that the staff required cannot be afforded.”

Ahah, it’s all the customer’s fault. Let’s explore this a little further.

Agencies have for very many years undersold their (usually excellent) planning, research and analytics capabilities, whilst at the same time focussing their commercial efforts on the increasingly complicated buying end of what they do. Ask yourself this: if faced with two options, the first of which involves some hard thinking (and hard negotiating with CMO’s and CFO’s) in order to demonstrate the true business value of communications planning and research; and the second involves toughing it out with the media suppliers (with no client anywhere in sight) in order to secure first a cheaper cost-per-thousand (however irrelevant such a measure might be) and second a rebate for the agency based on the agency’s total volume, which would you choose?

Why else would agencies go into pitches promising cheaper prices and lower fees, with the planning piece relegated at best to an interesting sidebar (albeit one with great potential to add value to the client’s business) and at worst as a device to justify the buy?

As previous Cog Blog posts have commented, that flapping sound you hear is of a number of chickens coming home to roost. Over the last few years clients have woken up to the fact that some agencies have not been wholly transparent when it comes to returning rebates. Furthermore, some have had a look at the many vices inherent in buying online space and have decided they don’t much like what they see. And they’ve concluded that if the game is all about money, it’s best for the procurement team to drive the money as low as possible.

If on the other hand the game is about adding value, acting as a trusted advisor, behaving more like a management consultancy (it wasn’t that long ago that Nick Emery of Mindshare was in the press comparing his organisation favourably to McKinsey – and he wasn’t by any means the only one), then the challenge is to get out there and sell the value of the service.

Whinging about procurement is just that – whinging. Some years ago now BJ&A was commissioned by the UK advertisers’ association ISBA (our equivalent of the ANA or the WFA) to do some work on procurement officers’ attitudes to the market research agencies (a whole other story). We found the procurement officers we interviewed to be serious, committed professionals who understood very well the difference between a cheap-as-chips commoditised service, and the service offered by a true, added value partner. Further we found them quite prepared to pay more for something that demonstrably added real value. The key word in that sentence of course being ‘demonstrably’.

ZenithOptimedia positions itself as ‘the RoI agency’, a positioning much lauded by the press and supported by the usual array of planners, researchers, and analysts. Yet it would seem, if we take Neil Ascher’s words at face value that his agency is beaten from pillar to post by those nasty procurement people who have his clients’ marketing managements so under the cosh that ZOG is forced against its will to provide services valued by the marketing team (but not it seems by the uninformed procurement team) for next to nothing. Thus the agency cannot be blamed if it earns a crust from media rebates.

Now, who would you say is to blame for that sorry state of affairs? Those doing the buying or those doing the selling?



  1. Pingback: Tiptoeing Back into Deep Water | asi - Advertising seminars and conferences for European media advertising and marketing

  2. Another insightful blog post. Rather than taking rebates, the agencies might consider a more entrepreneurial path to offsetting revenue lost to lower compensation. Also, I’m still waiting for the day that a media agency fires a client over comp. Those marketers who review and change agencies every 2-3 years would be a good place to start.

  3. Good piece Brian. The issue here is not the identity of the good and bad guys, nor whether rebates exist and who gets them but the straightforward challenge of open transparent trading. The Watergate scandal was never about the burglary but the subsequent cover up that brought down Nixon. The advertising media rebate cover up shows all the signs of some businesses heading for a similar fall

  4. Although I agree with your argument, there has to be some fair sharing of the blame. Advertisers are trying to have it both ways, by demanding to negotiate away any media inflation, and rewarding agencies on their ability to deliver below-market media rates (as evaluated by the John Billett et all!).

    The rebates exist, and marketers should either accept them as a reality, and then demand full transparency (while letting agencies keep a negotiated fair share). Or they should pay for what they want.

    I wrote an extensive blog post about this last year, which we also included in our book Z.E.R.O.: http://malbarda.blogspot.com/2013/06/the-media-agency-conundrum-advertisers.html

  5. Thanks for the comments. My point is quite a simple one – agencies have undersold their planning related services, have failed to convince the broad client organisation of the true value that they bring, and subsequently are seen by too many procurement people as buyers of a commodity. I agree that advertisers have to take some share of any blame – after all you reap what you sow at the end of the day – but as sellers you surely have to demonstrate the value of what you’re selling; or stop selling it.

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