Disarming the Ad Bomb: Part 1

By The Village Smithy Archives
Cover image for  article: Disarming the Ad Bomb: Part 1

Mike Drexler has been an industry leader for over five decades. So when he talks we listen. Drexler’s recent MediaVillage column “The Advertising Industry as We Know It Is About to Blow Up!” resonated with many readers. All of Drexler's points are valid, in that they are being talked about in the industry, but there are counterpoints and possible solutions that beg to be heard. In that spirit, I am providing a four-part response which will run over the next four weeks.

(Editor’s note: Before continuing, be sure to take another look at Drexler’s column, one of the most heavily read in the history of MediaVillage.)

Let’s dive right into Drexler’s first point, which speaks to the transparencyissue that has put advertisers, agencies and media companies in a confrontational zone.

Drexler says: “Agencies need to be assured of a reasonable profit and advertisers need to understand the significant investment agencies are making to deliver what they want. Media companies also need to understand the deal flow and that they can’t get in the middle of the advertiser/agency relationship to only serve their financial self-interest.”

My response: The lack of financial transparency across the digital landscape has led to a lack of trust on all sides. This was confirmed by the virtual no show of most major agencies at the 2015 ANA Masters of Marketing Conference in early October. The rampant spread of stories about arbitrage, kick-backs, agency discounts not being remitted to clients and bogus fee arrangements between agencies and media properties has resulted in the ANA appointing two auditing firms to look into these situations. Mediasmith is (and has always been) among the agencies taking the position that it is the client’s money and that they should know where it is going. Agencies which practice full disclosure are important to the infrastructure of the industry. The client should always know the price and the mark-up for anything they buy from an agency (again, it’s their money). The agencies being investigated have said they have done nothing wrong. If so, the ANA owes them all a big apology. The agencies that are full disclosure applaud the recent ANA actions. Clients also need to take responsibility for their own due diligence by asking if their agencies areactuallyagents or just vendors. If you are going to use an agency make sure they are representing you as your agent, with fully disclosed media costs and fee structures, and are not selling you point solutions with opaque mark-ups.

Another of Drexler’s points speaks to the fact that client relationships are judged to be less than satisfactory.

Drexler says: “Look at any survey among CMOs and you have the answer. But what really brings it to bear is the number of agency changes that continue to go on among clients. Unprecedented. What’s even more stunning (as was recently announced) is that a client who changed media agencies about two years ago changed again last year and recently changed back again to its previous agency about a year later (and the press release read about the same as it did the last time).”

My response: The Bedford Group (competitive to Drexler’s Drexler/Fajen Group in performing agency searches) produced a white paper titled Client/Agency Relationship Sustainability. This piece outlines a number of issues that cause agencies to be terminated including turnover on both sides, lack of understanding of a client’s business, lack of relationship between strategy and creative and a number of other cogent points. It also lays out some best practices for clients relative to trust, respect and overall treatment of agencies, permitting them to make a profit and a number of other ideas. Anybody on the client or agency side would be well off in reading this piece. After all, changing agencies is often much more expensive than fixing the current relationship. Interestingly, just because some businesses are churning over who they work with doesn’t mean anyone is getting out of the pool. They are just going to another, often similar agency. We need to all work together. True agencies need to stop acting like they are selling point solutions and clients need to stop treating agencies like vendors and more like partners. This is especially true in the procurement process. Procurement processes haven’t always been something that is done with the best interests of marketing considered.

Another of Drexler’s facts talks about clients wanting to bring certain operations in-house. Not only media but creative services, too.

Drexler says: “With the advent of technology and automated processes, client in-house trading desks and strategic resources are gaining ground. Some are even bringing creative people on board. The reasons are primarily cost, data sharing, control and response time. Of course, many advertisers don’t fully realize the full cost associated with bringing communication and technology services in-house, but once they get started they will be committed to getting it right (with plenty of help from ad tech companies, consultants and the media who all expect to benefit in their own way).”

My response: Last year, Anheuser-Busch InBev decided to outsource media-buying, bringing about an end to the Busch Media Group. The fact that one of the biggest advertisers with the most resources could not make in-house buying work is a prime example of the resources and experience media buyers bring to the table. They apparently realized media buying wasn’t all about deal making. It is a complex landscape and if you don’t know how to navigate the terrain you will lose. Before bringing anything in-house a marketer should consider if they have (in addition to the media people) the engineering, ad-tech knowledge, data sciences and marketing analytics support needed for the initiative. We hope that going in-house is more than just hiring a DSP and letting the algorithm do the work. That’s akin to going back to the site network model, which was largely inefficient and expensive.

Next week we will talk about Technology and Ad Blocking.

The opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaVillage/MyersBizNet management or associated bloggers.

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