Agencies need a new model: Media360Summit

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The oultook for media agencies is considerably brighter than it was a few years ago, but it’s still far from straightforward, as a discussion betweeen three agency heads showed. Moderating, R3 principal and co-founder Shufen Goh began by raising the “boring” topic of accountability and asking within this context how media agencies should be paid. OMD CEO Mainardo de Nardis quickly responded that accountability is not boring but fun. “If we can’t measure [the effectiveness of our work], what are we here to do?” he asked.

Accountability has always been part of the equation, panelists claimed. Goh countered that there was often a poor perception of transparency around the work of media agencies. But Gerry Boyle, Asia-Pacific chairman of ZenithOptimedia, said what agencies have become accountable for had changed.

“What we want to be measured on is the value we create for clients,” Boyle said. “There are two key limiters: the availability of data and the imagination as to what we want to achieve. Particularly in Asia, there’s less demand for [accountability] because there’s natural growth in many categories. In Europe, clients are looking for answers. I would say look for those answers now.”

De Nardis interposed that “we need to find a new way of remunerating agencies”, to which Goh agreed, but asked what was holding agencies back from really innovating to effect that change.

In the past, de Nardis said, it was hard to reward agencies because the KPIs were “fluffier”. He predicted results-based rewards would become more widespread over the next few years. “Really it’s [a case of] rewarding success, not rewarding the agency,” he said.

This kind of model is much more attractive to agencies than commission on bulk buys, Boyle said. But as Goh noted, while P&G rewards partners as a percentage of sales, the majority of clients have yet to go down that path.

“Business performance is becoming more relevant to our compensation,” insisted de Nardis. “it’s not a big part, but it’s there; it’s a beginning.”

Inevitably, the conversation moved to the topic of procurement, which Boyle said could be a “very good thing” in that it lent an independent perspective on transparency. The problem, he said, was that procurement tended to focus on measuring the wrong thing — paid media, which is diminishing in influence. “The influential channels are not measured at all in the procurement process,” he said.

Speaking of which, Goh then noted that a lot of clients were rethinking their agency models. With less need to invest in paid media, they are weighing up the options of shifting the balance to digital or creative agencies, or simply integrating.

To this, de Nardis complained that the industry focused “too much on the journey and not the destination”. Boyle stood up for agencies by claiming that “we’re one of the few [disciplines] that has complete visibility of everything a client is doing”. But Alfonso Rodés Vilà, CEO of Havas Media, said real collaboration between disciplines was essential in order to serve clients’ best interests. “Media agencies are in the centre to bring about this change,” he said.

But are they? In terms of talent, “we’re not placed well”, admitted de Nardis. Boyle said the situation was “not dire” and that it was still possible to attract very good people, “but I don’t think we value highly enough what we do for clients. If people think they are doing something valuable, that’s a very attractive point. We’ve conspired to take the value out of it and we have to take it back”.

Boyle added that agencies need to become more closely involved in sectors like technology “if we’re to grow and have a strong future”. Rodés Vilà used football as an analogy to suggest how marketing’s different stakholders should work together. If agencies don’t change from an old-style “tennis” mindset, he said, “our competitors will be consultants and tech companies and we will be dead”.

See all coverage of the 2015 Media360 Summit