Media Agencies Are Getting What They Wanted And Deserved

Media guru and friend, Mike Drexler of Drexler Fajen & Partners, sent me an email the other day with a very good thought piece on media rebates.  In it, he briefly outlined the history of media agencies.  It got me thinking and I would like to expand on this subject (without joining the discussion about rebates). 

Years ago, the media agencies started as media buying firms.  In those days the big agencies turned their noses up at them.  After all, the media buying agencies were cutting into the business of the big agencies by going to clients and offering a value proposition: they could buy better and cheaper than their current agencies at no additional cost to advertisers, since, ostensibly, they merely worked on the commissions offered by the media. They generally took about 5% in commissions, as I recall.  In actuality, they made their money by not only taking commissions, but by making deals with the media and, as I understand it, they did not necessarily divulge their true costs to advertisers. They got this “spread” in addition to the commissions they earned.  Clients mostly didn’t care because they were paying what was budgeted and the media agencies did deliver, in most cases, more gross rating points (GRP’s) than their normal agencies would or could. 

So media agencies started out as a way for advertisers to get more for their money.  Gradually they started adding services and attracted more and better brands and companies. As they grew, the media agencies became more and more “legitimate”.  In the 1990's the holding companies spun off their individual agency media department to form what is now the various media agencies and the original buying services were were gobbled up by these firms.

It was an inevitable transition because traditional agencies always had an issue with media.  Media people were perceived by their agencies as second class citizens because creative was king.  How many times did the media plan or media discussion not get presented at client meetings because media generally went last and there was no time for them?  Media always demanded a seat at the table, which they rarely got. That is, until they came into their own.  Ironically, good media people were always good marketers and strategists and could contribute a lot to the creative process, if allowed.

The media department was also where entry-level account people went when they could not get their initial jobs in account management.  After a couple of years media training, many media planners moved into account work.  Media people always complained about this movement, saying that media should be its own profession.   They were right.  Media planners often made really good and effective account managers.  There used to be a lot of movement between media and account work, but today there is almost none because traditional and digital agencies don't do media and there is no demand for that skill.

When, in the late seventies and early eighties, advertisers started cutting commissions on network buying, the snowball started rolling until it became an avalanche. Advertisers determined (with the help of certain outside consultants) that agencies made excessive profits on network buying.  After all, it only took a couple of people to plan, negotiate and buy the bulk of most advertisers spending. Big advertisers forced agencies to cut commissions on network.  Shortly after that, they started cutting commissions on spot buying, although there was recognition that spot buying was more expensive to handle than network.  Print followed and then once they started to negotiate page rates and the rate card that they used to charge pretty went out of existence.

Soon after that, the procurement departments of advertisers started cutting commissions on creative work.  The 15% commission system died and the fee system as it exists today was born.  When the the holding companies started spun off their media brands, it became a boon to advertisers and hurt the creative agencies by eliminating a huge source of income and profits from those agencies.

We could debate the significance of separating media from creative.  There are many arguments that this separation has hurt the business, but that is beside the point of this discussion. Today, we have come full circle.  Ironically, media agencies have begun expanding their services into territory which was historically the bailiwick of the creative agencies – strategy, account management, traffic (project management) and even creative.  On top of this, theThe media agencies/companies tend to be far more integrated today than the traditional creative agencies, which remain very siloed.

The media landscape has become incredibly complicated. There are hundreds of cable networks and radio stations, magazines, newspapers and a huge diversity of digital media opportunities, not to mention sponsorships, events, and all kinds of promotional opportunities.  The media agencies have proven themselves mostly up for the challenge to put all these elements into a cohesive whole.

Procter and Gamble’s announcement in April that it will be cutting fees by a whopping half a billion dollars while at the same time demanding that all its agencies find ways of better integrating can be debated. However, what is clear is that this will change the advertising landscape forever.

Creative agencies have lost their ability to lead the communications business.  (If you don’t believe this, just ask yourself this: name five advertising campaigns which are cutting edge, creative and come anywhere near the creativity of the sixties or seventies.)  

Media is taking over –  and the tail now wags the dog.