Media agencies are structurally unsustainable
Management consultant Henry Innis believes media agencies are in structural decline. There is a solution… but the humans of adland aren’t going to like it.
There’s an elephant in the room when it comes to the transparency debate. The media agency model of commissions just isn’t making enough money anymore.
20 years ago, it was all rosy. Clients paid a fixed fee commission that was healthy. Then this horrible department called procurement came along. Their sole job was to focus on driving value out of the agencies — which mostly came down to putting the squeeze on their prices.
When the average agency operated on a 30% margin back then, they had room to move. But commissions have dropped more than 50% now.
Who’d be a TV buyer in this day and age? Automation will take around 70% of the media agency jobs. Unfortunately they’ve never really had much creative or strategic empathy so they’ve lost the battle to make content. The “content” coming out of media agencies is dire. This is due to most media agencies being run by ex buyers or ex account people. They had a great opportunity a few years ago and squandered it.
Speak for yourself mate
If you think “programmatic” is a push of a buttom you have another thing coming. Its just as complicated if not more than buying TV and thats the misunderstanding!
Well Said.
Very bold piece Henry. Well done for honestly calling it out.
Said the “never worked in a media agency” person.
This article once again highlights the real issue with media buying agencies – commissions! Let’s face it, the agency strategy will only ever include recommendations for channels that offer commissions.
If you’re serious about transparency then remove the commission model all together so that maybe, maybe you could actually start thinking beyond impressions.
Have you heard of something called a fixed fee, @therealagenda?
Look it up, been around for 20 years.
Many many clients have them for media agency fees instead of commissions
It means agencies dont get more or less based on a channel recommendation. They get paid a fixed amount based on resources.
I second HJT, fixed fee is mutually beneficial
New model is win business through pitching a retainer with resource cost that runs at a loss. While maximising investment in a small select group of media or tech partners that give back huge rebates. Basically anyone but Google and Facebook. It’s done behind the scenes so even less transparent than the old commission model and not traceable by procurement or auditors.
Nice try @HJT, thanks for the laugh though. You’re either out of the loop or deep in the transparency issues that plague this industry.
Henry clearly has little or no idea about what a modern media agency actually does.
Love to see a name here. Worked with a number of media agencies. Great businesses and no one is saying they don’t deliver value. But there are clear structural issues around them on price. Well documented issues.
So rather than get your back up, let’s work on how we can either deliver very profitable service at a better price point (automation) or pivot the industry into new territories (take on the consultancies).
One of the best media agencies in my view doing the latter in Sydney is OMD – they’re almost like a consultancy in their approach – and brilliant at it. Great model for people to follow!
Jokes! You hvave to be kidding. They have the same agenda as all of them. If anything the smaller more agile ones are different. Not the cumbersome machine that is OMD!
I see no evidence of consultancy.
I’ve worked with some pretty great people in there – but could be I had a good experience. Still rate them!
The work doesn’t back it up.
OMD are the least like a consultancy! They’re too big and old fashioned.
I don’t think this is new news to agencies. The problem isn’t just the structure within agencies, it’s the structure of the industry. When the TV networks create a fully automated offering (that is consistent), this will allow buying agencies to change their model. A lot of time and energy is spent on buying spot and dots, which still requires bums on seats.
Can’t believe we’re still talking about media agency commissions and not say, license fees and commissions from tech vendors….
How many digital / tech / consultancies declare those?
How many clients know ?
you clearly have no idea how small agencies & inhouse client media teams work!!!
certainly will be interesting times ahead when people don’t have jobs so can’t buy the very products/services companies are trying to promote.
Who says people will be out of a job? Agencies are struggling to fill the roles which deliver the manual and administrative tasks now… automation will remove the empty jobs.
Agencies won’t be fighting for the same (small) pool of traders, and somebody who has been in the industry for 2 years won’t get paid the same salary as somebody who has been doing their job for 4 years.
Henry Innis is the new Jon Holloway.
Ha Ha
Funny
Henry is right. It’s healthy to have this debate, but alarming some deny the model is collapsing. Following the commissions model is an inexorable steeplechase to the bottom. Yes, media agencies add value. Are they compensated as equitably as they used to be? Not on your life! For the nay-sayers, examine your Profit & Loss Statements and Balance Sheets, run some ratios. Until you do that – you have no business disputing transactional media buying margins are ruptured and bleeding out. What used to be dominion of highly skilled, knowledgeable and networked negotiators will shortly be the dominion of recognised consulting firms and automated buying. You are witnessing the opening of an abyss in leadership vision in media agencies. OMD may have altered course toward consultant space. I don’t know or care. Is it nice to be the size of WPP, Publicis or an Omnicom? Sure! Except…when their global leaders fail to envision their value creation for the client based on their capability or incapability to deliver user experiences in digital, design, web and mobile while simultaneously pulling a margin out of coordinating congruent mainstream buying. Who are the big agencies of the future? Deloitte, PwC, even McKinsey and IBM. Firms already in the consulting space are acquiring agencies that demonstrate capacity to deliver user experience, hand over fist. The death of the big agency hasn’t happened, but the legacy of outdated agency thinking is certainly on the nose.
Spot on. It’s naive to think that media agencies have the skill sets to compete with the output of management consultants. (despite Henry’s personal experience with one or two people). Sure they use the language of ‘partner’ and ‘business objectives’ but their toolbox is still a blunt offering.
Omd Sydney embody all the traits the author criticises. Add staff churn to it and unhappy people. This kills your argument Henry.
Not really, didn’t include it in the piece, just said I had a positive experience with them.
Suggest if you want to comment take your name off anon!
Suggest you refrain from suggesting how and what form people comment.
All comment is valid. Anonymity may be needed for many reasons. Perhaps the person works at OMD.
I have no personal knowledge of OMD SYD but should “Anonymous” be correct and able to support his OMD claim with evidence (without commercial in confidence / employee conflict), we as an industry should be celebrating these milestones. All too easy, younger, less battle exposed planners, buyers and strategists fall foul of NOT valuing their intellectual property (IP) and firm’s gravitas when faced down by a CMO who’s becoming increasingly more powerful with bigger budgets in the firm as CEO’s, boards and shareholders bay for blood in the form of mega profits, dividends and share of market voice. The only way to feed the starving beast is delivering user experience to customers – digital, social, mainstream or otherwise. The industry badly needs paradigm shifting leadership vision and courage – not further debate filling the void of dwindling commissions, skill retention, re-pitching or rewriting client contracts to manage scope creep. Continue to do the same things, get the same result. Dwindling confidence and fear is palpable. Nay-sayers are the last inertia. There is no blame to be apportioned, but there is a glorious opportunity for the industry collective to unite and debate delivering user experience, proving value to CMO’s and cascading confidence down the line to the next generation of media “wunderkind”. We should also be looking over our shoulder at the likes of News Corp. Products and services like ‘News Xtend’ are beta testing clients appetite for packaged solutions which have potential to drive a stake between client direct and agency. This is not a News Corp strategy. Being able to straddle the line between publisher and providing quasi-agency services saw them collect APN on the way through and broaden their digital and social appeal with a swathe or rural, regional and suburban digital, social and web content delivery. The rest is history.
Is no one going to mention Henry’s jacket?
it’s horrible…
Consultant/Depeche Mode tribute act.
Quite the differentiator
80s called, or the Fonz, Blade Runner? Consultant my ass! Hippy! Check for Nautilus boardies below Innis. Show us the togs.
Always happy to whip out the togs, Jamie. 😉
Bringing new meaning to casual Fridays…
Sure you have edit permissions for your profile pic or, swap the smashed telly for some smashed quads and revealing leisure wear. Do it for your fans. I’m 35% more creative in boardies however, 50% less credible.
It’s an interesting look!
Is he over-18? And does he have any paying clients in his ‘management consultancy’?
It is very cute
1940s bomber pilot
Loved it, very insightful.
Another day, another “media agencies are dying” article on Mumbrella.
Yawn.
Henry if you want to be famous at least produce new content.
“again”, or anyone else – if a novel persepctive appeals and you want to abandon first quintile globular philosophy of “media agencies are dying” so, let’s all become consultants”… , read and re-read “Blockchain for Video Advertising: A Market Snapshot of Publisher and Buyer Use Cases” February 2018.
Here’s an abstract/teaser.
“Long-form, premium video and TV advertising, with their high CPMs and low volume, is a compelling use case for blockchain. In the coming year, we expect to see some significant beta
tests from both traditional media and new entrants.”
….traditional AND NEW ENTRANTS.
Nicely put Henry. The fact that clients and media are already jumping to programmatic solutions for trading without a media agency in sight and most of the big media agency profit is from trading arms then I think media agencies are as close to dead as they have ever been. He has a point.
You’re getting worked up over a 26 year old kid only 2.5 years out of uni. Media agencies, get your interns/graduates to write op pieces to counter this. They’d have the same level of credibility.
Easy on the age discrimination there anonymous person. Larry and Sergey were PHD students when they founded Google (@24 years old).
Disruption and progressive innovation, generally comes from people bold enough to talk the talk AND walk the walk.
Avanti Henry!!
I’m going to look you up.
Its not age discrimination, it’s experience discrimination in regards to his opinions being stated as fact. I just want to know what he’s actually done & accomplished in our industry so that his opinion and brush stroke matter-of-fact comments, are worth being published on a major industry press site that’s read by clients? Saying these things is damaging and dismissive of good, smart people who drive results, who do the work and do it well.
Where’s the work that shows he walks-the-walk? Some anecdotal new biz wins? I’ve only heard of him cause he comments on all the stuff on here, giving shit, and a handful of ‘i like this and heres why’ comments on some pretty bland creative.
This is nothing but grandstanding to an existing topic and profile building for him.
Pointing to some billionaires who made it big in the late 90s during the dot.com boom (and successfully survived), isn’t a counter to that.
– Ronnie Pickering
I’m not sure that’s right, he is young and a bit crazy, but was definitely not in a grad role and led quite a bit of new business stuff. I think he’s invested in a couple of things successfully as well. No slouch
Worked with Henry when he was in a senior strategy role (he is no spring chicken) and he raises some very good points here. Some will heed what he has written, others are already doing it and many will choose to ignore it. However, doing the last one would be a mistake in my opinion.
Hey Henry. Very glad you are not advising me!. You have clearly read one too many text books. Can i suggest you do some research and really understand what is going on (which helps define the future) before writing such a ridiculous woffle .
Is a Woffle like a cheese toastie?
I read the article and it’s well written. But I am not actually sure of the purpose though as it’s the same old topic as any other articles that’s been written regarding the doom and gloom of the “the value of media agencies”. The article can be summarised as a one liner that is applicable to any business, not just media agencies, which is “a business must and should evolve as the market evolves in order to survive and thrive”. There is no need for a 5 minute article that probably took days to write.
As a management consultant, outline your credibility by being brave enough to outline solutions, not highlight the same boring stuff that’s been regurgitated multiple times. I appreciate the time you took to write but the articles you have written follow the same format (i.e. too broad and bleh, and no one is really interested other than taking a p—). You don’t have to divulge all your trade secrets (if that’s how you make a living). I.e. if you are going to preach about value, do so by adding substance in your own work, otherwise it’s just another noise. #ihopethishelps
Answer is quite simple. Media (at least the buying) should shift to a software business. Looks radically different in structure, personnel, capability etc.
Did say that quite clearly above, and have been excited with the progress we’ve made on businesses like Flobox which are playing in this space…
I agree this is where it is heading in the near future.
Marketing team subscribes to a media agency in the cloud. Buys everything through software with a data marketplace included. If it doesn’t work out, finger can only point inwards… But I think the control available with this model overtakes the appeal of less responsibility using a 3rd party media agency.
It’s so painfully obvious that every person commenting here (and the author of this “article”) either works at a creative agency or a consultancy, not in media.
Also, this has literally all been said hundreds of times before in much more articulate ways.
The real shame here is that Mumbrella let this hack be published. Shame that these AU publications aren’t even close to the same level as their US counterparts.
https://adage.com/article/cmo-strategy/mckinsey-change-years-rebate-uproar/313320/