David Indo and Tom Denford are joint founders and CEOs of global media consultancy ID Comms and talk with Darren on the state of the media and the media agencies across Europe and the globe. Specifically they discuss their focus on media value and the ways to define, manage and maximise media value for their clients.
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Transcription:
Darren:
Welcome to Managing Marketing. We’re still in London and I’ve traipsed out to Spitalfields here to talk to two of my colleagues, Tom Denford and David Indo who are joint CEOs of ID Comms, global media consulting specialists. Welcome.
Tom & David:
Thank you Darren.
The rising importance of media
Darren:
I wanted to catch up because media is such a hot topic at the moment and I reflect back on my days in advertising where media was always the last thing that people talked about but now it’s the first thing. Why do you think David, that’s become the fact?
David:
Well I think because more companies, more marketers realise that media is the single largest lever for business growth. If they get media right, then business results improve.
Darren:
So Tom, what are the changes that you’ve seen in regards to media as part of the marketing mix?
Tom:
Well I think the biggest change is just in its complexity, the opportunity, all the different options that exist in media for a marketer as channels to connect with their audience. When we all started in agencies 15 or so years ago, the options were relatively limited.
Darren:
Yeah, like TV and outdoor and the usual traditional media.
Tom:
TV, print, radio, outdoor. So planning media was pretty straight forward, right. You had to make some quite simple choices. But now those choices are hugely more complicated and not only that there’s so many more channel choices, but actually the decision making that goes on in agencies to decide which channel they recommend over other channels. It’s just kind of difficult sometimes for marketers to know, and understand how those recommendations are being made.
So I think that’s one of the hardest things. As David said, media is really a path or lever for growth for a lot of brands. Marketers are understanding getting media right is really important, but at the same time, whilst media has grown in importance and influence perhaps, it’s also grown in huge complexity and that’s very hard to keep across all of the different options from a marketing perspective.
Darren:
Because really it is technology isn’t it that’s driven this?
Tom:
Yeah.
Darren:
The digital landscape is so much more complex than say, traditional media. And also, produces so much data, like you literally would drown in the amount of data that comes out of it. That’s part of the complexity isn’t it?
Tom:
Yeah, exactly. So not only are there more options, but then the consideration that has to be taken into making the right decisions, fueled by data, we call it data by the way.
Darren:
Oh, not data? Oh okay.
Tom:
It’s a very different thing over here.
Darren:
Let me make a note of that, as I eat my tomato sandwich.
Tom:
Yeah, you do that. Marketers are building great loops back of data from all of their marketing activity and I guess the wish is that they can then implement that data to then make better decisions in the future, right?
It should be kind of a self-fulfilling thing. But I think it’s difficult to go from that old model where it was easy to buy TV spots and print pages and outdoor billboards, to something which is so radically different in a relatively short space of time. It takes a lot of rethinking, how you actually market your brands.
David:
Absolutely, and media still remains the largest single ticket item in most organisations.
Darren:
Absolutely. And that’s the thing that amazes me. Even last night at the ISBA IPA, they were talking about briefing and a media guy there said, “We should be briefed at the same time” and you could see the creative agencies go, “No, we’re the lead agency”.
I mean, if you just think about the level of investment, on average it’s ten times more money goes into getting the channels right, getting those environments right, than goes into planning what content is going to go into those channels.
David:
But it has to be all the more accountable. I’ll give you an example.
Six or seven years ago, a media budget generally was the control within the control of a marketing department. Now, most CEOs have a perspective on where that money is being spent and they expect their marketing teams to be accountable and responsible for its delivery.
We’ve conducted a global media review recently. An advertiser that spends in excess of 2 billion. There were global presentations conducted in their global headquarters. Within the client stakeholder group that attended those presentations, I’ve never seen more senior members of the team from company chairs all the way through to presidents of the entire organisation, dedicating their entire day to listening to what the agencies have to say.
Darren:
That’s great to see because it shows the level of commitment and interest within the organisation.
David:
And it suggests that media is at the very top of their corporate agenda, which is where it should be.
Media is more scientific
Darren:
I think the other thing that media has always had but hasn’t played the card as much, is that the measurability and the accountability that comes with that, makes it so much more, not precise, but more, “scientific”. Whereas, the content side of it relies so much on gut feel and belief, doesn’t it?
Tom:
Yeah. And it’s weird in some ways that the kind of the content, the advertising part of it has always been the most dominant because it’s so subjective.
Darren:
Yep.
Tom:
And you’ve had to have marketers who are able to brief and evaluate and judge and create good quality work and then media which was more than 50% of the overall marketing budget.
Darren:
Or more.
Tom:
Or more! As you say, it’s kind of the last 5 minutes of the presentation when everyone was really just looking forward to going to lunch. And there was a guy that stood up at the end, which used to be us, right, we used to kind of stand up at the end of these meetings with some spreadsheets and desperately try and keep everybody awake at the end.
But it is so scientific and that’s what’s interesting because media has raised in profile within organisations, we see it all the time now. The level of interest within large organisations, not just, from the CEO, from the CMO, from the CFO, everybody has got an angle on the media spend for different reasons, but they all recognise now that it’s a really significant investment that a company will make and it’s one big line as a media spend and it’s often hundreds of millions or billions of dollars and there’s huge scrutiny on that now to be more accountable, to be working harder.
I think we’re going to see brands perhaps over time reducing their reliance on this paid media spend because it’s such a significant amount of money which I think has been somewhat overlooked for a long time.
It’s been left to the end of the meeting and it hasn’t really had the scrutiny that’s required. And yet, it is under scrutiny. So every dollar now invested in paid media has got to work really, really hard. It’s got to have some kind of clear outcome aligned to it and the agencies that then are appointed responsible for that spend are being put under greater scrutiny, rightly, to be more transparent and more accountable for how that money is being managed.
Darren:
Going back to your point about how people, marketers especially, focus so much about the content they’re putting into a media channel.
I was a copywriter and creative director, and when the campaign breaks, everyone has an opinion about the TV ad, that is back in the days when TV was the way to break a campaign.
No one mentioned the media placement because it wasn’t the visible part. It’s an essential part and it’s incredibly important to get it right; there’s no point having one without the other, except it just wasn’t visible. That’s why I think it’s always interesting.
I don’t know if you guys have noticed, but Cannes media awards seem to go to creative agencies more often than they go to media agencies because I think there is still a difficulty some people have in judging the true creativity and strategy that exists within a media strategy.
Media is less visible but not less important
Tom:
It’s difficult to evaluate media work, it really is difficult. We do some work with some clients where we help them evaluate media strategies and plans that are coming back from their agency just to be able to support them and hopefully train them over time, give them the capabilities of briefing in a media plan, understanding what it should look like and then evaluating whether it suits the strategy or not.
But it’s really difficult, it is really hard. It takes a lot of skill to be able to read a media plan properly.
David:
Yeah.
Tom:
We see those exact examples where you go to media awards and somebody will say, “Let’s have a look at the campaign” and then they show the 30 second ad.
Darren:
Not the strategy behind the placement or the channel selection or anything else. But here’s the ad.
Tom:
They show the ad! And the winner is, and you haven’t seen any of the work. You’ve got no context into actually, was there an insight in this? Like, what was the strategy, what channels were selected? How efficiently was the budget used?
David:
I think creative agencies also have had to evolve with the times. They’ve had to relook at their role within the market communication mix and find a role for themselves for the future.
I think a perfect example of that is Coca Cola awarding Ogilvy I think it was, a big chunk of their media communications scope. That’s a fantastic tribute to the way that I think that agency probably is evolving itself internally to make it more adaptable to the future.
Darren:
When I read that article, David, I was wondering whether it’s because media, with the distinction of paid, earned and owned, whether the marketers are starting to think that their media agency could be very good on the paid, but the earned and owned, they’re looking for other alternatives. Could that be part of it?
David:
It may very well be, absolutely. But they’ve seen an opportunity in the marketplace and they’ve migrated away from traditional creative agency output and they’ve had to embrace something which is far more progressive and I think that’s fantastic.
Data paves the way for a more customer centric approach
Darren:
One of the exciting things for me is to see media agencies with their access to huge amounts of consumer behaviour data, whether it’s from publishers or media owners or their own research, or their client’s research, they are actually becoming more the advocate or the voice of the customer, of the consumer or the target audience or whatever you want to call them, because they’ve got so much information about the way people consume media.
And so, they’re able to then inform the whole process, the comms process, based on that. And it just seems to be growing. Especially with so many media agencies getting into providing their clients with a DMP, a data management platform as a way of collating all of this information into one place and then extracting incredible insights on customer behaviour to actually inform the whole marketing strategy as well.
I think that’s a really big change that’s helped to move media from the last ten minutes of the meeting up to the front of the meeting, or even better, a meeting in its own right.
Tom:
Exactly. That’s been the driver of that change as you say because media agencies have had that insight which again I think was slightly overlooked and in the old linear model, a brand would make an ad and it was all about the features and benefits of the product making it brand centric and executed it in a very linear way.
They’d then distribute them through those push channels like TV, interactive media channels. And I think brands then started to think, “Actually, how could we tailor messages based on the various needs of our consumers?” so then they had to understand how to segment their own customer base actually.
Darren:
Yes.
Tom:
Different types of users. They were developing different types of product to cater for different types of users. And you only have to walk through a pharmacy or a supermarket to see the variance of brands and brand extensions and different serving sizes and methods. They’re all catering for different consumer segments.
Darren:
And also different points along the consideration process.
Tom:
Yeah.
Darren:
The purchase process.
Tom:
Yeah.
Darren:
Because there’s not the realisation that there’s an incredible number of different channels, there’s so many different places, what’s the customer’s or consumer’s mindset at each of those that we can actually be tapping into?
Tom:
Exactly. And media agencies are actually quite good at that. They’re all sitting on a bit of a gold mine which was actually really understanding the end consumer perhaps far more than the creative agency who were always ready proud of understanding the brand, often understood the brand better than the marketer themselves because often they’d been in that position longer than the CMO or the marketer that they were reporting into.
So in some ways, a lot of the big agencies have been guardians of those brands but media have the insight on the consumer behaviour and as people started spending more and more time with content and that was splitting into many, many different channels that were hard to track, agencies are now incredibly well positioned to do that and I’m not surprised that they want to be the guardians of helping brands use that data to make targeting decisions.
David:
But it will be interesting to see the clients perception of their agencies owning all of that incredibly valuable first party data, because it makes the divorcing of a client agency relationship far harder.
You’ve worked with an agency, you’ve provided them with three years’ worth of first party data, and they’ve helped you segment your audiences and effectively manage your media better, but then you leave and you take with you nothing, because they keep that data.
Data ownership
Darren:
Look, the question of data ownership, have I got it right now?
David:
Yeah, we converted you.
Darren:
Alright. Data ownership, it’s really about having access to it, not necessarily ownership. So the fact is that media agencies are getting that from a larger number of sources. They have their own, any data that their client provides them still belongs to the client and they can take it away.
What they would lose would be being able to put that into the DMP with all the other sources. But I don’t have a problem with building relationships that are much more long-term than we currently see, as long as they’re performing and when you start using a data driven methodology to be able to understand your customers, then that should be building long term performance driven relationships.
And I know you guys are as passionate about this whole idea of media value because it’s not the cost of the media, it’s the value that’s derived by purchasing the right media in the right place, at the right time and then putting the right content message into it, isn’t it?
And you do a lot of work with your clients around this idea of media value.
Forget share of voice and cpm – why are you spending this money?
David:
Yeah, and it’s stuff that we’ve been talking about with you for years, this idea of media value.
We’ve observed that a lot of brands, going into a new year when they were budgeting for media, their only question is, “What’s media inflation? What did we spend versus last year? What do we need to budget for?”
And actually, if you said, “Why are you investing 600 million dollars in media? What are you actually trying to get out of that?” If you can put that spend, because it’s a big significant investment that company is making, it needs to be put in some kind of context like why are you spending this money?
Then if you can answer that question which is normally quite straight forward which is, we want to sell more and more product and this is a way of getting those messages in front of the consumers in an efficient, effective way. That’s the rationale for an investment in growth. So fine, you’re going to invest money for growth so therefore you’ve got to make decisions about what you want to buy with that money.
Darren:
Yes.
David:
What you’re buying, hopefully is something that’s worth more than 600 million dollars because if what you get back is worth less than that, it’s a pretty bad investment and you’re not going to be very good at your job.
Darren:
Except people weren’t measuring that because the media budget setting was largely informed by two measures that are way out of date and the first one is share of voice, who has the most amount of voice in the marketplace spends the most and that could only have been a measure that was created by someone selling media.
Then the second one is cost per thousand. This idea that audience could be like buying books by the kilo. I don’t care how crappy they are, as long as I get my kilo of customers, my thousand customers and how cheap can I get them?
Tom:
The third thing is an outdated auditing approach.
Darren:
Yeah, which is all about the cost of the media and not what it actually delivers.
David:
Absolutely. Looking in the rear-view mirror.
Tom:
So that’s why I think that historically, mistakes were made by just looking at budget as an amount of money that needs to be spent across the next 12 months and divvied up. It is okay but it wasn’t really measured properly.
As soon as you can start to understand why you’re spending that money, set some KPIs, simple metrics for what you want that money to do and then if you can track that back into what you’re spending, that gives you an idea of the value of what you’re buying.
Because a single piece of imagery and by that I mean a TV spot or a web banner or an outdoor site, might actually have a different value to different advertisers which kind of makes sense, but we’ve never used that as a currency in the industry.
We’ve never priced media according to its value. It’s always been a discount off some arbitrary rate card. And that’s why a programmatic marketplace suddenly gets quite interesting because it democratizes media buying, makes it more accessible.
Also, because it’s based largely on a supply and demand principle, like if you’re buying search keyword phrases, you pay what you think it’s worth to you and you can ascertain what the value is or what the price you should pay is based on the data that you’ve got and the insights that you’ve got.
So if you empower yourself with the right data, you can make a better prediction of what that piece of media might be worth to your business to drive some kind of outcome. And then you can bid on that and if you win, that’s what it’s worth. And that’s the price of it. The price determined by the bidding. That’s what’s really exciting now because that whole model will change so quickly now in the next few years.
Is auditing and bench-marking a digital buy futile?
Darren:
Thats why – going back to that point you made David about the old auditing process – it always cracks me up when a marketer asks if we can benchmark or audit their digital buy. And I’m going, “Well it was done through a trading desk. Don’t you know what you should be paying for it? What’s it worth to you? Are they hitting the numbers? Are you getting the results? Are you getting the behavioural change that you want from the investment?”
And they go, “But there must be a benchmark somewhere”. It’s like they’re obsessed with wanting to know what everyone else is buying.
David:
That’s presenting some huge challenges to the industry, isn’t it? Because, as we’ve just discussed, a lot of marketers have historically not dug into the details of media enough perhaps over the years.
I think a bunch are feeling rather exposed now by their lack of knowledge of how agencies work and how media is bought and it’s suddenly got even more complicated in the last three years, it’s incredibly difficult to follow.
So that reliance that you might have had in the past to hire a traditional kind of media auditor to say, “Did the agency buy well or not?” Okay great, well they’ve got a particular gold star, fine job done.
Darren:
The elephant stamp.
David:
Yeah. Now, less and less media is auditable because less and less of it is in these pools.
Darren:
And less like for like. It seems almost impossible to get like for like comparisons because it’s become so fragmented. There’s not these huge billion dollar pools anymore because they’re all trying to do different things under different circumstances to different inputs.
Tom:
In three or four years of reviewing audit reports, I’ve never seen a bad audit.
Darren:
Yeah.
Tom:
Because they don’t seem to exist.
Darren:
Well everyone’s just slightly above average. Suitably just above average. There’s the pool, let’s beat it. And if it’s a CPM pool or a spot pool, whatever it is, the agency knows what they have to beat. But the trouble is the buying then starts driving the strategy.
Oh we want to go into zone 1 or top quality environments. Oh well, we couldn’t afford that because it would destroy our CPM or it would raise our spot price and that’s just crazy.
Tom:
And where the performance incentive programs are linked overly to a pool based media audit, then the whole thing gets even more opaque.
Darren:
We incentivise you financially to basically screw up the strategy.
Tom:
Well this is it.
Darren:
Buy us the cheapest possible media you can and in a world where media options are expanding all the time, there is a lot of crap.
Tom:
Yeah, absolutely.
Darren:
The media owners want to sell it to someone so if there is a client out there that only wants to buy the cheapest possible, you just bundle up a whole lot of crappy media and sell it to them.
Tom:
And you improve your margin because of it.
David:
But that’s a challenge to the agency model. To be fair to agencies as well, they will often say that their margins have been squeezed over time because of the increasing influence of procurement.
Whether we agree with that around the table here or not, the increasing influence of procurement or responsibility and oversight of media dollars, we think, is a good thing because it’s brought some great discipline to treating that investment as some kind of working money that drives some business result.
And it brought some discipline to managing large amounts of money which previously was almost entirely delegated to the agency to manage. But where they have put pressure on agency income, that’s caused some knock-on effect, I think, where agencies in this new reality of potentially a very transparent and democratic marketplace, we’re not there yet, but you never know.
Where do they add value and what can they legitimately charge for? Because some of the stuff that we’ve been talking about, like using data to drive insight, coming up with strategy that should then lead the buy, they haven’t been able to monetise that very well because they’ve always been working on very buying related income.
So that’s been the focus, its been a kind of, self-fulfilling chain of events where the agency’s obsessing about a good audit result, obsessing about buying performance, obsessing about discount versus something, because that’s how they’ve been paid, sometimes, and been incentivised to do that.
They’ve got all the potential in their capabilities and skills to go a bit more upstream with their offering, to start analysing data properly, finding insight, defining audiences, which are much more of a value-add service to buyers but they’re not monetising that and I think we’ll probably see a lot of agencies change their business model over the next few years.
The need for changes in the agency model
Darren:
But have you seen the trend with programmatic buying? The agencies now are coming out and going, “Well, we’ll be transparent, we’re adding 30-40% commission on top of the trade”, and they’re saying, “That’s our level of transparency”. We’ve gone back to the past of the commission system, except that they’re being very transparent that there’s a 30 or 40% or they’ll define a commission.
Tom:
See I don’t have a problem with my agencies earning a healthy living from a really smart programmatic planning buy, where if I was a client, I would be asking some interesting questions; where are those margins being taken? I don’t have an issue if they’re buying me really good inventory and they’re making 20, 30, 40, 50% margin on it, but I want to know that, I want to have absolute transparencies as to where that margin is coming from and that’s where the agencies I think are still less than transparent.
Darren:
Going back to what we said before, if we’re talking about media value, it’s even better to start incentivising them for taking that investment and not taking a commission on the amount I spend, but actually taking a significant performance bonus on the results I get.
David:
Absolutely.
Darren:
Because if it’s one thing that we know about that environment, is that it’s incredibly accountable, even if you’re using attribution models if not direct models. So we could completely change that on its head.
But I just wanted to move onto another thing that I’ve noticed and see whether you guys have seen this as well. There’s this strange perception amongst some marketers, that digital media is somehow cheaper and therefore a better option than traditional media and that’s because they look at the pricing on digital media which can be dollars, and they look at traditional media where you’re buying spots or locations or whatever and it’s thousands or tens or hundreds of thousands of dollars.
Have you seen that type of simplistic attitude towards media investment?
Tom:
Yeah, definitely. And I think a lot of brands have dived head first into this space without really asking the right questions, without really knowing how it works on a promise that it’s going to reduce their cost per thousands.
Darren:
Yeah.
Tom:
That actually programmatic techniques are a way of just reducing cost or finding greater efficiency and it’s just not true. There’s a lot of reporting over the last couple of years about the level of fraudulent activity within this space and so you know, it could be 40-50% of all clicks, ads served or impressions could be fraudulent so it’s a slightly misleading CPM if you think that actually, there’s going to be at least 50% out in terms of the actual human impressions you’re buying.
So straight away, whatever CPM you’re being quoted, you could at the very least, double that.
David:
That’s six billion dollars’ worth of fraudulent activity in one year, which is astonishing.
Tom:
The industry is coming together now. There are some good initiatives that are kicking off to try and finally tackle something like that. But it’s criminal practice. It’s not the responsibility of agencies, it’s the external influence, it’s very hard for people to keep on top of. But the industry has got to work together to tackle it and it will come down.
Darren:
Well what it certainly says for you guys, being specialists in this space, is that there’s plenty of work in the coming years, isn’t there?
David:
There is, and we embrace it.
Darren:
Well, why not? I think the worst thing in this day and age is a pitch consultant because the number of pitches run by procurement is increasing and the number of pitches run by consultants is decreasing so I think any smart consultant is moving away from that. Going from the old intermediary model into value creation and making sure that clients are getting what they pay for and showing them how to get more.
Tom:
We’ve discussed before, I think it would be a great, but there are just frankly far less pitches out there. Pitches have been run for not necessarily the right objectives or the right ambition.
Historically there have been a lot of pitches at large scale that have been really focused on just trying to drive down cost. They come with their own implications because as we’ve referenced, they’re trying to just buy as cheap as possible and on a race to the bottom you miss the opportunity to buy the right thing and connect with the right audiences right?
Which stops you driving the business growth that you need. I think we’ll see brands committing to longer term relationships with the right agency, taking time to really understand, actually the agency resources that they need.
Because that old linear model, if you’re talking about the old advertising agency, hands off to the creative to media agency and buys some media, it is changing. A lot of the brands that we talk to now are rethinking the way that they structure their marketing departments with media far more at the centre.
It’s a discipline that touches everything from CRM to e-commerce which is now often coming under the management of marketing for the first time, it’s not an IT channel, it is actually a marketing channel, often with some kind of internal content capabilities and media’s a really good kind of hub, really, for all of those different spokes to connect to.
I think a lot of marketing departments are going to be re-engineered with media much more at the centre and they’re going to look for external partners that are very different to these buying organisations that they currently work with. They’re going to need more strategic guidance and that’s good for businesses like ours because we’re independent and neutral to the whole buying and the selling of media, so perhaps we can give a very good…
Darren:
An independent.
Tom:
An independent perspective which in an industry that is notoriously riddled with conflicts of interest, our clients find great value in that. But there’s no reason why agencies couldn’t evolve to similar consulting type roles.
David:
I think they will do and the really confident, smart agencies, are the ones that are approaching this kind of new landscape in a really open-minded way. They’re the ones that aren’t being defensive and trying to protect and land grab media investment, they’re the ones that are working with their clients and understanding that there is a more flexible way of operating. And they’re the ones that really forge the long-standing relationships that we’ve been talking about.
Darren:
Well look, it’s going to be an interesting future and maybe we should sit down and do this in 12 to 18 months and see what’s changed. But I want to thank you both for your time and let’s do this again soon.
Tom:
Our pleasure.
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