IPG Mediabrands out of SMI: why did they quit and what could it mean for the industry?
Earlier this week, one of the biggest media holding groups in Australia IPG Mediabrands quit key industry metric Standard Media Index. Nic Christensen looks at what could be behind the move and what it means for the index, agencies, media owners, clients and the industry alike.
It’s probably fair to say that Monday afternoon’s announcement that IPG Mediabrands was quitting the Standard Media Index (SMI), globally, took many in the industry by surprise.
In fact, you could probably go one step further and say, four days later, the decision still perplexes many industry figures.
But let’s go back three steps and begin by talking about the position in the industry SMI has carved both locally and globally.
SMI co-founder Jane Schulze
An Australian initiative, SMI was co-founded by Jane Schulze and Sue Fennessy and launched in 2009 in recognition that the media market could gain valuable insight and data from media agencies – a key funnel-point of advertising spend – if it shared and pooled its data with a third party, SMI, which then breaks it down based on total media agency, individual media owners, category segments, etc.
Seven years later, and despite being a polarising element with some media owners, SMI now plays an important role in many markets, including the US and UK as well as Australia.
While some media operators are supportive, many dislike the fact that media agencies can see how they are doing in total media agency spend and then do the math to work out what share of a publisher or TV network’s revenue their agency represents and use that as leverage.
As a negotiation tool SMI has proven very effective when it comes to the pointy-end of trading discussions.
Other complaints are that SMI struggles in its reporting over the growth of digital due to its direct-to-client information pipeline, with many media owners frustrated that the index fails to get a view on direct sales – which for the likes of online behemoths Google and Facebook is now thought to have exceeded total sales of $2bn and $500m a year, respectively, but SMI (as of FY15) had listed agency revenues of just $480m and $145m, respectively.
SMI reports on approx. one quarter of Google’s local revenues
To be fair to SMI, on this secondary criticism, the index has never had line of sight on direct sales – be in it print, TV or digital – but as the industry goes digital this issue becomes more problematic and the broader point is that some media owners don’t love the index despite the fact that more than 40 media owners now subscribe. SMI also notes its advantage is that it allows everyone to independently verify the level of ad demand going to the various holding groups.
Now when we look at media agencies, however, it’s a very different story.
The media agencies generally love the data and in Australia they have been eager to share it. Indeed, Australia was kind of the SMI case study for rest of the world where it gained good traction with everyone and became a key metric because it captured a large portion of the paid media market.
Globally, however, achieving penetration across the five major holding groups – Dentsu Aegis, Omnicom, Publicis, IPG Mediabrands and WPP – has been more challenging, with Sir Martin Sorrell’s WPP refusing to sign on in any other market other than Australia.
So why did IPG Mediabrands suddenly quit the metric globally?
It’s a complicated question; on a basic level it’s understood that commercial negotiations globally between the two sides failed to find agreement specifically around data and the share of the burden of cleaning it up.
SMI often pulls in multiple data sources on sales in order to put together its numbers and it’s labor-intensive work that SMI expects to be remunerated for.
This appears to be where things seem to have broken down, although both sides have declined to comment specifically on the reason for the withdrawal with their joint statement saying only that it “related to conversations about the global relationship between the two parties.”
But this raises the question: is there a broader rationale behind the withdrawal?
IPG Mediabrands agency UM has been clear that it is moving away from a sole focus on paid media to a broader model that also recognises paid, owned and earned.
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This shift in media agency is not unique to IPG Mediabrands but it did lead AdNews to postulate this week that the real reason for the exit was due to the shift away from paid media.
IPG Mediabrands is refusing to answer questions about the withdrawal but in the absence of an explanation its rivals have lined up to put the boot in.
One rival media agency CEO noted that despite claims it is shifting to owned and earned media, Mediabrands still has close to a billion dollars in paid media spend – we’ll know the exact figure when the new SMI numbers come out today and the historical data has the group’s data taken out. Expectation is that it will be substantially less than the $1.47bn claim in RECMA.
“I’m not sure I buy this logic (that a shift away from paid is the reason),” said the rival agency CEO. “You’d have to worry when the best part of $1bn that they invest on behalf of clients isn’t their priority.”
A trading director, also from a Mediabrands rival, noted that with the media pitch for one of Australia’s biggest media accounts, Coles, currently in play the impact of the withdrawal on the market would be significantly reduced if there is an account move.
“It won’t matter if UM lose Coles,” said the trading director. “If there is an account switch then it’s likely that some $200m of that spend will come back in to SMI”.
In many ways this commentary is rivals taking advantage of the vacuum created by Mediabrands’ silence and you can expect in the coming weeks, months and years that those rivals still in SMI will use this to argue to clients that they have a trading advantage over Mediabrands.
IPG Mediabrands and its agencies UM and Initiative would obviously dispute this, and even rival trading directors concede that while SMI is helpful in media owner discussions it is, in the words of one trader: “Not the be-all and end-all.”
However, more broadly, some in the industry are questioning if the real rationale behind the decision is that IPG Mediabrands sees earned and owned as the priority but fears that it will be held to account by media owners as it decreases its spend in paid.
While SMI has typically been used to the advantage of media agencies with an overall shift out of paid, some wonder if the holding group fears being held to account through the metric and it’s this that has motivated its sudden withdrawal.
Again, IPG Mediabrands, for the moment, is remaining mum on the issue.
For the wider industry the other risk and fear is that the withdrawal of IPG Mediabrands will make media owners less likely to subscribe to the service and in the long-term threateni the viability of the metric.
SMI has recently had some traction in this space, at last securing the likes of long-term intransigent Nine Entertainment Co., which under previous sales boss Pete Wiltshire refused to subscribe, but there is some concern that the withdrawal of IPG Mediabrands could set a precedent others may wish to follow.
Schulze told Mumbrella she is not concerned: “SMI launched in Australia seven years ago and has reliably published the monthly ad spend data ever since'” she said.
“Companies across the broad landscape of media rely on SMI for the most up-to-date information on advertising demand, and that won’t change.”
SMI has grown from nothing to play a key role in the industry and offers a valuable service but it’s also fair to say that the withdrawal of IPG Mediabrands from SMI has potentially impacted more broadly than just on SMI and IPG Mediabrands. For the moment, there are many questions, but precious few answers.
Nic Christensen is the media and technology editor of Mumbrella.
Any index with 40+ data contributors should not allow back calculations on any of its contributors’ revenue. The biggest mistake here is in thinking one could be competitive just by aggregating raw numbers and producing a highly transparent index (without advanced analytics). While one may think they have a product, they don’t, because all they’ve done is give their raw data away. Worse, it’s not even their data… But their contributors’. And now with their customers trained on seeing this much transparency, they expect nothing other than the raw data. This is one great reminder that data itself is not a sustainable product.
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