Tag Archives | agency

Good Advice

The thing about really good advice is that you never really know how good it was until a while after. If you knew it was good advice at the time you probably knew the answer but were fudging the decision. It’s when you are in the moment, on a track hurtling in some direction when you just think you need someone to reinforce your position.

My old boss gave me a couple of great ones when I left the comfort of the payroll 6 years ago.

1. To be really great you have to make tough decisions when things are going really well

2. Make sure you pay yourself properly

Both fairly intergalactic in their own right. The first we could talk about for along time and something I really believe in, but its the second that I often come back to. For any new business its key that you get to a position where you start to pay everyone their market value. If you don’t its fairly easy to run a business getting a £100k plus people to work for £15k, it just doesn’t last very long. I fell into the trap with a business a while back – thinking I was “reinvesting”, but the reality was that I was becoming more and more detached from the value of the business and the products we offered. The “reinvestment” plan made it all a little make believe vs feeling every penny you spend which is what a small business should be feeling.

Where I see this happening more and more is not so much in small businesses, but big organisations who are looking to change, or innovate with their products.

The advertising industry historically grew by around 3%. Essentially it didn’t. This made most agencies  try and differentiate from the competition – you had to, it was about stealing. Then along came digital. the growth charts were phenomenal, it was the saviour. New products and services were launched things grew like mad, but the independents (media or creative) grew faster and innovated quicker. Why? They paid themselves properly. They charged clients properly, they paid their people properly, they paid their dedicated management properly and they had a crystal cler idea of their product and how to manage it and importantly grow it.

The “traditional” agencies, were trying to protect legacy revenue – TV media or production, the army of planners who sat in mild panic hoping they wouldn’t get asked a digital question by the client. Money was taken from digital to invariably prop up the old model. Why? because clients didn’t feel they needed to pay for this but agencies felt as though they should – so they took the money, thinking the strategic high ground would be safer than the commoditised trading or production. Clients want the job done, not save money on the money they give you. Its lack of belief in we do that makes it start to be about the money.

It all comes back to being paid properly. Having the tough conversation, being clear on what you are worth which makes you focus where you allocate you resource and why.

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Will digital agencies continue to exist?

Will digital agencies continue to exist

What are they and what is their value proposition? Super clued up on technology? Spot a trend a mile off? Do the things your current agencies can’t do in terms of building and delivering or as Mark Cridge recently wrote in his piece Are digital agencies the new dinosaurs? more open and forward thinking in how technology remains relevant to people.

We forget that they evolved in a world without natural predators, which is why they grew so quickly and so were able to be broad. As the ad, comms, PR, media, CRM, BTL agencies start to really tool up and get what is going on, there isn’t just one predator now but many and they know their discipline as well as which platform it sits on.

The final threat to digital agencies is that more and more of them are finding that the continual change in technology means that having specific disciplines on their books isn’t commercially viable and so start to out source production and build. Which grows the production market.

So you are now left with the idea and approach. If we had a room of the industry’s finest and someone said “probably the most important bit” everyone would nod rather wisely, but ask them who gets paid for their ideas, without any kind of execution underwriting their fees and it would be small.

Unfortunately businesses aren’t great for paying for ideas and the getting someone else to execute and as  “non digital agencies” are very good at the idea and able to outsource the execution quite openly, it will continue to squeeze the digital agencies.

I continue to believe “digital” is too broad to be given to one supplier and as such I think many of the digital agencies will disappear. Some will die, some will be picked up and turned into departments, but I’d like think there are some who would drop their digital flags be confident of their skills they have picked up and turn and charge the big guys again.

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Digital and Regional

blue
“Digital or regional” – that was the view given about 5 years ago to me by an outgoing chairman of one of the large media agency networks. If he had to start again now – that is where he would put his money? No prizes for dropping the “D” word, but going regional? leaving Soho, Noho, Madison Avenue, Charlotte Street etc? Urghhhh

“They make a shed load of money. No one sees them coming. Low cost base. Less churn of good people” – was the longer response.

I recently read a book called Blue Ocean Strategy. In a nutshell the authors look at how you can grow a business by nailing what is called your “Value innovation”. Innovating to increase value to your customers while also innovating within your own business model to reduce costs.

If you can have one proposition that does both. BINGO!!! Change the rules vs. compete within a finite market.

Anyone that has been involved in an online unit within an agency or publishing business will at some point have been “thrown in” as value on a pitch or deal. Crass, but if anything it solves the big issue of “How do we charge for our digital thinking?” or “Are we willing to have the conversation with the client about how we need to charge for our digital work”.

Interactive digital work (I’m not talking digital radio or TV) is labour intensive and can’t be charged on historic execution percentages. If positioned correctly it can be a higher value proposition as well higher margin for the agency. It also provides a counter balance to the commoditisation of print, TV or radio buying (planning traditionally be paid as % of what was bought).

Media agencies have been worried about the commoditisation of the industry for years. It is seen as real threat to their pricing. Finally a non commoditised, higher value, product comes along in online media …… and it’s used to plump up the commoditised side of the business. Something has gone wrong.

So, back to the start. As I read my book, I wondered how the agency world has really innovated with its own value model and there it was …. “Digital and Regional” – 2 sides of the same value coin.

It begs the question – why are the agencies based in central London? Most advertisers aren’t the media owners are, as they need to be near the buyers. But why the agencies? If we started again would we choose central London? In the 80s – when media was probably taking about 4% on the gross spend and people in the industry were driving read Ferraris, it made sense. How many big (offline) accounts are now on sub 1.5%? How many have moved out of central London?

You sense that moving out of town would never be seen as an “innovative” agency move, yet I sense the time is to be honest about what we are and what we do? Treat our high value products correctly and treat the lower value products accordingly and both will flourish.

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Middle East agency debate

body snatchers

I recently attended the agency debate in Dubai’s Media and Marketing show. The session was moderated by Dr. Lance de Masi, president of The American University in Dubai and IAA UAE Chapter President.

The panel included Raja Fares Trad, CEO Leo Burnett Group MENA; Joseph Ghossoub, Chairman & CEO MENACOM Group;  Ramzi Raad, CEO TBWA RAAD; Alain Khouri, Chairman & CEO Impact/BBDO; Edmond Moutran, Chairman & CEO Memac Ogilvy and Roy Haddad, Chairman  & CEO JWT.

It was reminiscent of a scene from The Godfather when the heads of the families are brought together. These guys were experienced, relaxed and refreshingly opinionated. Most had built up their businesses and been bought by a network and interestingly all realised that things were changing very quickly.

“There are no real partnerships” – this was in response  to Lance de Masi asking about the partnership between client, agency and media. The point being that “partnership” is a term used when things are going well and there is no real need to truly invest in the partnership, or more clearly there is no risk to that investment. When times are tough – the partnership disappears and everyone will fight for themselves, or leverage what they can. Not personal, just business and to be honest it’s true.

“Body Leasing” – Chairman  & CEO of JWT Roy Haddad couldn’t really be clearer. “We have found ourselves in the body leasing business. Selling full time equivalents to clients”. The distinction was body selling vs talent selling. Do advertisers ask about the person on the business, interrogate what kind of body they are getting? Which ties in the final point, which really nailed the oveall feeling. For agencies to remain fresh and exciting, with motivated empowered staff, the body leasing model needs to change.

“Creating big ideas” – This was how the agencies defined their skill, value, and role. The point was made that they are producing ideas but not getting paid for the affect their work has on the advertiser’s business . If  anything, encouraging them to sell more bodies (see above if you think I have gone mad !!). On a simple level, when agencies could get paid on the number of times an ad was aired or printed, through to becoming involved commercially.

I came away thinking that things need to change. Agencies are wanting to help solve business problems and not just comms challenges and for many agencies that is going to mean a rethink. Rethink on people, the “partnership”, the way they charge and how brave they want to be.  A previous post already started to look at this and how it is starting to happen within media agencies.

In Dubai and across the UAE they don’t have form for adhering to the rules and aren’t too bothered to challenge how things are done. Something is going to have change with these large agencies and businesses that service the comms industry. A braver more emmergent market such as the UAE may have a better “why can’t we” attitude to tackle this.

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Publicis & Razorfish

marriage

So, Publicis have won the bidding and managed to get their hands on Razorfish. Publicis haven’t been shy on acquiring large digital businesses over the past few years and I’m sure share holders and the Parisian city boys, will be chuffed that billings for Publicis are now up to 25% as promised.
Couple of observations. I’m a big believer in “partnerships” or that good relations come about when you are working on something real with said partners vs the theoretical outline of “how we could work together?”.
It would appear that Microsoft and Publicis have achived this and the relationship goes well beyond the transaction. Publicis. like WPP, have been keen to get closer to technology companies (as the technology guys have been keen to understand the ad men). The recent Razorfish deals involves potential ad money and media trading withinthe Publicis network, I am sure Publicis will be looking to work closer with Microsoft’s development people as technology becomes more important to the whole comms product. Razorfish remains the agency for Microsoft – all looks pretty cool for both parties.
As with any large network acquisition, the press releases talk about the strategic fit and how it will add value to other assets across the conmpany. The reality is invariably that once the money men get their hands on it, its all about getting a return from what was bought and ensuring the network doesn’t fiddle or distract the new addition. I suppose the point is how do you get your 25% digital to be talking to your 75% vs just a portfolio of companies that focus on their own PnL.

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Who is looking over your shoulder?

 

behind

As the media industry continues to change shape, many businesses find themselves starting to question where they are sitting on the value change. Are you still relevant to the people who buy from you? Are you more relevant to a new and different group of people? Do you still need your existing suppliers?

As the purses tighten and people look for higher ground, one thing you can be sure of is that many organisatioins are going to be looking to move closer to the money and if that means moving across someone else, then tough. Areas where I think you will see this are: (beware, may not be pleasant reading)

1. Ad networks bolstering their client direct proposition
These guys are smart and have nailed their proposition. If it doesn’t work you don’t pay. They have the technology, they have the hook onto the advertisers’ site, they have the skills to trade the right media. Don’t be fooled in thinking this is about finding the right advertiser to fit their unsold. They’ll trade what suits and what works. To be honest a fairly compelling offering and something I think agencies need to argue hard against to prove their value. Ad networks see this. They have seen how Google can move past the media agencies as well as service the small businesses. Agencies will all talk about having to have central tracking, hence the danger or dealing direct, but this can’t go on forever.

2. Agencies start to forward buy
In many ways the counter to the above point. Ad networks only really appeared because media owners didn’t want to admit they weren’t selling all their inventory and didn’t want surplus unsold to affect yield. So they gave it to the ad networks to repackage. Agencies got lulled in the wonders of CPA and CPC buying (when times were busy and buyers were only too happy to have prepackaged, definite delivered deals). Agencies lost ground on the technical side of mass optimisation across multiple sites and tend to use licensed off the shelf technology with no competitive advantage. By not taking a risk the ad networks have taken all the margin (20%-30% on gross vs a 8% for an agency). Agencies still have the respect and ear of their clients and I think it won’t be long before some agencies start to forward buy with certain media owners. Get a small group and start to buy up the excess. Prices will mitigate risk. Risk and reward can be shared with an open minded client and pressure can be applied on the media owner. It needs a different level of trading with some serious underwriting and planning – but there is money to be made.

3. Publishers go for consumer direct money
“They already do!” I can hear you saying. The do indeed, many publishers will have a commercial partnership arm, or product arm or customer direct. What ever they call it, it tends to be inbedded deals, almost affiliate plus and to be honest many see this as backfill, playing second fiddle to selling ads to agencies. The reality is for many large publishers the penny is starting to drop that there are too many people in the boat and by the time everyone has taken a cut, there isn’t too much left for them. They know their readers, viewers, listeners, surfers (all of the above) buy and consume, thats the whole point of advertsiing with them. “So how about we try and start to sell direct to them”. The key is that this needs to be marketed and managed correctly and with focus and not necessarily “Yahoo Beef Burgers”, but the right structure will work. Customer money can no longer be the poor cousin, no longer every advertiser and their dog. For years media owners have been talking about the relationship their audience has with their brand, surely this is true realisation of that relationship. Share of wallet not share of spend.

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