Magazine article Marketing

Andrew Walmsley on Digital: Murky Media Deals

Magazine article Marketing

Andrew Walmsley on Digital: Murky Media Deals

Article excerpt

Too many contracts create the illusion of value for brands and force agencies to live on kickbacks.

As we set forth into Q4, and many of us lock and load for the Christmas rush, spare a thought for your humble media buyer.

You might have sales targets to meet, websites to keep online, customers to keep happy. But the media buyer has all that pressure and the requirement to squash your media into the boxes dictated by agency deals. If early placements went awry, now is the last chance to pull that position back; you might end up in some odd places if you're not on the ball.

Small clients think they get better rates by being part of a big agency's portfolio. They figure the overall average is so much stronger that they benefit even if they don't get the sharpest prices. Big clients, on the other hand, generally do get the best pricing, but nevertheless agency dealmakers are past masters at playing 'find the lady', and even these advertisers often don't know what they're really paying.

The real value of agency deals goes to the agency, not the advertiser Some agencies are rumoured to earn 150% of their profits this way, by retaining volume discounts passed back to them by the media owner.

While many client contracts demand these discounts be passed on, it can be pretty hard to identify them when they are run as separate income streams outside a client's account. So these deals thwart transparency, creating the illusion of value for clients and allowing agencies to claw back margin.

It isn't just the effect on agency/client business that makes these deals toxic.

Theoretically, a media owner knows that if it invests in the right content, audiences, and then advertisers, will follow. But agency deals at best introduce a lag to this, and at worst decouple this investment rationale; agencies might be more influenced by the kickback than the media opportunity, corroding the incentive for content investment by publishers.

When I said this last week on stage in a panel session, my observations were wafted away with the comment that this was an out-of-date view, and that 'rebates now are more transparent'. Unfortunately, this dismissal was from the representative of an agency that just four months ago settled a EUR30m case brought by a client that accused it of retaining undeclared discounts.

Sir Martin Sorrell has rightly complained of uneconomic price competition in the media business, and nowhere has this been more keenly felt than in digital. …

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