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Tuesday, May 5, 2015

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.

13 comments:

  1. Great piece today. Truth is that media has taken over – creative agencies have lost their way and the best, the brightest, and the most creative have found other more lucrative avenues to pursue. In addition clients have far more regular interaction with their media agencies – as a result the relationships are stronger. When a brand problem exists clients first look at creative as the issue – not media. And it is so very easy to move creative agencies. After all the lion’s share of dollars are spent with the media firms.

    On top of that small agencies are thriving providing real senior talent at affordable prices.

    Jerry Gottlieb

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  2. Jerry: Thanks for your excellent comment and observation. I also agree that smaller agencies are providing excellent work at much lower cost.

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  3. I’m no longer in the business, so I’ll take your word for it that creative agencies no longer lead the communications business. If by lead you mean make the most money.
    But I can’t buy that creative, by which I mean message and not media based ideas, still doesn’t lead communications. After all, it doesn’t matter where or how you say what you say, if you have nothing worthwhile to say.
    As ad-blogger and ex-SF creative director Bob Hoffman (The Ad Contrarian) once wrote, “Creative people make the ads. Everyone else makes the arrangements.”
    It’s an offensive remark in how it dismisses the contributions of others. But it’s full of truth.
    Not necessarily in a business sense, because, as you point out, there is far more money to be made and saved in media than in creative, on a fiscal basis.
    But certainly in the sense of what makes advertising valuable to those who practice and use it with any success. It always starts with what you’re going to say.
    Agencies may now make less money figuring out what to say than they once did, but when they figure it out, their clients still make gobs more money from it than they’ll ever save in media.
    Wouldn’t campaigns for brands like these, all created since the golden days, bear this out: Apple, BMW, Dove, GEICO and Nike, just to name a few.

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  4. Bob, good smart comments.

    But let me put it in perspective. I fully agree that the message is everything in advertising and communications. And the traditional agencies still own messaging, for the most part. But more and more, it is clients who have to force or at least foster their lead agencies (creative) to integrate. There are very few stellar advertising campaigns these days. And, while it isn't as universally visible, some of the best work is digital.

    As to leadership, I still believe in ad agencies, but they are struggling to lead. Once upon a time, an agency created an ad or a commercial and told the media people where to run them. Today, just the opposite is happening. Media strategy (not media planning) is often dictating the type of work which has to be created. Even for the brands which you name (which I agree are doing good work), have the media people telling them what to create and where it should be run.

    Sadly, today, few account people even know what a GRP is. Mostly, because they don't have to.

    Most of the innovation that is coming out of the business these days is on the media side of thing.

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  5. Like the Postman, media agencies deliver the mail or Brand message. They don't "create" it. BC

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    1. @Anon: If you read Marshall McLuhan, the medium is the message. In other words, today, especially, what we say may be less important than how we say it. To put it another way, for many, perhaps most advertisers, more importance is accorded the budget and its placement (delivery) than the message (branding) itself.

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  6. Spot on analysis. Thanks for connecting the historical significance of Media Integration to the evolution of the ad industry.

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  7. Regarding Marshall McLuhen, who I've never agreed with, the "Message is the message".

    Certainly, the medium is very important. But what does it matter if the medium is right on in terms of effective delivery (target audience reach) and cost efficiency if there is no relevant and persuasive message concerning intrinsic or perceived Brand end-benefits and competitive differentiation?

    Finally, as anyone at Landor or Interbrand will tell us, brand messaging and media are just two of many moving parts in BRANDING. Others like naming, logo and "package" design, retail sales environment, customer service, etc., are equally important to a Brand's total identity and personality. BC

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  8. To PG ... After re-reading your article, whether I agree with it or not, I'm confused by the closing line of your post here: "Media is taking over – and the tail now wags the dog."

    What exactly do you mean?

    Certainly not a positive expression and the complete antithesis of "First things first". Such as, first define your Brand, identity, personality, and selling message; then get that out via whatever relevant media (traditional and/or social) that make sense.

    Help me out here. BC

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  10. The sad thing is that clients are losing out ultimately, chasing lower cost at the expense of better marketing. When Media teams help determine the right vehicles for the message, and then Creative teams develop those messages, everyone wins. But when Creative is treated like a menu item "Yo, I need 2 :30 spots and a 1/2 page print ad" there's no opportunity for brainstorming and improving the overall campaign.

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    1. Well, said, Anon. I couldn't agree more.

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