Wall St. Speaks Out on Cannes and Commoditization

The Cannes Lions awards amp8211 the advertising industry39s preeminent honors amp8211 occurring this week will undoubtedly provide awards to welldeserving examples of creative excellence Although we do not claim particular expertise in making assessments of standout creative campaigns on a global basis a recent one which resonated for us was on behalf of the Cannes Lions themselvesAs evidenced by the growing throngs of attendees the quotLumascape flotillaquot of ad techfocused yachts the celebrity involvement the presence of CEOs from many of the largest media and technology companies and many other factors the business behind Cannes has certainly grown rapidly We39re guessing that advertising campaigns such as the one described above probably wasn39t a meaningful factor in bringing this latter audience segment out By contrast as the CEO of one of the world39s leading advertising agency networks noted in an article in Digiday this week quotWe reduced our participation this year by more than 50 percent To come here either you are coming to my creative meetingamp8230you39re judging or you have client meetingsquotEven when the work is stellar and more obviously impacts a marketer39s business spending on a campaign can be difficult to justify and hard to explain Media or marketing mix models can be applied to a given situation but these are expensive to develop and depend on incorporating the right variables in order to make any assessment The related subjectivity may be hard to explain to a marketer39s procurement department in the business language or context that marketing procurement might understand it framed using the language and frameworks that procurement executives from disciplines outside of marketing might usePut differently it shouldn39t be surprising if budget overseers respond to agencies and media owners much as a monolingual French speaker in Cannes would when presented with a question from a monolingual English speaker who frustrated with an evident lack of understanding on the part of the listener chooses to continue speaking in the foreign tongue with added volumeThe upshot of it all is that marketers39 procurement executives lacking evidence that is clear to them are often dismissive of the agencies they work with and focus on price rather than strategy if only because the price rather than the strategy is clear This further leads to a notion that agencies are interchangeable with one another within a given discipline They are commodities for lack of better word differentiated primarily by the individuals working at any given pace and the relationships that each on has In some ways this perceived lack of differentiation in the media agency business has led to price cuts for likeforlike services and efforts from agencies to find new sources of revenueOf course commoditization follows the industry in other spheres Early reports on the US national TV upfront market suggests low pricing increases on negative volume changes for some networks In part this is possible because as ratings fall for individual programs marketers are less likely to be specific in demanding certain programs in their schedules If marketers treat specific TV programs as commodities which produce Gross Ratings Points and nothing else then marketers are not beholden to buying the packages that networks sell and can express indifference by widening the range of potential suppliers they might acceptably buy from In digital advertising the same is generally true where most digital inventory is only as valuable as the data the marketer assigns to it which means that that core content production will be something of a commodity to the marketer too potentially Everyone in the ecosystem constantly fights to avoid commoditization Scarcity is necessary to realize the kind of pricing amp8211 let alone growth amp8211 they expect to see For digital media owners scarcity may come from investing heavily in premium content or in data assets which add value to a sale For TV network groups it may mean ensuring that as many of the sales they make include brand integrations with programming or other benefits that lock advertisers into a program schedule For media and creative agencies fighting commoditization will involve finding ways to add more value to services that they provideOn the other hand there might be value in embracing commoditization Both sides may benefit from the capacity to speak quotprocurementesequot as agencies better translate the choices that marketers want with the frameworks they need It may mean developing more campaigns with the strategies that procurement executives might find preferable such as production decoupling even if an agency39s creative team would prefer more conventional commercial message development It may mean studying procurement text books and trade magazines to gain ideas that might be applicable in the agency world Most of all it probably should involve a cessation of badmouthing of the function of procurement After all functions that agencies perform in the media sphere are effectively forms of outsourced procurementPerhaps as the above campaign suggests efforts to produce more breakout creative that marketers want to pay agencies might require exposing middling agency professionals described above to best practices raising the bar for average work However more effort will still be required to explain the value that agency professionals provide to marketers through the language of procurement which is the one they increasingly understandREPORT INCLUDING DISCLOSURES CAN BE FOUND HERE Madison and Wall 62615pdfThe opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaVillagecom management or associated bloggers

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Wall St. Speaks Out on Cannes and Commoditization

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Brian Wieser

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