January 5, 2010 § Leave a comment
The Ad Age staff compiled a list of challenges and pitfalls awaiting the advertising industry as it turns the corner into 2010 and the start of a new decade. Editors gave the issue of agency compensation and the role of client procurement officers prominence as the first entry on the list. Quoting Mediabrands CFO, Tara Comonte, from her remarks at the American Advertising Federation’s Hall of Achievement Awards, Ad Age summarized the issue: “Procurement wants to pay less than enough. And it will be self-destruction.”
It is an issue that deserves to be at the top of the list. The issue of agency compensation must be addressed if the industry is going to be able to afford to keep pace with the rapid advances in new media in a way that provides maximum benefit to marketers.
In that regard, further down the Ad Age list was what to look for in Digital Marketing. “In short”, says Ad Age,
“marketing on the web has not been about creating demand so much as reacting to it by delivering the right ad to the right person when they indicate they want it. This has been a boon for Google (and has given birth to 400 ad networks), and represents the best thinking of largely West Coast technologists. But it is increasingly disastrous to content industries that are watching offline revenue erode and finding no equivalent revenue stream online.”
It remains a mystery (sort of) why the media value of the Internet can be so obvious and so invisible at the same time. Ad Age reports that delivering the right ad to people when they indicate they want it has been a “boon for Google.” Yes, but this is not the invention of West Coast technologists, nor the impetus of 400 ad networks. Google’s success is tied to rules cavemen (whose primitive work got us on the right track with media as much as with the uses of fire and raw materials, we might say) understood: the right message in the right place reaches people predisposed to what you are trying to sell them. Ug.
Most ad networks evolved differently. Most pay very little regard to placement if they are paying regard to anything more than price. Those that invoke any targeting do so almost exclusively on the basis of person, not place; and not time, either, though some would argue that “in-market” means “right time” as much as “right person.” That may be the best thinking of West Coast technologists. Hunters and gatherers, however, think differently. They fish where the fish are.
Google has successfully leveraged all of the Internet’s power beginning with place, which has been the thing most responsible for the boon. One person has learned that lesson well-enough: Tim Armstrong. Hence the new and improved, comes-in-a-resealable-package, add-water-and-stir, instant content formula of Aol. Will it work? Not like Google. It’s instant after the fact, which is an instant too late. But, the heart is in the right place: content. Place. Audience pre-disposition here (an operative word) and now (another operative word). They are both on sale, online (you’re probably already buying them, thanks to Google) and available – as Ad Age says – in “millions of tight niches.”
The millions of niches part, of course, has been the distraction. New media is a vast place and the buying industry has been ill-equipped to navigate it. The digital market, therefore, has a very clear stake in the future of ad agency compensation (see above). If the industry wants the Internet to emerge as a boon for itself and not just Google it must figure out how to reward planners and buyers for the work that goes into harvesting the power that Google has harvested – deliberately and transparently, not passively or non-transparently through third-parties, or by trying to find escape routes around the media nexus of person, place and time.
Maybe it’s not so simple that even a caveman could do it today. But it’s still pretty simple.
December 9, 2009 § Leave a comment
Veteran OnlineSpin(er) Cory Treffiletti proves he is no Internet lap dog with his column today about demand-side networks, asking important questions about the ad network model that is emerging in-house at ad agenices.
I think he’s right of course: it’s about the money, not the media. And, as it’s been said in this space before, who can blame agencies for identifying with a financial formula that has paid huge dividends to some third-party networks while agencies have tried to stay warm, huddled over an ember fire.
Fix agency comp. Preserve media planning transparency.
November 16, 2009 § Leave a comment
Further to Ad Age Editor, Jonah Bloom’s, remarks to the ANA last week about the current role of procurement in the marketing industry, the IAB’s CEO, Randall Rothenberg, has published a comprehensive review of how we got here, to the point where as an industry we are convulsed by the question, “Is Marketing a Strategic Resource or a Procured Commodity.”.
“I’m frustrated by marketing being so misunderstood by so many, and I’m tired of reading articles placing all of the responsibility on the CMO.”
We should regard each of these items as part of the same awakening: marketing cannot be allowed to hit bottom. Within a consumer-driven world, marketing must have purview to engage consumers in a way that builds trust with consumers – which can mean something very different from using marketing for results in the short-term.
November 13, 2009 § Leave a comment
You have to respect any editor that wades into a controversy up to his hips in front of an audience that may be hostile. Hats off to Jonah Bloom, Editor of Ad Age, for raising the possibility that the role of procurement has gone too far in grinding down ad agency compensation in front of the Association of National Advertisers’ (ANA) Annual meeting in Phoenix this week (see link below).
Of course, the audience might not be as hostile as one thinks. It is, after all, composed mostly of the Chief Marketing Officers and other marketing executives at the country’s leading brand marketers, and the attrition of trust and resources over the past 20 years has affected them, particularly.
I won’t bother to look it up right now for it is known generally anyway: the average tenure of a CMO today is – well – stupid short. I imagine, in fact, that if the video had panned the audience during Jonah’s remarks, you might have seen many a tough marketing man or woman discreetly dabbing away the tears of emotion and relief.
It’s okay, everybody. Let it out. It’s time.
February 17, 2009 § Leave a comment
I agree with just about everything Jeff Jarvis has to say – and has always had to say – about new media, most notably the power of niches. Small is the new big as long as the power is there to network, which the Internet, of course, provides. However, in several reviews about his new book (which I have not read), “What Would Google Do?”, reference gets made to Jeff’s view that ad agencies are doomed. More accurately, his view that their days as curators of brand messages are doomed. This is because in a networked world consumers can emerge on their own as the true brand owners with the power to shape and articulate brand image and value. Agencies as middlemen become irrelevant. Jeff’s well-documented “Dell Hell”experience on his blog, Buzzmachine, is a classic example of how one person’s experience can connect with the experiences of many other people to change brand behavior in a way that, eventually, rewards the brand. Agencies never enter into it.
That can change if marketers will re-invent how they compensate ad agencies by returning to a media commission standard. After all, that’s what Google does. Google gets paid on commission. It is the same with a lot of networks online that have made plenty sharing media revenues.
The economics of media commission works well in the new, networked economy that Jeff so rightly points out has taken over. The fee structure imposed on agencies over the last 20 years, does not. It’s killing them and it is holding back the ability of brands to adapt to the new media reality, which is open and distributed. Agencies still have possession of the budgets, but they have neither the financial means or incentive to distribute the money efficiently online. Consequently, so-called “brand dollars” get spent within easy reach, on a handful of web sites, while the rest of the money gets carried away by networks, including Google, where its future can be uncertain.
Agencies are starting to catch on. They aren’t choosing to try and re-negotiate how they get paid by marketers, yet, but they are thinking about how to get into the network business themselves and become commissioned media buyers again. They are in possession of the marketing strategy, the marketing data, and the marketing budgets. They just need to be able to share in the media spending in the same way other networks do online in order to take advantage of the available distribution.
If they succeed the outcome will be good for brands, long-term. Brands need advocates. Consumers make the best advocates, but agencies come second. In a competitive world, you need both. In the short-term, however, we need to be concerned about the transparency of agency goals and intentions and the conflicts of interest that may result from directing client business in the interest of profitability instead of client objectives. That may sound harsh and accusing, but it’s not. Agencies need relief, especially online where the future of brand marketers is playing out in places like Jeff Jarvis’s Buzzmachine.
In all of this it may be worth mentioning that J. Walter Thompson started out life as a magazine rep. He got into the business of helping customers and prospects create advertising as a way to facilitate selling more pages. The rest is history, until now. Suffice to say that Thompson may have been responsible for the media commission model that sustained agencies like his until recent times. Were he here today, he might then be the one telling agencies they’ve got to get back into the media business.