Rigging And Transparency — Brands Are Just Reaping What They Sow

Make your bed, then sleep in it. Right? Well, whenever something happens in the advertising industry that brands don’t like, it’s well worth a little more self-examination behind the causes. Sure, big agencies are not exactly innocent creatures who should avoid blame — but let’s be honest, 2016 has been the year of blaming agencies for everything under the sun. So how about a reality check?

OK, here goes. Brands; nearly everything wrong in the current advertiser and agency relationship right now has been at least exacerbated, and sometimes created, by you. Sounds harsh? OK, so consider this. Are brands really so dumb that they think when they beat down the big agencies on media that it’s the end of the story? Of course it isn’t.

Procurement has triumphed in commoditising marketing, and its tentacles are deepest in media. Blind e-auctions and a general policy of letting agencies know the cheapest bid will win have stripped out nearly all the visible profit from media. It’s no surprise, then, that agencies try to claw some back through third-party tech deals and publisher rebates.

That has been much discussed in 2016, and it’s true that brands have a reason to complain when their budget is more influenced by the media agency’s rebate requirements than their own brand-building criteria. However, the area this is already spilling into is only just being uncovered by the Department of Justice in America. Trust me, this is happening in the UK too.

In the above model we have a bunch of large media agencies who have had prices screwed to the floor, although they have no idea what price media will cost in a year or two. Parting of hedging their bets, then, has been to win business for sister agencies, typically in creative. Often it is just forced on brands, but where they insist on opening up projects to rivals, the big agency will get in bids and then — guess what — the sister agency comes in with just the right price to win the deal.

Knowing many people as I do in the smaller, independent sector, I would never defend this. There are too many decent people trying to make an honest living against the odds who are hurt by it. However, if the brands think this is all just a matter of greedy agencies adding to transparency woes out of malice and an insatiable thirst to grow the bottom line, they are missing a point or at least part of it.

If brands continue to turn everything into price, if they continue to screw cost so tightly — particularly through the mega money media deals — then they would be stupid not to realise there will be mission creep. Big agencies aren’t going to be cut to the bone without trying to make a little action for themselves through rebates and third-party costs, as well as — and this is the issue of the day — ensuring that another arm of the business wins other work to grow billings and profitability.

It’s not action that can be automatically completely forgiven. But it can be easily explained, and when it is, the brands have a lot to answer for. As for the poor old independent, smaller agencies, they are responsible for virtually none of this, yet they are the main victim. If brands can’t see how reducing everything to cost at first saps the big agencies but then emboldens them to eat the independents’ lunch, then they are dumber than anyone could have ever thought. If they continue, there will be no choice when deals are renegotiated. Just the big guys they have ground into the ground who have paid it forward by grinding down or buying smaller agencies in return.

Let’s hope, then, that 2017 is the year where brands focus on value and on ROI than simply cost. Only they can do this. It can’t be done for them.

by Sean Hargrave, Staff Writer
Courtesy of mediapost