Chris Walton is the Managing Director of Nunn Media, Australia’s Leading Independent Media Agency, and earlier this year he attended the inaugural meeting of the Advertising Who Cares meeting in London, hosted by Brian Jacobs and Nick Manning.
The ad industry is by common consent not a great place to be these days. Many within it are unhappy with the state of the industry but are understandably anxious about expressing their views openly.
Driven by a desire to make the ad world a better, more productive, more creatively driven place, Who Cares assembled a community of like-minded professionals who understand what’s broken, are collectively smart enough to ideate how to fix the problem and passionate and powerful enough to deliver what needs to be done.
Chris shares with us the experience and the outcomes of that meeting.
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Distrust in the industry, dissatisfaction in the industry, diminished pride in creativity across all disciplines, a business model that’s not fit for modern creative industry and an unattractive industry of low appeal for the best graduates.
Transcription:
Darren:
Hi, I’m Darren Woolley, founder and CEO of TrinityP3 Marketing Management consultancy and welcome to Managing Marketing. A weekly podcast where we discuss the issues and opportunities facing marketing, media, and advertising with industry thought leaders and practitioners.
If you’re enjoying the Managing Marketing Podcast, please either like, review, or share this episode to help spread the words and wisdom from our guests each week.
The ad industry is by common consent, not a great place to be these days, many within it are unhappy with the state of the industry but are understandably anxious about expressing their views openly.
Brian Jacobs and Nick Manning are two professionals now out of the corporate world. Both are driven by a desire to make the ad world a better, more productive, and more creatively driven place. They assembled a community of like-minded professionals who understand what’s broken, are collectively smart enough to ideate how to fix the problem, and passionate and powerful enough to deliver what needs to be done.
My guest today attended the first meeting of the Advertising: Who Cares? earlier this year in London and has returned to share that experience with us. Please welcome back to the Managing Marketing Podcast, the Managing Director of Nunn Media, Australia’s leading independent media agency, Mr. Chris Walton. Welcome back Chris.
Chris:
Morning, Darren.
Darren:
Now, earlier this year, Chris, you flew to London and you attended this first meeting of who cares or Advertising: Who cares? First of all, how was it?
Chris:
It was good. I mean, it came about as many of these things do through an ex-colleague of mine shared online a blog post by Brian Jacobs which quite resonated with me in terms of unpicking and framing the challenges facing the industry in a way that I thought was quite a good succinct and quite accurate.
And when they decided to spend an afternoon in London discussing the issues, the challenges facing the industry, and I happened to be over there at the same time, I thought it would be a good use of time to pop along and hear what is largely a UK centric, not surprisingly take on things, but at the same time, I think was broadly consistent with challenges or frustrations felt over here.
Darren:
And look, that is an important distinction to make, isn’t it, Chris? Because while there are many similarities between the Australian media market, and the UK and even the U.S., there are some fundamental differences, aren’t there?
Chris:
Yeah, I think, the risk of oversimplifying it, a broad thing is just a concentration of media within London, a small geographic market in the form of the UK, large numbers of people, so there’s a lot going on there with a wonderful track record of innovation and creativity.
And it basically has a size and a scale to, I think, allow for or prompt discussions in these areas compared to Australian market, which is smaller, potentially more fragmented and slightly more influence from stuff going on outside of Australia than maybe the UK market is.
Darren:
And then I think we have to include the U.S., which is a dominant market, population wise, size wise, but also their influence across so much of the global media with so many of the social media platforms and the technology platforms really being based there, if not for tax purposes, certainly culturally and operationally are very much based in the U.S., aren’t they?
Chris:
Yeah, I mean, if anything, the U.S. influence has grown over the past 10 or 15 years. I mean, now key, should we say share owners of the ad market include Facebook, YouTube, Google, increasingly Amazon.
It’s amazing to think none of these businesses existed pretty much 20 years ago, and now they’re taking a huge amount of advertising dollars in Australia. So, yes, what goes on in the U.S. has a massive impact and a growing impact on what goes on both here and in the UK.
Darren:
Now, this get together was a half day, as you said and where was it? Was it the Royal-
Chris:
The Royal Society of Arts. So, it was a bit posh, Darren. It was very …
Darren:
Did you have a suit and tie Chris?
Chris:
I didn’t actually, no. So, I didn’t really hold up the Australian side of things very well. I think I was the only one from Australia there, but it was good in typical pony fashion. There was no air conditioning in the room for about the first 30, 40 minutes. So, it was quite warm and sweaty, but they managed to work that one out.
And yeah, so I sat in a room with I think paintings that were probably older than Australia, kind of looking down on me from the ceiling. So, it was a lovely environment though to share with a couple of hundred other people.
Darren:
And what was the audience like? Was it primarily agency people? Were there any procurement people or even clients there?
Chris:
Well, this is the interesting thing there, I sense it was mainly agencies with the odd media owner or two and other people and this is a key thing and what Brian and Nick had been very clear about, if you look at the demographic makeup, should we say it was potentially possible to label this as a bunch of our old white guys having a bit of a whinge about, it’s not like it used to be.
And to be fair, both Nick and Brian have said, look, they’re at pain to say, “Look, we understand it can come across like this, but it’s not meant like that.”
But it just so happens that a lot of people that by definition, if you share a view that the industry is not in a good shape it was years gone by, you would’ve had to have been there years gone by maybe. And so, there was an older demo skew to the audience. So, all those luxury cruise lines would’ve had a ball at advertising at the people who were in the room.
Darren:
So, to be unkind, male, pale, and stale, or would that be-
Chris:
Yeah, if you were to characterize it, yes, but I think knowingly that, so they weren’t … and this is what I say very respectfully, is that they said, “This is what we are,” but they’ve been open saying, “This is what we think of things. Do you agree? Do you disagree?”
And that question is aimed at anybody and everybody, whoever they are, wherever they are, how old they are, whatever background. And so, they’ve been at pains to say that, but the early adopters, if you want to call them that are maybe the older generation.
Darren:
Well, and I think you’re right because to know what it was like is then to really contrast the dissatisfaction. Because I guess for many people that have entered the industry in the last 15 years, it is what it is rather than there’s a way of it being better.
And I think that comes out on the website for Advertising: Who cares? They raise what’s broken as distrust in the industry, dissatisfaction in the industry, diminished pride in creativity across all disciplines, a business model that’s not fit for modern creative industry and an unattractive industry of low appeal for the best graduates. Were they the types of topics that were addressed on the day?
Chris:
In fact, it was interesting as these seemingly disparate topics were spoken about. And it was business models, trading and transparency, measurement, accountability, journalism and recruitment. But the more they were spoken about, the more you could sense these things are all kind of connected.
And indeed, Brian’s just come out overnight with a blog post kind of essentially stating that much, that people’s view of advertising is who would sit outside the industry is not what it was and maybe that’s linked to, because of the work being produced by the industry is not what it was.
And all the murkiness that goes around about trading, all the frustration about business models, all these things are somehow intertwined. If you’re not paying an amount and you’re going to get people who will focus more on trying to get money elsewhere, the work doesn’t get the focus, therefore, the appeal of the industry goes down.
So, people don’t want to join and because of the fees, there’s not the wages that can be there to attract people anyway. So, it’s a bit of all the spaghetti but people can see whilst broad themes, a link underneath the surface that might tie all these things together.
Darren:
And I remember, more than 15 years, probably closer to 20 years ago, when we first identified the race to the bottom of agency fees and having a disagreement with quite a prominent marketer on LinkedIn.
Because they were saying that it was the agency’s fault, and I was maintaining, it was actually the marketers using the competitive model to actually drive down fees. In some ways, appointing blame is largely useless because it doesn’t get you to a solution, does it?
Chris:
Not at all. I mean, and now with the cloud of hindsight, you can look back and say, I think it’s quite clear that the unbundling of full-service agencies and the creation of the large media shops was a drive towards efficiency.
And to be fair, for 10 or 15 years, the efficiencies that scaling provided did flow through to value for clients, be it through in the good old days of greater volume discounts or of lower overheads, of shared resource, all of those things, but that ran its course, and the problem’s been in the last 10 or so years when the efficiencies have all been squeezed out, what do you do next?
And that’s where we started to see a real impact and a realization that actually the efficiencies, the value through efficiencies that can be delivered to a client are nowhere near the value that can be delivered to a client through greater effectiveness.
And arguably greater effectiveness would’ve happened and could still be happening by keeping all those skills together with a single focus, that being the client’s issues but that’s unfortunately been largely lost.
So, like I say, you can point fingers at who’s to blame, but it’s happened, and it’s got us into this situation. The big question is, well, what do we do now to try and regain some of that lost ground?
Darren:
And did that come out of the session? Apart from exploring these areas and the realization that they’re all intertwined in many ways, was there any actionable outcomes that were discussed on the day or was this the first step in heading towards those? Did you walk away with some positive things that you could implement or think about?
Chris:
I don’t think we walked away with some positive things to implement, but again, I’m not sure that was really the role. And in fact, again, there’s been as much focus on what is done next because if there’s much shaking of heads and gnashing of teeth and stuff, that’s not going to change things.
But to me, the day acted as a great I think session to help clarify and crystallize what the challenges are. To me, ultimately, if the client doesn’t see a problem in what’s going on in the industry, I don’t think anything will change.
Michael Farmer and his presentation on business models and what’s happened over the last 20, 25 years with agencies doing more for less unless that’s recognized as a problem, then nothing will change.
If clients turn around and you can kind of understand why some of them might and say, “Look, you don’t have to agree to it. If we don’t get somebody to provide what we’re asking for then of course things will change.”
But if somebody’s always there, always willing and I remember, years gone by, a big global client of mine when I was at a Holdco, I was working in another market, and this person was relentless in just pushing and pushing. I was working my ass off for this particular client and whatever I did, whatever the team did, there was never good enough, or there was always something else or whatever.
And maybe it was fortunate, maybe not, but one day I actually blew my lid. And I said to the person, I said, “For F’s sake, I said, you never ever stopped, do you?” And kind of, as soon as the word came out of my mouth, I was like, “Oh, shit what have I said?”
But her response was quite interesting. And this was a lady who’d gone to client side, having been on the agency side, and she said within their company, within their business, and it is a big global business, bigger than any other, I mean, agencies are small businesses compared to any large client.
And she said, “Within the culture, within our businesses, any suppliers, any partners, you push until they push back.” And she said, “You know what? And I say this as a next agency person, agencies are not good at pushing back.”
And that in itself, I think on reflection, is tied into the holding company model. I mean, the holding company model is a profit extraction model that it’s again, squeezing juice out every year a little bit more, a little bit more without really too much investment going back in.
But because of that model, it’s not an investment model, it’s an extraction model. Senior managers within those businesses are not set up, they’re not resourced, they’re not incentivized to actually push back, it’s just get as much out of this client and for as little pain as possible.
And that was interesting how culturally, how that affected everybody’s reaction to a problem from a client, wasn’t something that was embraced and welcomed and mulled over. It was, “Oh, shit, get it sorted as quick as possible,” and therefore the value that you deliver within a relationship is seen much more as a commodity.
And so, if clients take the view that, “Well, it’s up to the agencies to push back from each change, then we will wait and see.” I wouldn’t be full of hope that there’d be too much pushing back because short-term results still went out over longer-term results.
Darren:
There’s a couple of things in that Chris, that as you are saying it, the first is this idea of retaining people. How much can a person produce as far as outputs? How much can you do? Because retainers are all about buying a certain amount of a resource time and no one’s actually focusing on how productive they are, what they’re actually producing.
I see that as a big reason for an increased move towards either value-based pricing, putting a price on the work done, or even performance-based remuneration where agencies are sharing in some ways or getting bonused for actual delivery of growth or value into that relationship, that’s the first part.
The second part is that I think you’re right and probably why we’ve seen an increased interest from marketers, particularly in Australia, in talking to independent agencies where the management are actually in the room talking to the client rather than being off somewhere like London or New York, where they’re more worried about what they’re going to tell the shareholders and the quarterly profit statements than they are about actually delivering the appropriate outcomes for the client on a local level and I think that’s been quite a big shift that we’ve seen.
Having said that, most of the indies that start come from those big, publicly listed network companies where that culture has been ingrained in them. And I think it takes a while because you’ll often find indies with very much a service attitude very similar to the holding company, rather than a sort of performance attitude or an advisory or I think Michael Farmer says, “Embracing a consultancy model.” I’m not sure that’s right for the industry, but I get what he’s saying there, which is about problem solving, which is right.
Chris:
Well, I mean, I actually think the success of indies at the moment, and they are doing well, is probably the biggest indictment you can put on the holding company model. Because so, if you think about media for a minute, if you just landed from Mars and I explained to you the mechanics, the makeup, the media industry, you come to the quite logical conclusion that scale global footprint, all of these things would be a hugely differentiating factor, a massive barrier to entry.
So, the fact that independents are not only surviving, but thriving shows you that model does not work. And I’d go so far as posing the question, are certain service-based industries and creative service-based industries just not conducive with everything that comes with being publicly listed with the quarterly reporting, whatever.
I mean, John Hegarty spoke very eloquently at this, he’s a bright guy. He was up there with a guy whose name escapes me, but who used to run the Coke on the client-side Coke, and he said when going around and doing negotiations, I think BBH were the only industry that said no to him in terms of what he proposed they’d be paid and what their response was.
Everybody else says, “Yeah, bloody old Coke,” but BBH said, “We’re not doing it for that. You’re not going to get what you need.” And they seem to be one of the few exceptions for people who so believe in the quality of what they do and the value that they provide, that they can say no.
Chris:
And at the time, obviously they’re private owners, it’s not that they had to report to the market, whatever, how the Coke pitch was going because there was a risk that Coke might have walked away, but they were prepared to take that risk.
But it does make me wonder, creative services, for the industry to get back its real problem-solving magic and really clear ability to deliver growth on that is what above and beyond, a time fee plus overhead type approach that they need to remove the shackles of public ownership.
Pretty much all of the great creative agencies when they’re doing all of the great work, a lot of them were just not having to deal with that. They weren’t part of that. But becoming part of that seems to have just been one of the commoditization levers that are being pulled that help us get to this position we’re in now.
Darren:
Well, I think we saw historically and well before your and my time, we saw the global networks built, J. Walter Thompson, which we both worked for at various times, and Ogilvy grew at a time, early 20th century, but particularly post-second World War when global corporations were being built out of the U.S. and Europe around the world. And it made sense to have a global network of agency working for a global brand, they saw it as aligning the two.
We still see that, we still see this head office centric view of the world where the idea of managing different agencies in different markets on the same brand is an anathema, but what we are seeing is certainly local or single or regional companies not thinking that they needed a global agency to run their business because they’re much more interested in getting the best ideas and the best thinking.
If that’s in an indie, then actually choosing the global brand, I think while there are global brands, there’ll be global agencies and network agencies maybe not necessarily publicly listed, because that is a problem.
I have a couple of cynical clients that I know marketers that every time the earnings notice comes out, they rub their chin and go, “Perhaps I’m paying them too much.” If the profits have gone up and look that leads me on to one of the issues, which is media.
We’ve now seen and Brian Wieser from what’s it called, Madison and Wall has been pointing out that two of the big holding companies are making significant profits primarily out to their media operations.
With this move to more principle-based trading or arbitrage as some would call it, was that one of the issues that came up? Because media’s facing all sorts of non-transparency, ad fraud, there’s a lot of really big issues there that in some ways seemed too big to handle.
Chris:
Yeah, that was an interesting one because it was one of the main earlier factors that was focused on, and Nick Manning has spoken a lot in his columns about it. To be fair, on the day at the conference, it took less of a role.
It was part of one of the five pillars that were covered, and it was covered under the trading thing. But I mean, my view on this is that I think a client has the right to understand what their agency’s business model is, that they should understand how …
If you are asking people for feedback for their advice, their leadership, their consultancy, whatever, then I think it’s right to understand, well, what are the commercial kind of leanings of that business?
And so, that they can understand the advice they receive in the context of the business model. A lot of the distrust, I think, exists around in media and trading is that clients simply don’t understand the business model of their agency.
Now, we don’t do principal trading, but if we were to, if we were to go to a client and said, “This is how we trade, is it open to you or is this of interest to you or not?” Then we’d have that conversation. I’m not sure the extent to which any of those conversations are happening.
And in the absence of conversation and knowledge, that’s when trust gets eroded because the clients don’t know. I’m not saying the clients need to be taken through every single detail of the commercial makeup of an agency, but they need to understand what the business model is. How do they make money?
Because what some agencies are doing, they’re saying they’re making it off a fee that the client pays, where actually they’re not, they’re making it round the back and potentially at the risk of having agreements around the back influence what advice and trading recommendations they’re giving to their client and that lack of clarity is what’s a key reason for the lack of trust.
Separately, you can also have an argument of principle and agency, that’s actually something slightly separate as what do you want your agency to provide? Do you want clearly delineated, but that again, comes through knowledge.
Some clients don’t care, so well go for your life. It’s like if you are buying cheap flights off a web jet or a flight center, if that’s the type of model you want then fine, isn’t nothing wrong with that, but it’s the lack of understanding of what model is actually being deployed that is causing a lot of distrust.
Darren:
It’s funny because earlier you were talking about, there was quite a lot of more senior industry people at this meeting and I often hear people in the industry talk about, “Oh, if we could only go back to the commission and service fee days,” and yet that wasn’t particularly transparent.
Because I remember when I started back in 2000, even though that model had been discontinued, there was no longer media accreditation at that stage. There was still lots of agencies marking up the 11.1% as the 10% commission on production, for instance, and then adding a seven and a half percent service fee.
And I’d be explaining to clients how I could pick it because suddenly the $500 fee was appearing as $551 or $55, doing the math in my head and then it would have 7.5% and I’d say, “Well, that’s got a commission on it.”
And they’d go, “How can you tell?” I think transparency’s always been, particularly financial transparency has always been a challenge in the advertising industry, because I always wonder whether people have the self-belief in what we do.
Because agencies all the time go, “Well, how do consultants get away with charging a thousand dollars an hour?” And I go, “Because they make the client believe that that’s value for them.”
Chris:
I mean, you hit on a good point there where let’s not for a second, let’s take off our rose into spectacles and think back. The week after I got back, funnily enough, when word got out that I’d gone to this conference, it was great being contacted by various people who wanted a bit of a chinwag about what had gone on.
And one of the people that reached out was I would say probably one of Australia’s most famous, most awarded creatives over the past 20, 30 years. And he said to me, he said, “Let’s not forget 20, 30 years ago there was a load of shit work done then.” There’s always been crap work done and like you are saying, there’s always been issues around transparency.
What I would say to both of those is actually it’s never been as easy to get it wrong today. I mean, from a media point of view, we are awash with choice and unless you’re making relevant choices for clients, the potential wastage, if you get it wrong, is greater than ever has been because there’s just more places where we can put ads.
Similarly, the supply chain in media has got longer. So, unless there’s clarity, whilst you talk about the good old days of there was commission and in-service fee, so 17.5% or thereabouts. So, like-
Darren:
It was closer to 20% because-
Chris:
So that’s 80, so we’ve got 80 on, well-
Darren:
One was on the other. So, it’s compound interest. Let’s say 20% flat.
Chris:
Okay, so 20 and 80. We are in a world now whereby some people, either they don’t know, but they’re estimating anywhere between 40 and 60% in some media transactions just goes essentially is on non-working media.
So, even compared to that, potential wastage, the potential, call it fraud, graph, whatever is greater now. So, there’s actually a greater need for transparency today than there was and there’s a greater need for more impactful work than there was because of just proliferation of media.
So, yes, I would agree with you. Issues have always been there to a certain or less degree, but actually the need to get him corrected or better today is greater than it ever has been.
Darren:
That leads me to the thought that after the financial collapse, global financial collapse or where the banks were seen to lead this process back in 2007 and 8 there was a belief that well, no one will ever get prosecuted because the banks were too big to fail.
Have we reached a similar thing here now in media where when you think about the holding companies, they seem quite significantly large, but nowhere near as big as the social media, digital media platforms who are really dictating the terms.
We saw recently GARM, which was set up by the WFA and a number of major global clients were sued by X formerly Twitter for antitrust action, making a collective decision not to invest in them, which led to GARM being shut down.
And I’ve read that Unilever is no longer being sued by X because they’ve decided to go back and advertise back on the X platform. Are these players too big for even the advertisers to be able to bring about change, let alone the agencies even if they wanted to?
Chris:
I think they probably are. A key thing without getting off topic too, but I think governments need to work out how to appropriately tax these entities. That won’t solve everything, but it will address several issues.
For one, it will make sure that they’re playing in the same way that all the other legacy media companies have to play and be taxed appropriately. That tax revenue can then be deployed as the government sees fit or government see fit to support local media businesses.
Then we won’t get into the ridiculous situation like we had with the news bargaining code, which was a completely ridiculous solution to a … it was a wrong solution to a problem that was poorly framed.
So, if they tax these and worked out how, and I’m not saying that’s easy, these entities appropriately, then there would be more money raised to invest in supporting local journalism or whatever.
Let’s not forget it would have an impact on the pricing mechanism of these platforms. If they’re losing 20 to 30% more their revenue to tax, for example, that will impact their pricing, which will equalize the pricing compared to other non-platform entities, if we can call them that, which in turn will help further readdress the balance of where money is going.
So, whilst I don’t see it, it’s completely as a panacea, I think a high priority from the platform point of view is globally governments need to work out how to tax them effectively because at the moment on a market-by-market basis, they seem to be getting away with murder.
Darren:
And look, when I’ve raised this with people in Australia, and both from a government perspective and industry, they all point to the fact that as I said earlier, these are mainly U.S. companies, and we’re now seeing in the U.S. Google now going through the second round of antitrust first for search, now for advertising.
So, there is a move by the government there in the U.S. to hold them to account for antitrust. I’m just wondering, can we wait for that process to roll out or are there things that the industry should be thinking about, particularly advertisers and their agencies? Are there things that you would want to discuss with your clients?
Chris:
It’s an interesting one because we get to the media agencies you largely follow eyeballs to put messages to create a response that one client within one agency saying, “Right, we’re not going to invest where the eyeballs are of a point of principle, we’re going to invest in other places at and exclude those totally.”
That could certainly on that one instance and in the short-term, let’s not forget that marketers themselves and within their own businesses are under more pressure to deliver short-term than ever has done.
And then that goes into the whole discussion about how marketing as an industry is one that’s challenged. So, it would be hard to do on a micro basis. That said the owners should be on the media agency to understand the relevance of the environments that they are advertising in.
And according to cliche, not all impressions are equal, but understanding which ones are and which ones aren’t and how to value those accordingly. But just to carte blanche so we’re not going to advertise on those platforms because we’re not in agreement with their global business models would be a big call to make on an individual brand basis.
Darren:
Well, I think they’re already considering things such as brand safety is definitely a consideration and trying to minimize ad fraud should be part of any agency’s due diligence.
Chris:
I totally think it’s-
Darren:
It’s going above and beyond that.
Chris:
It is. And any decent agency, if they fully understand audiences, the marketing and business challenges, brand safety requirements, the benefit and value of contextual advertising and also understanding how much just click bait and ad fraud is going on out there, that’s a lot to cover.
But that, any good agency, by having all of those things sorted, you’d see less advertising in some of these platforms than you might the lazy man’s approach to just chasing the cheapest impression or cheapest click.
Darren:
Chris Walton, thank you very much. We’ve run out of time, but I always enjoy our conversations and I’m hoping I’ll get you back sometime for a third installation on the Managing Marketing Podcast.
Chris:
Will do, Darren. It’s been great.
