2016 was, generally speaking, a difficult year for the world. Brexit, the US election, a number of iconic world figures dying, and various natural disasters, have not made for high levels of morale or happiness.
So can we at least spread a bit of cheer in our tiny little corner of the world, that of the marketing industry? Unfortunately not; the past year has given us very little to cheer about.
If advertisers are looking for some relief from the challenges and issues of the past year, I suggest they make sure they are well rested going into 2017 based on the biggest issues we have noted in 2016.
All signs point to the fact that these issues will continue to challenge the market place right through this year and possibly next.
Media Transparency rockets to the top
Is it any wonder? Consider that this was the year in which the USA based ANA released the finding from the K2 Study into media rebates and kickbacks in the USA and across the Atlantic, their equivalent in the UK, ISBA released a media agency contract designed to address the issue of media agency transparency.
More recently, the AANA has followed suit with a contract of its own. Whilst it’s good that steps are being taken to address the problems, it’s pretty clear that the problem itself is wide-ranging.
But consider an advertiser who is investing any reasonable budget in media and especially programmatically traded media through their media agency. From the K2 report alone, as well as work done by the WFA, there has to be a tangible recognition that for every dollar you are spending that only an estimated 40 cents of this is reaching the media publisher and that this could be as little as 10 cents in some cases, with numerous intermediaries taking their cut along the way.
Combine this with the issue of viewability and the fact that the ANA further reports that around 50% of paid digital display advertising is not actually viewed by a human-being either because of limitations in the system or fraud. The solution offered by some agencies is to guarantee viewability at a much higher cost with a significantly reduced range of inventory available.
I’m not suggesting that intermediaries shouldn’t be paid, that media agencies aren’t trying to tackle some areas themselves, or that media agencies should not be able to make a profit.
But surely, people are telling us, there needs to be more understanding before purchase, other than ‘buyer beware’. Advertisers will have to definitively address these issues in 2017 as CEOs and Boards question the logic of continuing to invest in a media channel that has so many questions hanging over it.
Rumour of new issues arising
We’re now hearing rumours that some media agencies have found new ways of generating additional income beyond fees from their clients and rebates and kick-backs from the media publishers.
Apparently the payments are moving from under the table to being right in front of the industry with some media agencies rumoured to be charging media publishers “consulting” fees to organise and facilitate meetings with their clients.
Interesting that at a time when advertisers are wanting to develop closer relationships with the media publishers the media agencies have possibly found a way to cash in on this and have the media pay for the pleasure.
You could argue that this should be the role of the media agency anyway; or that perhaps there is nothing wrong with this if it is completely transparent to all parties. But the fact that it is simply industry rumour and grumbling means that perhaps it is not as transparent as some may want us all to believe. It’s going to be fuel to the fire of negativity, which is really not a great thing.
The problems between advertisers and their agencies
Which draws my attention to the other issues that topped this year. The next being client / agency relations, which is evidenced by the recent public complaint of the CMO of one of Australia’s largest advertisers, Telstra, when Joe Pollard complained about the way agencies struggle to work together.
Is this really a surprise, when so many agencies, even within the same holding company, are in open competition with each other for a share of the advertisers budget to meet the constant demands of their own P&L expectations? Diversification of service offerings has and will continue to grow, which means that the grey areas are only going to get harder to define with any clarity.
The fact is that to create a collaborative working environment between agencies takes time and effort on the part of the marketer. It is not enough to simply wish they would work together and it will magically become so.
Even when media was part of the advertising agency there were tensions inside the agency that were simply hidden from the marketers, but they were there and often resolved by what was best for the agency (i.e. Winning creative awards versus Media revenue).
Today the issue is far more complex with the constantly expanding range of specialist capabilities required by many marketing strategies meaning that marketers are now trying to juggle larger rosters of agencies who are all competing for more than their share of the marketers budget.
So if you think client / agency relationships are at an all time low, then it is possible that they will get worse because agency / agency relationships are also at an all time low. Which brings me to the third biggest issue of the year and that is the money.
The root of all evil is the money
Agency remuneration, or as the Americans call it, compensation continues to be a challenge.
Clearly media agency remuneration is not working, because the media agencies have been turning to the media publishers for revenue growth. At the end of 2016 there were rumours that some agencies had found ways of bringing the rebates and kick-backs into the open with proposed fees to be paid by the media publishers to the media agency for “consulting” on meetings between the media publisher and the media agency’s clients as mentioned earlier.
The concern for advertisers must be the impact that these arrangements have on the strategic advice provided by their media agency. Sure the cost of the media agency has dropped over time, but now who is that agency working for? Is it the advertiser or the media publisher? The Golden Rule would say that perhaps the media agency is again the agent of the publisher who is providing the cash.
Meanwhile on the other side of the mix the Justice Department in the USA has recently begun an investigation into whether advertising agencies are rigging production bids to their own advantage, clearly showing that as advertisers move away from retainers, agencies are looking for other ways to increase their income and revenue streams.
Working together to solve the problem
The fact is these three topics are like a Gordian Knot. Agencies are competing with each other for revenue. Advertisers are relying on more specialists to work together. And media agencies realise they no longer have to rely on their client as their main source of revenue.
Can any one advertiser solve this mess?
It didn’t happen in 2016, perhaps this year holds the answer; I wish I could be more positive, but I think we need to be prepared for some further fall-outs along the way.
An abridged version of this article appeared in AdNews on December 12, 2016
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