These days, it’s a fairly well established fact that, on the whole, your media agency generates a bigger margin from buying your digital media for you, than it does from buying other ‘offline channels’.
There are a number of potential reasons for this. Higher up-front commissions as a proportion of expenditure. Mark-ups on low-unit, high volume incidental services such as ad-serving. Mark ups on other parts of the ‘technology stack’ used to trade digital inventory. Undisclosed mark-ups on the value of inventory.
Many people have been asking questions about ‘agency transparency’ across the last year. But a few of the smarter marketers I’ve spoken to realise that probing agency transparency only gets you so far.
They realise that agencies, like any business, are entitled to make money, and that some revenue streams will be more profitable than others.
They also realise that, by and large, agencies are working within contractual bounds signed by their own clients.
They understand that when it comes to digital media buying, the question is not just about how your agency is making money.
The question is: does digital advertising help your business, your agency, or both?
Obviously, the ideal scenario is that it helps both, in balance.
The agency makes money in a way that the advertiser can basically understand.
The advertiser knows that the agency is recommending expenditure in digital advertising for the right reasons.
And both parties can see that the investment is moving dials within the business of the advertiser.
So how can this balance be realised and maintained? In a world full of more data points than people can effectively deal with, this simple question does not have one easy answer.
But from the advertiser’s perspective, there are some watch-outs to consider.
Media strategy is becoming ever-more important for advertisers to understand and engage with
It is still regarded by some as a ‘nice to have’ preface to the media schedule, but this view is seriously outdated.
Interrogate the strategy of your media agency. Why are they actually recommending digital channels? What part of the overall strategy does it bring to life? Is the recommendation linked to other parts of the marketing ecosystem, as required?
Be wary of over-wrought ‘digital is better than traditional’ arguments from your agency; there simply has to be a more holistic view of the media landscape than this.
Be very cautious of any strategy that ‘aims to increase digital budget to XYZ% of all investment by XYZ Year’
This, in my experience, can as easily come from the C-Suite of the advertiser, as it can from an agency. How, in any scenario, is this strategic?
The digital world is so amorphous that to try and establish a set level of expenditure is meaningless.
This kind of target also gives the agency reason to pile money in to trading digital inventory and increasing its own margin, without due thought.
Don’t spread yourself too thin – either in budget, or in resource
There are so many opportunities out there in the digital world, it can be overwhelming.
‘Fewer, Bigger, Better’ remains an important discipline, especially when testing new things.
The agency is often very keen to cram multiple new, innovative ideas into a channel plan.
But you need to ensure that the campaign retains focus. You also need to gain clear understanding from the agency about potential on-costs, in terms of your team’s time, content development and production.
Beware of multiple measurement metrics, without clear aim
Agencies are becoming more highly skilled in development of measurement tools for their clients.
Often these can be in the form of dashboards, with lots of moving parts.
A common challenge we find when assessing such dashboards is that, for all their complexity and multi-faceted data, they lack direction, and cannot fully answer the simple question of ‘overall, did it work for us, and what should we do next?’
It’s great to have so many ways of understanding the media performance of a digital campaign, but when it comes to assessing how that performance has translated into business outcomes, always aim for simplicity.
What dial in the business are we trying to move: what is the small number of media metrics that will have most effect on this dial: how, then, should we report actual campaign performance in business and media terms?
Understand from your agency what is being traded direct, and what is being traded programmatically via a trading desk
Many clients pay agencies a retainer that covers a core team, including digital team members.
The digital team members are still involved in trading digital media in a ‘traditional’ way on some platforms, or for some types of trade – that is to say, person to person, via an Insertion Order or similar mechanism.
The clients also pay an additional commission (anything between 10 and 20%) for the services of an ATD, or Agency Trading Desk, that trades digital media programmatically.
Over time, the amount of inventory traded programmatically – and therefore, at an additional 10-20% commission – has grown.
We have seen some instances when working with clients where inventory that could have been traded traditionally by the retained digital team, at no additional cost, has been passed internally to the ATD, attracting the additional commission.
To be sure of a balanced approach and avoid confusion, you need to understand where the lines of demarcation are and agree them with your agency.
Ensure that you know your programmatic options
Your agency will naturally incline to the services offered by its own ATD (Agency Trading Desk).
If your agency is owned by a global holding company, the ATD offering is likely to be sophisticated and well resourced. Alternatively, independently owned agencies often partner with external technology suppliers to offer programmatic services.
Many clients sign contract addendums that allow the agency to utilise its own trading desk as a third party, on an undisclosed and, to an extent, a ‘set and forget’ basis.
It is important to realise that your media agency’s trading desk is not the only option for you to consider.
Every major agency holding company (such as WPP, Publicis, IPG, Havas) has different product options, offerings and companies in the digital space, as do a number of digital technology companies who are not owned by a major agency holding company.
Rather than sign your own agency’s addendum, you can choose to pitch this part of your business, if you feel it appropriate.
In addition, you have increasing opportunity to work with alternative models to the agency trading desk, such as hybrid arrangements that allow greater cost transparency, or drive the process yourself via in house or self-serve arrangements.
The definition of ‘digital media spend’, over time, is highly likely to grow
As digital media becomes threaded through every type of media channel, and as more traditional channels such as television and outdoor start being traded programmatically, the definition of ‘digital media spend’ is itself going to evolve.
Much of this is in the future. But the future isn’t that far away. It pays to get ahead of this curve and get the right framework in place with your agency suppliers.
TrinityP3’s Media Transparency, Performance and Value Assessment takes a holistic look at the operation of your media agency, assessing against best practice at every stage of the journey. It aims to give you the tools to improve the output of your media agency.
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