The K2 Intelligence Report: A History of “It’s Just Media”

Has anyone in any advertising discipline ever been in a meeting (or even just a conversation) where the media component didn’t boast of their ability to get the lowest rates ... for everything? They either were so big that the media cowered under their clout, or they were the perfect size (smaller) to be nimble enough to get the best pricing. Recently, in the midst of a media agency search for a client, I heard three different agencies explain why their agency got called first when TV networks find themselves trying to dump unsold inventory opportunistically for under market prices at the last minute. Everyone was first. And everyone was best. But to most client marketers overseeing media who don’t truly understand the nuances of the media function: It’s just media.

Before DDB, when Maxwell Dane, Ed Doyle and Bill Bernbach were two ad guys and a business manager who formed an agency because they could have fun, do good work and make money, it was just media. Same with Papert, Koenig and Lois. Same with Scali, McCabe and Sloves. Even singletons like Ted Bates and Leo Burnett started that way. When Ted Bates, Co. was acquired by Saatchi & Saatchi for $500 million in 1986 Chairman Robert Jacoby personally walked away with $100 million. The industry was aghast. The clients whispered, “How can my agency make that much money?” Soon enough, $300 million in billings left the agency and fees began replacing the 15% commission. Warner Lambert, R.J. Reynolds and others were beginning to understand how Jacoby made so much money.

Time marches on and things change. We pay to watch TV now. A 30 share and 20 rating in prime time is entombed in a museum, somewhere. And now, it's not just media anymore.

Agencies formed holding companies which allowed them to have competing clients housed inside the same parent company. Stand alone media agencies were no longer called “buying services” and were elevated to respectability. Of course, the holding companies were very active in the media space allowing them to again own multiple agencies and thus keep competing clients. Ad agencies, no longer entrepreneurial ventures but now publicly held corporations responsible to shareholders, sought and found revenue streams with increasing margins. Smart people.

And then, as client purchasing departments were re-named “procurement,” they began reviewing ad agency fees as well as other parts of the marketing communications process. While protesting that they are only interested in bringing value -- not just cutting costs -- procurement began attacking costs. Procurement-driven clients were systematically reducing agency fees while Wall Street demanded higher revenues and profits. In many cases, procurement treated media as a commodity like the raw materials used to manufacture the client’s product. (“A spot is a spot, right? Why should I pay more for a 2 rating on one network vs. another?”) It’s just media. Remember those smart agency people? They listened to Willie Sutton and focused on media. “That’s where the money is” Sutton said when asked why he robbed banks.

As K2 Intelligence reported in “An Independent Study of Media Transparency in the U.S. Advertising Industry” prepared for the ANA, non-transparent business practices are pervasive. While there are multiple and varied qualifiers included in the 62 page report, in essence, agencies sought new and different revenue streams they believed to be contractually compliant (I hope). And for the most part, clients looked the other way believing their agency partners would only act in their best interest. After all, why should a CMO or Advertising/Communications Director with little deep media experience or understanding ask the agency tough questions or audit the process? After all, it’s just media.

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