I am indebted to my ex-colleague Maarten Albarda (once of Coca-Cola and AB-Inbev) for posting the summary of a recent WFA survey of its members.
The WFA, or World Federation of Advertisers is the global equivalent of ISBA in the UK, or the ANA in the US. In other words it represents very large global advertisers whose views and opinions are (one would have hoped) of some relevance to the media agency community, given that where sophisticated advertisers go today the rest of the market will go tomorrow.
The WFA study makes grim reading: 87% of their members are unhappy with the levels of transparency offered by agency trading desks; 54% said they had been asked to sign separate agreements with their agencies limiting (among other things) the right to audit performance; 57% were aware that the practice of arbitrage exists, with 82% of that group believing the practice negatively affects the agency’s ability to act impartially.
The WFA’s own summary of the study concludes: "The central concern is that Agency Trading Desks offer a new way to charge more for the same product, that the price that is paid for an impression can bear no relation to the price the media owner charged for it."
"Advertisers also fear that the ability of Agency Trading Desks to provide a new profit centre makes them vulnerable to making choices that are determined by the agency's business interests rather than their client's marketing goals."
There are some interesting elements here. First – why shouldn’t an agency ask clients to sign separate agreements regarding the services provided by the trading desks? No-one is forced to sign such an agreement presumably.
Secondly, why shouldn’t an agency look to make additional profits? After all advertisers are forever looking to maximise their profits. Their shareholders would have something to say if that were not the case.
But, and it’s a very big but, the worrying thing about these findings is that clients are convinced they’re being fleeced. They may be OK about new agreements, they may even be OK about paying more for additional services, but they are certainly not OK about anything perceived to be clandestine, or under-the-table, or somehow dodgy.
Trading desks threaten the very future of media agencies. And yet at the same time they potentially offer a valuable service around their data analytics capabilities. The problem is first the name – whoever thought of calling a new service something so redolent of those nice, upright and morally respectable people in the City needs a severe talking to – and second the positioning.
That flapping sound you hear is chickens coming home to roost. For many years media agencies have focussed their efforts on the buying end of what they do. They’ve cut their prices to win business, in the certain knowledge that they’ll find a way to make up any shortfall. They’ve failed to convince clients to pay for what we can shorthand as planning services.
Now that they have created a service potentially of value, particularly to data-rich clients they’re being judged on their past record on transparency. It’s no good them whingeing about how it’s so unfair that they’re not properly paid for their efforts. They need to reposition themselves to their clients by stressing the benefits they bring through their planning abilities before it’s too late.
They need to walk the walk as well as talk the talk in order to become what they always say they want to be – the advertiser’s trusted advisor. But first they need the trust bit.
Brian Jacobs has 35 years experience at advertising and media agencies, including Leo Burnett, Carat International and Universal McCann. Prior to establishing BJ&A in 2006, he was executive vice president at the research agency, Millward Brown.