Divide and Conquer: The Future for Media Agencies – Part 3

02 September 2013

The last two blogs in this series on the future for the media agency have looked at the stresses between the public, planning led element of the organisation, informed by research and data, and the more private buying element driven (far too often often) by a need to make money for the agency as opposed to doing the best for the client. This final edition looks into how agencies might organise themselves differently for a brighter future.

In one way media agencies are a little like banks. Banks should be able to provide a helpful, central, even strategic role in their customers’ affairs – but any reputation they build up in that space tends to be subsumed by the behaviour of a few, who invent financial tools of such complexity that no-one understands them, no-one stops them and bingo – before we know it we’re embroiled in a full-blown financial crisis.

One proposed post-crisis solution in the banking sector is to separate the ‘good’ (in effect retail banking) from the ‘bad’ (the investment divisions). Perhaps the same approach might shape the future of media agencies.

The agencies’ problem is circular. They need a certain volume to be able to afford the talent and develop the tools necessary to understand and drive their clients’ use of all communication forms. But their clients keep seeing them as being primarily in the business of using their volumes to drive media prices down. As a part of this downward spiral of prices, clients keep putting agency fees under pressure (by reducing them, by imposing later and later payment terms and so on). Agencies thus find themselves looking for income from media owners or other third parties to supplement the lower fees from the client, in order to be able to afford the tools and talent that help them win the business in the first place.

And this is quite apart from having to bolster holding company margins at a time when other elements of the marketing services sector are under the same pressures, but generally without the unofficial income get-out.

Clients then find out about these unofficial income streams, fire the agency, call a review, and the whole farrago starts again.

The trick for agencies is to separate the buying end of what they do from the planning. Reposition themselves as something far closer to management consultants, but in the communication space. Charge accordingly for the advice they deliver and the plans they write.

Buying is hived off into a series of commodity, low cost businesses. It may well be that there will be clients wanting a pure buying service, and paying little for it. That’s fine – the buying group delivers a low quality service for a rock bottom price. But all the agency’s efforts, and those of the holding company parent goes into selling the high-end planning and consultancy service.

This end of the business delivers advanced communications planning and related research services at a higher price. If (as will generally be the case) the client wishes the planning agency to take the plans through to buys then that’s fine too – the planning side goes ahead and commissions whichever buying team they like, negotiates a price with them, and pays them out of the fees received from the client. The client relationship remains purely with the planners – the buying relationship (and payment for that element of the service) is between planner and buyer. The planner holds the buyer responsible for every aspect of the delivery of the plan.

A number of specialist planning organisations will emerge from this model, justifying and charging a higher fee for a quality service. This has happened before. Remember companies like Michaelides and Bednash, and Naked? To an extent it happens now, with smaller agencies. In this more complex environment the time is right to reignite this idea across a broader canvass.

For many years the media agencies have feared management consultancies trespassing on what they see as their turf. This way they go onto the front foot – they become management consultancies but within the communication space and with all the resources of sister (or more distantly related) specialists at their disposal.

The major agencies will thus be able to take their place at the centre of their holding company’s structures, selling such as research and even creative services around their plans. The smaller agencies will claim a degree of creative independence absent (they will say) from the holding companies. There will be a place for both.

The future for the media agency will be as the hub in the centre of the communications wheel, being paid for the quality of their thinking rather than for their buying muscle. The order of events becomes: work out who you want to talk to, and where and when you want to talk to them. Only then work out what you want to say to them. And then, buy them. In this world the media agency becomes a true strategic advisor, helping brief, allocate budgets to, and evaluate all aspects of the programme.

Media buying and all that goes with it becomes separated, with any financial relationship between buyer and client removed. The heat is taken out of the situation with the media agency planning team responsible for the delivery of the plan. The rule becomes ‘buy to plan; not to budget’. Deliver what’s asked for, what’s required. Then stop and reinvest the money into such as research or data analytics. Don’t just spend to budget.

This is how the future might look. To do nothing except to continue to add specialists, make money unofficially and to be subject to a lack of trust from their customers is to condemn the media agencies to a circular form of hell, being paid less and less for doing more and more.

Later this week we will summarise these three blogs on the future for media agencies – and ask: “Are they up to changing?”