Why the media model isn’t fu*ked

Really sensible take Ben. Love this just as much as your brilliant article the other day.

Couple of points.

1. Do you think there are reasons why media isn’t more committed to automation on the execution/buy side? Business model? Legacy issues?

2. What do you see as major issues in trust?

3. Do you see a need for changes to P&Ls in holding company structures to support your above changes? As lots are reliant on certain renumeration models in how they report and so on.

I still see almost every pitch submission document coming from a client asking us to complete a staff list and submit overhead rates and profit margins.. like it was 1997. I did one just today. The client was advised by one of your competitors Ben, a well known procurement consultant still pushing the FTE model

All the points above are good, but if clients simply refuse to consider other forms of remuneration and value exchange , the industry doesn’t move forward.

I would say 97% of my agency’s clients have remuneration in either fixed fee or commission – all the other models and ways of charging are not prevalent because clients do not want to consider any other option: the last 3 pitches I submitted i asked if they would consider alternative fee structures – they would not even consider it : hear us out.

There’s a lot to be done in the minds of client CMOs as well as media agencies in my opinion

Hi Henry – my thoughts below

OPINIONWhy the media model isn’t fu*ked
PwC’s Ben Shepherd argues that the media model has an optimistic future – despite what some recent commentaries might have you believe.
March 4, 2019 12:13
by BEN SHEPHERD
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I was reasonably surprised to read the below quote in AdNews this week (admittedly after being referred to it from Tim Burrowes’ weekend newsletter).

““The media model is fu*ked. They had to beg me to take this role,” one media agency CEO told AdNews in the secrecy of a dimly lit Sydney pub. When asked why she accepted the job if she didn’t think the media agency model was sustainable, she smirked and said: “I like a challenge”.

A few things stood out. 1. Who says this on the record? 2. Who lets the journalist basically out them for all to see?. 3. Why take a role in an area you claim is ‘f*cked’? 4. Why boast you were begged to take the role? 5. How would your staff feel about this viewpoint and have you shared it with them?

Part of me thinks part of the issue facing media in Australia is people like this being in leadership positions, but this isn’t my point.

The amount of ‘woe is media’ articles that have been written over the past 12 months is staggering. How many articles do we need that retread the same territory? It’s staggering how internally-focused these articles and the quotes surrounding them seem to be.

They focus on fees, full-time equivalent, commission, procurement, programmatic, extraction, SBUs etc. They seem to be a self validation of the worthiness (or otherwise) of the media agency model and the ‘agency’ model in general. They talk about margins not “being as good as the old days” and other things that probably only matter to the management of the agencies.

They very rarely focus on the key pillars that make media an exciting place where the value of well crafted, well thought out advice is more valuable than it’s ever been. They rarely focus on the disruption potential of a media environment that has lost a lot of focus around its role – on behalf or corporations reach the most important people, at scale, efficiently and with impact, in order to create favourable commercial outcomes.

The significant shifts in media consumption, as well as rapid shifts of attention into ad free channels are important and extremely valuable areas to master for companies looking to increase revenue.

This is a massive opportunity, but my belief is the industry needs to adapt rapidly to take advantage of these. Right now the industry is generally made up of entities that call themselves ‘media agencies’. But it doesn’t have to be. Those companies don’t have to keep awkwardly calling themselves agencies either. The term is no longer relevant or accurate.

1. If you want to price yourself like an outsourced service, expect to be treated like one. Full-time equivalent (FTE) throttles future potential.

Media agencies moved to FTE as a demonstration of innovation in pricing. What FTE looks like, and is, is an organisation outsourcing its media operations to a third party. No different from outsourcing a call centre or any other ‘non core’ (rightly or wrongly) activity.

The business model follows FTE as it becomes all about renting out a body, extracting 2.1x their salary and repeating this. My belief is this pricing model will ensure media agencies will remain expense lines in the eyes of most (wrongly). Moving outside FTE will reset the framing of value.

2. Job-based pricing is not as stable as recurring FTE – but it is a better way of linking actions to value.

Agencies could remove any higher value service from FTE scope and charge for this on a job/engagement basis. This would require better business development skills and more selling but it would allow them to better recoup on the best people and the best thinking. However it would require different management of these job-based staff – and these staff would need to be able to wash their own face in terms of business development. Job-based pricing would likely make up >> Good q – maybe capital requirements?

2. What do you see as major issues in trust?
>>> Nothing major – if anything client org’s I believe are very open to moving forward and building on their current relationships as opposed to them being too fundamentally busted. Glass half full would symbolise my experience – even in instances where that feels from an outsider like a stretch.

3. Do you see a need for changes to P&Ls in holding company structures to support your above changes? As lots are reliant on certain renumeration models in how they report and so on.
>>> Yes but being pragmatic SBU/silo P&L’s are also a lever so the alternative is difficult to conceive in terms of incentive to deliver.

@HenryT – that is concerning re the FTE comment. FTE is such an odd approach for any client that isn’t rinse and repeat 52x weeks a year as it creates periods of dramatic under utilisation and equal periods of dramatic over utilisation (which leads to staff churn, quality issues etc). Agree work needs to be done on both sides, and in the middle with the co’s advising orgs on RFP processes