‘Media agencies aren’t our competitors’ claims Mat Baxter as he repositions UM
UM is dropping its Big Boutique brand position in favour of a new model that sees it reinvent itself as “The Creative Connections Agency” as it pivots to embrace more earned and owned media, Mumbrella can reveal.
The new positioning will see the agency move its major clients off a commission structure and onto either a retainer or a paid for performance model — a structure expected to be rolled out to its entire client base by June.
In an interview with Mumbrella ahead of today’s announcement CEO Mat Baxter said the major change to UM’s remuneration model had stemmed from agencies’ addiction to using paid media at the expense of building clients’ other properties in owned and earned media.
“It’s getting off that drug that is commission,” said Baxter. “We don’t have commission in the agency any more and that is something we have been working over the last 18-24 months. Obviously commission is still paid but now it’s rebated back to clients.”
He also declared he no longer sees media agencies as competitors, pointing to companies like Google, R\GA and One Green Bean as its new challengers.
Baxter
Baxter announced the changes at the agency’s annual media upfronts this morning, where he took media owners through its strategy for 2015.
In an in depth interview around the repositioning, challenges to the media agency model and the reskilling of his staff base, Baxter argued the current system of agency payment systems too often biased media agency advice in favour of traditional channels.
“We now earn on a head hours model, based on retainer, or on a paid for performance model or a combination of the two,” he said. “That gives us a freedom not to be wedded to a revenue stream that is dependent on spending money on paid media frees the agency up across the range of things.
“The only way you can be advice neutral is if you are profit neutral. Once you earn your profit from a particular channel you are no longer objective. We have therefore made a considerable effort to migrate our clients off that system.”
Baxter also challenged media owners wanting to win business from its clients, which include Coca-Cola, Coles, McDonald’s and ING, to look to integrated partnerships with other media properties.
“What we are saying to the media is that actually what we are looking now for is the optimal combination of channels. The channels or connections points, might not be the strongest in their respective fields, when they are combined together they become super strong,” he said.
“It can be one media owner with multiple connections or it can be multiple media owners with multiple connections.”
The UM boss pointed to a report from Starcom Mediavest Group this week predicted those channels will grow 3.5 times faster than paid media channels this year.
“Clients understand that it is better to own the house than rent the house,” said Baxter. “They are looking to build equity in their owned assets rather than rent through paid media.
“The world’s best brands, Unilever, Nike, Coke, are all there – they understand it and when you get to that tipping point, which is where we are at, you have to question the sanity of the business we are in.”
A polarising figure within the industry, Baxter declared his desire to move away from the “baggage” of the media agency label, adding: “Media agencies aren’t our competitors. Media is exactly the sandpit we don’t want to play in anymore.
“The reason we are calling ourselves a connections agency is less about playing with words and more about getting the organisation outside of the psyche of the media plan: they think spots and dots, paid transactions, media owners.”
Challenged on who his competitors were Baxter pointed to digitally centred agencies, who were not tied down by legacy.
“If you map the agencies who are doing a very good job of connecting with the consumer in a very good way most of those names are not media agencies,” said the UM boss. “Media agencies are doing a very good job at spending money to connect to audiences but are not doing a good job with connecting to audiences without spending a lot of money.
“The companies in that connections quadrant are companies like Google, R\GA (who are in our Interpublic group), companies like Soap, One Green Bean, dare I say Naked, and you look at their work and they are connecting to large audience with really interesting ideas or programs of work.
“And they are doing it in a digitally centred, grounded way that is freed from a lot of the legacy of media agencies which is to start with TV and work my way out.”
Nic Christensen
“The only way you can be advice neutral is if you are profit neutral. Once you earn your profit from a particular channel you are no longer objective. We have therefore made a considerable effort to migrate our clients off that system.”
A nice sentiment that consistent with the way the industry is, and should be heading. But, how can this claim be substantiated with so many in-house profit makers such as Cadreon and Ensemble?
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We can do this because we are making millions through Cadreon! Thanks clients.
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Really enjoyed hearing about the foundations of the evolution of your business. Looking forward to seeing it develop and be brought to life.
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Stephen Allan, Mediacom, Mumbrella (Mar 2014): “Mediacom is the content and connections agency” (http://j.mp/1CGNoOn)
Mat Baxter, UM, Mumbrella (Feb 2015): “UM is the creative connections agency”.
You know those bottles of shampoo that Woolies make that look an awful lot like a bottle of Head & Shoulders? The ones that are just their own-label version of someone else’s idea that they’ve knocked together because the original one is the market leader and there’s probably some money in it? That.
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In summary, connect to audiances without spending YUM’s money. Isn’t that saying give us something for nothing? Why the hell should they?
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Good stuff Mat you always have been: https://www.youtube.com/watch?v=QA5gJ0hZpCc
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This is like Coke coming out and saying Pepsi isn’t our competition, we’re more like Penfolds. Beverage yes, competition no.
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can’t fault the guys ambition even if the reality is a bit different due to IPG units like mnet, cadreon, reprise etc
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This takes industry bravery. Very well done to Baxter and team.
I hope that CMOs across the country ingest this news and use it to reflect on how their marketing can be optimised to create these brand connections.
Yes. Brands need strong connections with people. The only way to do this is by connecting those people to the brands.
True connections – if you will, call them Love Marks (with a tip of the hat to Kevin Roberts) – need to be woven into a rich tapestry that knits together complex marketing disciplines.
The winners will be those who have specialists in making excellent yarn, and others who are master weavers.
Jack of all trades will be masters of none.
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Great vision as usual. Well done Mat and the UM team.
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So UM bills on head hours, and I’m sure they compensate their staff based on their hours too, right?
I mean we all sign the contract that says “you will work 9-5, but will be expected to work appropriate overtime where necessary”, but when you’re billing your clients for those hours and not compensating your staff…
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Fantastic move to create agency differentiation in the market with a positioning around creativity and ideas. A positive departure from the old world of reach and frequency. Good luck to Mat & team.
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Didn’t Mindshare just restructure away from being paid media specialists as well? Sounds great in theory, but the proof will be in the pudding…
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Matt should read Mumbrella, the worlds best brands are Lego, PWC and Red Bull
https://mumbrella.com.au/woolworths-australias-valuable-brand-index-reveals-276761#more-276761
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@Alex Mediacom’s position is nothing like this – did you read the story? And are you honestly trying to say Mediacom is the market leader? have you read the news recently?
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@Giggle
Thanks and yes I know, we look after LEGO.
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@ Dan
I completely disagree, it’s absolutely nothing like that.
We’re no longer competing in our legacy business with legacy competitors. The marketplace has moved on and as such we now compete with new companies providing new products and services.
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If no longer a competitor does that mean UM what be competing … Against other media agencies.
What nonsense.
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If other media agencies are not your competitors then why are you always on pitch lists with other media agencies?
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Great morning Matt! Thanks to you and the UM Team for such an inspiring morning. I find it’s always a great use of my time to come along to the UM Review Day every year! Keep up the fantastic work!
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Interested in how much they stand to gain or even lose by moving major clients off a commission structure and onto either A.) retainer or B.) paid for performance model. How does each model work? Anyone know?
Also what’s the net effect to UM? Feels like a fundamental change in business. Is this the return to full service debate all over again?
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Just wondering why it’s important to do a story on the way an agency decides to get remunerated.
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Nice work Matt for having a crack and moving the industry in the right direction.
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@Keaton and @Jason
Of course we will continue to compete with “old” competitors but this about transitioning our product (and competitive set) over time – we’re stretching our product into a new and evolving marketplace. This is a 3 year plan not a 3 day plan.
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Interesting that UM don’t want to be compared to Media agencies and ‘that baggage’ but are happily a finalist in Adnews Media Agency of the Year. Wondering if they will withdraw as an act of protest to support their new positioning?
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Mat thanks for today. Very insightful. But one thing got my attention. You mentioned you want media owners to work with UM in providing ‘Clients Partnership Added Value’.
I’d like to know what ‘Client Partnerships Added Value’ means to you on already heavily discounted media owner rates with added value on budget that is already spreading thin.
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Smart way to justify internal targets of further funneling client funds into IPG feeder agencies (Reprise, Cadreon, Mnet, etc) who then invest in paid media (and keep a larger margin than UM ever could).
Henry has built a great business.
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“dare i say naked”. nice one mr baxter, putting your money where your mouth is. A positioning that might actually mean what it says
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Nice packaging solution (albeit not unique to the market) and if Coke had trademarked their model…I fear UM would be infringing on copyright issues…but the reality is UM have the same people trading old fashioned media…so in reality nothing has changed. UM will need to swap out 70% of its staff if it is serious about this proposition. At the moment – it’s pure smoke and mirrors
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So UM claim they have moved on from being a media agency nor do they compete with media agencies…… yet are nominated as a finalist for another publisher’s media agency and media network of the year awards where the entry deadline was only three weeks ago… if this is your new positioning UM why did you not enter in another category like ‘specialist’ agency of the year….?
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Refreshing to hear an agency talk so passionately about ideas, creativity, and content. Moving away from focusing purely on reach and frequency is a smart move.
Well done to everyone who presented yesterday, those of us in the audience appreciated the passion, humor, and sincerity.
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@Ummmm…. That was a reflection of UM’s work over the past year, when they were operating as a media agency. Perhaps in the future they might apply for the specialist agency, but it only makes sense to do that when they have fully transitioned and the majority of their work (outside of just Coke) reflects their new position.
Stop being so quick to find a flaw, and just observe. I know I’m keen to see if they can actually bring this to life – lord knows it’s the shake-up our industry needs. And if anyone will do it, rather than just claim it, it’s Mat
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@AdNews and @Ummm
We entered these awards for our performance over the past 12 months and before our new positioning was launched. Moving forward we will no longer be entering “Media Agency of the Year” awards.
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@James
All journeys have to start somewhere buddy.
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Well done Mat B for answering many of the questions/statements to clarify UM’s new position.
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Ikon have just done repositioned in the same way.. Globally Zenith have done the same thing..
The problem is not in the thought, the thought is easy, its evolution 101.
The real deal is in sticking to it and educating Australian clients to understand that they need to plan, spend and monitor in a new way.
Hope all this works as it will make the whole marketing and advertising world a better place, a more effective place and actually give it a future.
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the way we are going everyone in media will be at pains to point out they are NOT in the media business.
Agencies, publishers. What’s the cause of the shame of the word ‘media’?
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UM – Welcome to the year 2005 where retainers and paid for performance models replaced commissions. Just 10 years late.
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@really – wrong, most big media agencies still have heaps of clients on commissions
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It has never made sense to me, why brands continue to think they can buy and plan their media better than an agency.
Media Agencies no longer only buy media. They are experts in strategic integration, cutting edge technology, new innovations and also sensitive intellectual property gained from other clients.
Funnily enough though, the above mentioned advantages of being with a good reputable media agency, are none of the reasons a brand will refuse to work with one.
Whilst I work for what I believe is a great agency and one of the best in the country, it still surprises me that small to medium size brands continue to think the can do a better job in-house by going direct.
Unfortunately, brands believe they get a better slice of the pie this way but nothing could be further from the truth. We would take any client under $500k if the deal was right for both parties.
BUT. I am constantly hearing ” oh we’re not big enough for an agency, we like to keep our finger on the pulse ourselves, we know media pretty well, our reps really look after us.
I was once told, it was not in the said companies moral fabric and organic foundations to use ‘Search’ marketing but wanted to start an e-store.
Good luck with that…
Many brand/marketing managers/business owners don’t know what they don’t know. Whether it’s ego, short sightedness, a bad experience or simply uneducated advice, some brands will continue to think they know better.
But then, one day they will say – “I wish we’d thought of that…”
And we will tell them – “We did but you never listened”
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@Big T…. your above diatribe makes no sense in the context of the article?
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“Media agency decides to abandon conflicted remuneration model and put its actual clients’ interests first”
is this 1995 or 2015?
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Should have read:
Can somebody list UM’s closest 4 competitors in Australia please? I am curious to know who they are.
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