Media Agencies Plan for the Future

06 September 2013

Over the last three Cog Blogs we have been banging on about the future for media agencies. Is there one? And what might it be? Today we summarise the issues and propose a solution.

Media agencies have for some time now had the potential to evolve into a position as a trusted strategic advisor to their clients. It’s clear that this is a smart idea. But they face a number of problems and barriers along the way, not least of which is overcoming their natural conservatism in order to embrace organisational change.

The Opportunity

• The sheer number and complexity of communication channels makes agencies’ position as experts in understanding how consumers feel about, value and use these options a key one.
• The growing importance of data and the many ways of using what’s out there fits neatly into any media agency’s skill set.
• The lack of investment over many years in research agency client service teams means that most simply don’t have the experience or the expertise to deliver business-relevant solutions to client problems. A research vacuum exists that is waiting to be filled.

However – the media agencies have several problems to overcome.

The Problems

• Top management at their clients see them as buyers first, everything else a distant second.
• Agencies don’t think it’s right to be judged purely on price (hence their dislike of media auditors), and yet they struggle to convince anyone of a viable, accountable alternative.
• As buyers are two-a-penny, that element of the agency offering has become commoditised, and client fees reduced accordingly.
• Agencies have thus looked for income from third parties to supplement client fees.
• Clients don’t trust their agencies to be transparent in their handling of budgets.
• As the number of communication options has multiplied, the agencies have added layers to their organisations. Often these layers are in different parts of the organisation, sometimes they’re in separate physical locations. This does not aid the creation of integrated plans.

The net is that the media agencies are in the wrong game. They need to get out of a spiral that has fees reducing, third-party income increasing, and trust eroding. They need to get out of buying and into high-end consulting. This shouldn’t be impossible (there are many examples of media agencies delivering excellent consultancy services to their clients) as the problem is largely one of perception, particularly amongst senior client directors.

The Solution

• Separate the cheap-as-chips bit, the buying into a separate commoditised division. This applies equally to digital: digital strategists and planners join the planners in an integrated structure, digital buyers are in with the other buyers.
• (Continue to) sell clients the brainy bit as opposed to the brawny bit. But now justify the value it brings and charge for it.
• The client relationship stays with the brainy bit (the planners); they subcontract the brawny bit to whichever buying team they favour.
• The planners are fully accountable for the delivery of the plan – and for justifying the results.
• All financial dealings with the client are handled by the planners. The planners in turn pay the buyers.

What benefits would this bring?

The Benefits

• The client buys brains not brawn. Thus any assessment of value delivered has to be built around the power of the thinking, not the cheapness of the delivery.
• Any heat over transparency vanishes. The planner negotiates with his buying team, and pays them. The buyer has to deliver the plan within the budget; that’s all that matters.
• Over time the agency becomes known for the business relevance of its plans and ultimately becomes a trusted advisor.

And finally, will the agencies actually do any of this?

The Bottle

• Agencies are fundamentally structured much as they were 40 years ago. All that’s happened is that there are now more supports to planning (like data analytics), there are more things to buy, and accountability is more direct. Specialist silos have flourished at the expense of integration.
• Ironically in their early days the media agencies had to fight to justify linking planning (initially thought to be more at home within the old creative agencies) with the buying. Now, with buying so complex (and so tarnished) the time has come to hive off the buying whilst becoming known for the planning.
• To do what is proposed here takes confidence – the confidence to charge for thinking. The original media agencies had confidence in spades.
• In today’s world of holding companies and quarterly earnings one might wonder if they still do. Yet the holding companies rely disproportionately on the media agencies for profit, and so any change in income has far-reaching consequences.

At the end of the day the agencies have to change the game they’re in (or, the game they’re seen to be in). They cannot continue to be paid less and less for more and more.

The question is less will they change; rather it is can they afford not to do so?