STATE OF THE MEDIA: In the last 12 months, the government has made clear its distrust of the media, and the media has been doing some real soul-searching. We asked experts to give their opinions on the state of our industry from a political, academic, international and commercial point of view. This is the third in a four part series first published in The Media magazine. Here, Gordon Patterson, group MD of The Starcom MediaVest Group (SMG), gives his point of view on the commercial aspect of media.
The wonderful thing about our profession is the constant change and evolution that drives our companies to transform and reflect the ever-changing needs of our clients. Inextricably linked to this is the business side of our profession. Advertising is a key component to free enterprise and therefore, not surprisingly, it has evolved toward reward – the reward being profit.
As you will see in the evolutionary steps below, as reward diminishes in one area, it drives change into another. This satisfies the changing market needs, while operating in the arena with the most lucrative rewards.
Recent industry discussions highlighted the extent of this debate and it nevertheless prompted many in our industry to think – which is not a bad thing. To look forward, we need to remind ourselves of where we’ve come from, as evolution is progressive.
The profession of media independents was conceived about 20 years ago as an offering to smaller advertisers that either had access to creative, or felt they could produce it internally. These were media buying shops – extensions, if you like, of the media owner sales effort. Remuneration was based on a share of agency commission. In essence, the media buying shop retained a small percentage of the 16.5% commission and the balance went to the creative agency. Based on this share of the overall agency commission, considerable resource were required to manage the administration.
During this period, exposure and impact were the critical objectives. In all honesty, that is why creative was at the centre of the advertising formula.
We’ve evolved into specialist agencies with powerful tools to deliver measurable financial efficiencies and benefits. A term like ‘channel planning’ is used frequently to help differentiate individual agency offerings from previous ‘meat and two veg’ services offered but, that said, we largely remain platform experts.
I say ‘largely’, as we are seeing a growing trend towards achieving a better understanding of human behaviour. Our remuneration is no longer purely commission-based, but with an equal following of clients preferring resource-based fee structures with incentives. Interestingly enough, although the agency fee is based on the resource required, they would still contextualise the fee as a percentage of the 16.5% agency commission.
With each phase of development, we’ve seen increased pressure on our industry income and, ironically, an increase in the amount of services being given away for free! We’ve also witnessed, in certain quarters, a decrease in financial transparency. While certainly in the minority, this trend is concerning to the majority of ethical agencies. Efficiency was the critical objective during this phase.
So what about the future, or ‘next’?
Transformation of media independents will continue. The focus, however, will increasingly move away from being platform experts and, in some cases, an extension of the media owner sales effort. The future lies not in becoming experts in human behaviour, but more precisely in understanding the experiences that humans have with brands, and how to create these experiences. We’ve learned that demographics are a poor method to define target markets, and have realised that even similar people have different brand associations and relationships.
Engagement has now become the goal for most campaigns. This objective leads more closely into measurability than ever before. Campaigns and marketing efforts need to be measurable to generate learnings. These learnings allow for a degree of repetitive application and predictability in terms of outcome.
So, how are we changing? We’re diversifying our services, we’re investing in human capital to better understand experiences and we’re moving to an à la carte menu of services. The traditional ‘one size fits all’ share of commission or fee is simply too limiting to fuel growth. Without growth and development in our services, they will, over time, become devalued.
In a mere 20 years, media buying agencies have evolved into media independents and channel planning agencies. The next frontier is human experience.