Why 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.

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 <10% of an agency’s total revenue. How would the business change if this moved closer to 40-50% and the business balanced between retained services (stable, recurring tasks) and more frequent specific engagement work?

3. Dramatically increase public facing thought leadership.

There is a huge lack of deep, data-led domestic analysis around the changes in media consumption, what they mean for advertisers, and how to navigate these. Agnostic media specialists are in the best position to help companies in these areas but too often we are reliant on trade body research (admittedly conflicted) or overseas macro trends (lacking so-what for a local marketer). Think of it as a forward investment that will yield in future. I have personally seen material revenue come from external positions on key topical issues.

4. Business development doesn’t have to be mammoth pitches or current client scope creep.

Large pitches are exhausting and by design weirdly uncollaborative. Scope creep if natural can be win-win, but can also be forced. The big opportunity area is going after clients you don’t have, but on an engagement basis.

Case in point. Agency X may not have Brand Y as a client. Brand Y has a clear issue (let’s say its a low growth utility who has publicly been challenged on its marketing efficacy), so what is to stop Agency X looking to approach them and help solve this issue in a consultative capacity? Absolutely nothing. Multiply this by 10, or even 100, and you have a pretty sizeable pool of clients that could find high value in your thinking and work. This requires a cultural change and resource composition change (more external, more entrepreneurial, more resilient) but again the upside is massive.

5. Assertively reframe the concept of ‘professional media advice’ from ‘media agency’ to ‘media practice’.

Agencies have changed what they do, but I still hear most clients refer to them as media buyers. This is inaccurate and possibly a legacy habit, rather than an expression of how they view them. However there is an element of truth that right now the view could be that their media partner is viewed as an outsourced service that buys and places their media.

This hides where the overwhelming majority of value is created – which is not in the transaction and finances, but in the intimate knowledge of how citizens consume and perceive media and entertainment.

Which brings me to my last point:

6. Reframe core expertise from media investment to media consumption mastery.

It’s a furphy that your media partner will know your category better than you will, or how your consumer shops your category, but the blind spot they should be able to absolutely navigate is how your consumer interacts with media and entertainment.

What music they like, what they think about current issues, what talent they admire and why, how they consume media across an evening. The best ways to reach them. How they attend the cinema. What entertainment and media is fighting for their time. What your competitors are doing. What shows they buy. Where they align their brands. Where are there new opportunities to win?

No one should know more about the media than the media partner. No one. What a rich area to immerse yourself in to benefit your business.

With those six areas in mind, I don’t think media is ‘fu*ked’ at all. It’s in an opportune position to be transformed and redefined if we allow it to be. The question is – do we? Do we want to leave behind the ‘comfort areas’ that cause many to believe it’s terminal? The dated processes, tools, reliance on FTE, price-based competition, short termism, ideologies around division of trading/thinking/’strategy’, limited client relationships, lack of c-level rapport, procurement as oppressor, consultant as an enemy etc.

I am optimistic that collectively we will move towards the discomfort and clients and media advisors will be significantly better off.

Ben Shepherd is a director at PwC.


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