Bring back 15% agency commission, Redux

Of all the posts made in this space over the past year none has garnered more interest – leastwise, page views – than the one that proposed a return to 15% ad agency commissions on media spending. It has had many companion pieces over the year (this one, this one, or this one, for instance), but there it was again today, as it was yesterday, as it was the day before, the second most viewed post in the catalogue of Top Posts & Pages on the Burst Blog.

The American Association of Advertising Agencies (AAAA) will convene its “Transformation 2010″ conference in San Francisco this Sunday, combining their annual Media and Leadership conferences into a single event attracting agency Heads-of-State from across the country. In anticipation, as an open letter of sorts, here again (below, with minor edits) is the entreaty that was made nearly one year ago, exactly, to fix agency compensation.

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March 16, 2009

Bring Back 15% Agency Compensation

Another conversation over lunch today with a long-time media industry executive who was full of enthusiasm for a  media planning spin-out currently incubating inside his ad agency. He brought with him more data supporting the fact that TV and newspapers get a disproportionate amount of the ad dollars relative to audience penetration. He hopes that his company’s solution will offer more media planning neutrality to repair some of that dis-proportionality and help truly engage consumers. A great idea.

So, I launched into my current riff that media planning, as it stands, can’t afford to be neutral. Fees currently paid to media planning and buying companies cannot sustain deep dives into new media – notably the Internet -  even though it is well-known and documented that that’s where the people are. My friend acknowledges that the costs of buying online are 3x – 5x the costs of buying TV or print. “A page in the Wall Street Journal!” he exclaims, “Cheap to buy. Very profitable.” Is it any wonder to us that newspapers still enjoy a greater share of overall ad dollars than the Internet?

I was impolite enough to ask how his new media enterprise will get paid for its work. “Well,” he said, “Agency commission, of course, is dead. We work on hourly rates.”

Rats. This is our problem. Fees and hourly rates. It means new media is not cost-effective to plan and buy. There’s too much of it. The consequence is that traditional media forms such as TV and newspapers continue to enjoy allocations that exceed their value in today’s multi-layered information marketplace. The consequence is also that online display advertising continues to huddle around a handful of larger, branded properties – something like 70% of ad dollars on the top 10 web properties is still the reported norm. There is not the financial incentive or capacity to venture deeper: We know the oil is there, but we can’t afford to drill for it.

We can fix the problem by spending more online and leveraging existing cost structures. This should be our first choice. But while I, personally, don’t think it’s fraught with too much peril, clients may disagree who want POVs and appropriate metrics assigned to every new possibility. Alternatively, we can fix agency comp.

“What do you suggest,” my friend asked?

“A return to 15% agency commission,” I answered. Let’s face it, the oil-drillers online are getting paid substantially higher rates than 15% arbitraging – i.e. planning and buying – media budgets. And, it’s not transparent. Restoring agency commission in a new media world restores an important degree of accountability in a process that is currently rewarding older, shrinking media platforms, and undermining growing media platforms.

“Good luck,” said my friend, in a tone that meant, “That’ll be the day.”

Yes, well, but the alternative is to side with those who say the days of ad agencies are over - that they are relics of an old media age along with old media. 

Is that why media continues to be allocated disproportionately to traditional media? Because agencies see newspapers and TV as extensions of themselves and feel duty-bound to save them? Do we think twenty-five year-old media planners who don’t know much of life before Yahoo!, and grew-up on Facebook and MySpace are determined to save newspapers and television? Do we?

No. I don’t think so. We need to fix ad agency compensation.

Picking sides for the Interactive industry’s Golden Age

The IAB Annual Meeting and Leadership Conference just ended in Carlsbad, California, is now easily the most important media trade event in the country today. The American Association of Advertising Agencies’s “Transformation 2010″ conference will take place next week in San Francisco and many of the issues that dominated the agenda this week in Carlsbad will re-appear on the 4A’s agenda in front of important agency principals and buyers. But Interactive owns the issues, and this is the good news and bad news confronting the industry today.

Randall Rothenberg, IAB CEO, understands both aspects. He was ebullient through the event, clearly charged-up by the size of the crowds, the content-rich agenda and warm social atmosphere, sensing that Interactive is on the cusp. But his opening remarks were devoted to leadership knowing that the Interactive industry must pull together to meet a broad set of marketer requirements, inclusive of the core need to support brand advertising, which, as Randall explained, is not a fantasy object (or objective). Brands are real, as real as the people that define them through their loyalty.

Unfortunately, the Interactive industry has loyalty issues and is struggling to decide what side to play on – seller or buyer. By charter, the IAB represents sellers. It leaves room under its tent for associate members, such as ad agencies, that have more than a passing interest in its proceedings, but the IAB represents the interests of Interactive sellers, by design.

In every other media trade organization “sellers” means content providers. The Newspaper Association of America (NAA), the Television Bureau of Advertising (TVB), the Magazine Publisher’s Association (MPA) and the Cable Advertising Bureau (CAB), for instance, all have well-defined constituencies that are pre-dominantly their content providers. Interactive, on the other hand, does not. Wander the hallways of the IAB’s Annual Conference and substantial segments of the Interactive seller population – e.g., numerous ad networks, ad exchanges and data mongers – are working expressly for the advertisers, putting them at odds with many other sellers in the association, notably publishers. This is a problem affecting leadership; it is hard to lead from the middle.

Someone over the course of the two day conference talked about “ad model chaos” within the Interactive sector, which is the heavy price buyers pay under the weight of the industry’s division. The chaos exists because not everyone is working on the same problem for the same purpose. For many, the frame of reference is the advertiser. For the rest, the frame of reference is the content provider. The result means an industry not competing with itself, but at odds with itself, which is clearly evident in its products, its value chain, and its conversations.

It will be argued, as many have argued from the beginning, that the industry is lined-up behind consumers and that the visionary approach of Interactive media is forging one-to-one relationships with consumers, minus the middlemen. This does nothing to mute the antagonisms, of course; nor, would it seem, has it done much to make the industry more successful or desirable; nor, finally, left it with many better options at its Annual Meeting other than to propose getting tougher on consumers. Getting tougher on consumers is an odd directive coming from an industry that owes its existence to the consumer-driven forces of nature, and stands in contrast to the data from Vivaki, for example, that awarded first place to the AdSelector (operative term, “selector”) video product from Hulu and dead-last to pre-roll.

To be sure, the IAB is leading. It begins by drawing everyone to the table, and the Annual Conference did that this year in record numbers. The flourishing attendance endorses IAB Chairman David Moore’s predication that the Internet’s Golden Age is ahead of it, but it will remain there until the industry decides upon its loyalties.

Citizen media, Swedish style

There is much that can be said about the campaign from Swedish public broadcaster, Radiotjänst, encouraging people to fess-up and pay the annual TV license fee that underwrites the cost of television in that country. For starters, it’s a great viral campaign that has earned it “Idea of the Week,” from Ad Age and Cream Global. But the presentation resonates in our new media world today, accounting, perhaps, for the 6.1 million videos that have been created and shared in the campaign, so far.

The campaign (you need to be prepared to upload a picture of yourself if you intend to watch it) is intended to transform the idea of a fee into an investment that promotes ownership and accountability. Pull vs. push: citizens as determiners of the outcome and assurers of a free and open world. Against a backdrop of  haunting music and images that describe a society clinging to hope, words such as “trust”, “opinion”, “voices” and ”choice” pepper the dialogue, along with arguments for ”alternatives to uniformity” and against being “scared into silence”.

Those are Internet themes and mini-manifestos of our new media world. They explain the Long Tail, blogging, social-networking, the exuberance for content and citizen media, the global scale. They harken to the formation of the World Wide Web. They are its foundation code, the ones and zeros of its creation, recognizable to anyone who was there and anyone today who listens. They are rich in promise. They separate us from bondage. They reverberate, “First, do no harm.” 

It’s only an ad campaign, of course. For a TV tax, no less.  But it says a lot about the chance to sell anything in this new world if you can tap its DNA.

Advertsing sales 101. A lesson from the Zen Master.

According to Wikipedia, Mel Karmazin started selling radio when he was 17 years old. Years later, Don Imus would refer to him as the “Zen Master” on air (being contractually obligated not to use his name) when Karmazin ran Infinity Broadcasting and Imus was at WFAN in New York. Today, Karmazin runs Sirius/XM, and if there’s new media newer than the Internet it’s probably satellite radio. Maybe mobile, but while ubiquitous as a device, advertising has had a hard time sticking to mobile, which has been without the adhesive material characteristic and necessary to most ad-supported media -content.

Satellite radio is all content. Thus it’s interesting to compare to the Internet. Both are digital. Both are new. Both are content rich. Both have lived through/are living through a tortuous right of passage to believability which, until the line is crossed, consigns them to a diet rich in direct response and light on brand.  

Go figure, right? Here we have satellite radio, a close relation of broadcast radio, which our father’s father’s father grew-up with, and which buckets listening audiences into engaged, affinity groups that, until now, required live stage performances to assemble in one place, and satellite still struggles as a start-up. Sometimes, it makes one want to shake the head and throw-up the hands.

You have to hand it to Mel Karmazin, though. As picked-up by Paid Content and FORA.TV (link below) he would not be dragged into a conversation about audience ratings during a conversation at the Paley Center for Media, even by Barbara Walters, host of an episode of The View which airs on Sirius. This is what 100 years of experience selling radio gets you: knowing how to stick to the high road and sell the programming.

As Karmazin says, if you sell ratings people will simply want to buy more ratings. Never mind his chutzpah, his hubris or the obvious fact that satellite is still just starting out. Sell the programming. Sell the content. Sell the reason consumers love your show, Barbara. Sell the value.

Of course, as charmed media dragon-slayers, we did not sell that way online. We sold ratings in the form of results. And, well, guess what?

Ratings may or may not ever come for satellite radio, but, if they do, the advertising industry will, as Karmazin says, be happy to tick that box. It will know apart from ratings what and why it is buying. Hopefully, by then, the Internet will have found its own inner value bringing together not just ratings, but reasons for buying online.

Lessons from the Zen Master

Google and the NSA

Hopefully, no one visits me to ask questions after writing about the news that Google has reached out to the NSA for help with security. But, as the Washington Post reported last week, Google went to the NSA after the cyber-attacks on its network in China. Google is not the first, nor the only commercial entity to lean on the NSA for security help. Google is, however, possessed of the ability (more of the desire) to connect to every man, woman and child on earth.

If anyone is listening, please, I think it is generally a good idea for Google and the NSA to conference on cybersecurity issues. I am a concerned citizen. Also, I am not a communist. I am, however, a Republican (but you probably already know that).

I do want to make the point to everyone else, however, vis-a-vis the whole privacy thing, that in a side-by-side comparison with Google and the NSA huddled together around whiteboards and data terminals, the prospect of, say, Kraft Foods possessing my anonymous surfing behavior online in order to tempt me with macaroni and cheese advertising does not appear especially threatening. It will not be the privacy issue I go to bed worrying about tonight.

If you know what I mean.

God bless America.

Media. Strap it on.

This picture (below) was included as part of a report in MediaPost about a new laboratory opened by Metrics Marketing to help seekers unlock the truth about consumer eyeballs and the pattern in which they absorb the reflected light bouncing off web pages – or, more specifically, the pattern in which they absorb the reflected light bouncing off the advertisements on web pages.

Eye-tracking technology is not new, but this most recent announcement and the picture of the young woman with the cool binoculars is the inspiration for a further and perhaps final step in the evolution of new media – one that might put an end to the worry about what happens to media dollars after they are converted to electrons and released to spawn in the open waters of the marketplace.

Let’s give everyone a pair of eye-tracking binoculars in exchange for free content. Order two cable boxes and get four pair of binoculars. Enter the proper code to view programming for free through the binoculars. Ditto Internet service. As long as you are wearing the binoculars in front of your screen, the Wall Street Journal online will cost you nothing.

The same opportunities are present with digital out-of-home and mobile. Wear the “binocs” around town and in the car (high-definition, polarized sunglass lenses optional) and earn credits redeemable at participating retail establishments. iApps are available for the binocs that transfer images to built-in heads-up display technology. Experience what it is to talk to the avatar images of your Facebook friends while navigating through the urban jungle thanks to Google maps. Binocs also comes with free, six-month satellite radio trial.

Media. Strap it on. Help end the madness.

Stop selling scarcity. Start selling relationships.

 

I posted a reply in Jeff Jarvis’ discussion over at BuzzMachine about “Selling Scarcity.” Uncharacteristically, I’ve disagreed with him. 

The link to Jeff’s thread is above. My reply is there and here, but there is a difference in the last sentance where, as an after-thought, I have chosen to be more emphatic here about the question of results vs. relationships. (I could not go back and edit my reply to Jeff.) Fundamentally, it has not been shown that results are more abundant online than off, though they can be, perhaps, measured with greater ease. Relationships, however, are far more abundant online. Therein lies the differentiator. We should be selling relationships.

Dear Jeff:

If I have followed your reasoning properly, then I have to say I disagree with it, certainly as far as the media and advertising portions of the argument go (which are the only portions I’m semi-qualified to address). I’m a fan and advocate along with you (and of you) in regards to the consumer driven information economy, but I believe strongly in the value it has created. My reading of this post is that the new media economy has, instead, wrecked value. Rupert Murdoch would agree; perhaps also Mel Karmazin. Not I.

Start with advertising. “Sell the outcome” is a pretty good summary statement of the points you make, for which we/you thank Max Kalehoff. From it, you admonish those in the media business to align with marketers if they are to have any hope of surviving the chaos of the new world. This is a bad idea, I believe, and poor recipe for survival. Why?

Relationships. You say that media “must become” about relationships. I say media has always been about relationships, and I’d say further that the exciting part about new media is how especially good at relationships it is relative to old media. It is substantially more personal and timely. It is more one-to-one.

The principal stakeholder in a media relationship, however, is the consumer, not the advertiser and the media must stay firmly aligned with consumers or perish. Google’s remarkable success with results was/is driven by value it creates for consumers, not advertisers. Google is in the results business, which is the same for all search engines – as it has been the same for the Yellow Pages and the same for classified section of newspapers (May they rest in peace). BuzzMachine is not in the results business except so far as when I show-up it better be interesting – as, indeed, it always is. Google doesn’t have to be interesting. Google has to be reliable results-wise. You, have to be reliable interesting-wise. You have the harder job. You should make more than Google on a pound-for-pound basis. But, that’s for another day.

I am clear about the primacy of the consumer as principal relationship holder with media in the way that I think you are a bit unclear about it. You say that Rupert Murdoch and others are playing a dangerous game when they propose to charge their “best customers – cutting off their richest relationships with a toll booth.” If you are right in this case (I think you are) it follows that you are wrong that media should align with marketers.

Unless I’m missing the point, which may be that media should be equally devoted to consumers and marketers serving as some sort of Den Mother between the two, as community builders, or Tupperware party organizers inviting advertisers to share coffee and donuts with the neighbors. I’d argue the idea lacks passion, which suits Demand Media and other content mills paying $20 an article just fine. They are not in the passion business. They are not in the relationship business. Coffee? Donuts? Warm bodies? Save a seat for them on the sectional.

…Which is where I get stuck again when you argue, “advertising is failure – it’s what you do when you don’t have a valued relationship.” Right, but then, ipso facto, advertising is not failure in the presence of valued relationships, the “richest” source of which is the media – the richest source of which today is the Internet, where I think we have always agreed consumers find more of what they care about.

Interestingly, this outcome still supports your overall premise to stop selling scarcity. Instead, sell abundance – of relationships. That’s what the old media world was missing: the fact that they could not produce and distribute content abundantly enough to satisfy the needs of all their consumers. The Los Angeles Times tried to serve an area the size of Ohio and failed. It could not afford so many relationships. Ditto the rest. If they are smart they will retreat to their interest-based borders and thrive on the meaningful relationships that result, way into the future. Profitable, only smaller, just as you say.

The Internet can afford countless relationships. It remains to be seen if marketers will harvest them. If we want to help the marketers, however, stop selling results and start selling relationships.

Tit for tat: TBWA appoints a Chief Compensation Officer

Ad agency TBWA is clearly serious about instigating a new level of conversation over ad agency compensation. As discussed in this space a few weeks ago, TBWA Chairman, Jean Marie Dru, had opined that the current compensation formula is broken. This week, Ad Age reports that the agency has appointed a Chief Compensation Officer to lead negotiations with procurement people on the client side.

Why didn’t anyone think of that before? Good idea. Tilting the balance back in favor of ad agency revenues is an urgent need of the 21st Century Information Era, notable for its global, super-abundance of creative media opportunities. Having parties on both sides that speak the same language when it comes to money and compensation is good way to start the balancing act.

Google stops by the old neighborhood on Super Bowl Sunday

According to MediaPost’s Online Media Daily report this morning, John Battelle, at least, knew Google would run a commercial during the Super Bowl yesterday. It was a surprise to most of the rest of us. But it was a welcome surprise. All was right with the world for 30 seconds when Google showed-up still looking and acting like its old self – a search engine – back in the Internet neighborhood, in touch with its roots.

“Hey, look who’s here!”

“Hey, Ma, Google’s outside.”

(“Hey, don’t he look swell.”)

“Hey, don’t you look swell, Google! Where you been!? Come over here.”

“Hey, you look tan. Nice suit…where’d you get it? Paris? Hey, Ma, check this out…Look who’s wearing a suit from Paris!”

“Wait…who’s the girl? This girl with you?! You with him?!“

“HA HA HA!”

“Bonjour.”

(“Bonjour? Is she French?”)

“A girl from France, Ma!”

“Geez, it’s nice to see you, kid. All we know is what we see in the papers, you know? Oh boy, the papers say some things, don’t they? We all know better, of course. We tell ‘em, too. We tell everybody. Google never hurt nobody.”

“But, hey, look at you! A tan. And a girl from France! Geez. I never been to New York, let alone France.”

“HA HA HA. Laugh with me, you old dope! You lost your sense of humor?”

“HA HA HA!”

“It’s good to see you, Google. It’s good that you stopped by. Really good. Really good.”

(“Give me a hug.”)

“You stay in touch.”

“Do you hear me?! I’m watching you! You stay in t-o-u-c-h!“

Happy Commercial Day

Commercial Day is this weekend, the centerpiece of which is the Super Bowl game between the Indianapolis Colts and the New Orleans Saints. America will load-up on snack foods and ground beef, beer and soft drinks and watch the game on wide-screen television sets with remote control. Every iGadget in iVill, both big and small, will join in celebrating the hard-hitting, high-scoring, fist-pumping thrill of consumerism. At half time, The Who will perform (merchandise available here).

Monday, the armchair quarterbacks will pick apart the commercials. Some schools around the country will be closed in observance, just as many office workers around the country will be absent because of observance, and the hum of extravagance will linger in the air.

It is fundamentally untrue that America doesn’t like commercials. America loves commercials and each year the country takes time out to honor this secular art form that tries to tap our aspirations and desires in ways that motivate us to think happy thoughts about ourselves and others that we might buy, perchance to give.

But, sadly, as with so many other observances that are now buried under an avalanche of irreverence and irrelevance, it is hard to remember the true meaning of Commercial Day.

Well here it is: