| Challenging the Agencies to Change |
| By
&
; Mediasmith, Inc.
Editor's note: This article was first published on MSN
Advantage, Agency Relations.
At this year's Microsoft Strategic Account Summit in March, Donnie
Deutsch of the eponymous named agency put a challenge out to the agencies.
He questioned why the agencies continued to have silos of offline and
online. He contended that there was no ongoing reason for that. He said
that they were successfully integrated, that others can be to, and we
tend to agree. But there are many barriers, some more obvious than others
and many reasons that agencies give for the silos.
- We've always done it this way and it works. Yes,
keeping online in a special group has worked for over ten years. It
started out as the "new media" group when we did not know what was
coming. But does it really work? How many big agencies, either creative,
media or full service, really have online and offline working together?
The ones who have seem to flourish (ask Donnie). At the same time,
how many clients are looking for new, global solutions? My interviews
with clients on this topic find that most want their agencies to be
integrated.
- We can't really consider giving Interactive more emphasis.
It costs too much to service and the margins are terrible.
No question that this is true. Interactive has a number of elements
that cause it to be more expensive to service than other media. These
include, but are not limited to: size of deal, technology vagaries,
continued standards issues, tracking and optimization issues and back
end reconciliation.
- Why interactive costs more to service
- Size of deal remains an issue. In a marketplace where agency
commissions are low single digit for network TV, due to the
fact that millions or tens of millions can be committed in
a single order, the Web has a long way to go. There are bigger
deals out there, sure, but they take a long time to consummate.
Even the terms and conditions apply only to deals of one year
or less. It would be hard to guess at the average size of
a Web deal today, but suffice to say that across the Web,
most deals are still under $100,000 and many deals are under
$10,000. The result is that the agency has to make many more
deals to make for each $1MM of spending.
- Technology is our greatest blessing and also a curse. We
would not have interactivity without technology. And the exciting
thing is that new, intriguing technologies continue to be
deployed all of the time. The hard part is keeping up with
the new technologies. Ad serving, rich media, metrics-both
front end and back, email, search, contextual tools, outside
the browser and more. Some of these offer real solutions.
And some are way overpriced for the value. It takes time,
people and money to sort through all of this and find the
next great thing for our clients.
- Tracking and optimization are most often used as the quick
answer as to why Interactive costs more to service. This rationalization
is valid. It is not unlike DR TV for which the average fee
is double or more vs. traditional TV due to the tracking,
optimization and reporting. For DR on the Web, the intensity
of these tasks are sometimes overwhelming. Weekly reporting,
optimization on the fly, and not enough time to think about
the business when you are in a constant reporting loop are
common complaints.
- One of the primary reasons that major agencies cannot make enough
money on Interactive is that they don't charge enough. This is not
a global problem for some agencies which were adopting Interactive
strategies in the early stages for enlightened clients and worked
this out long ago. This produced a model that worked to everybody's
satisfaction. The issue of inadequate compensation is often greatest
with companies who are newer on the Web (e.g., consumer goods) who
have driven compensation for media down to large budget commodity
fee pricing of low single digits percentages. Agencies may say that
they are working on a fee basis and no longer on a percentage basis,
but you can be sure that someone at the client is looking at the fee
as a percentage of spend. Free standing Interactive agencies have
always understood how to charge for their services. But the big agencies
and media services do not seemingly want to bring this up to clients.
Separating compensation for a single medium at a premium to others
means revisiting the contract. And today, revisiting the contract
brings in a new player, the purchasing department.
Bringing the purchasing department into the equation generally costs
the agency money. After all, their reason for being is to reduce costs.
Both client marketing and agency management are frustrated by this
standoff. The client wants to bring all communications into their
lead agency but the agency doesn't have enough horsepower. The agency
won't fund the horsepower and won't go back to the client as long
as the specter of the purchasing department looms. They would rather
pass on the business, despite the fact that the client wants global
solutions and integration.
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Mediasmith Morsel. . .
Mediasmith now has expanded capabilities in
Search Marketing. Bob Heyman heads up the expansion as Chief Search
Officer. Bob was the co-founder of Cybernautics (sold to USWeb in 1997)
where he is credited with pioneering the fields of Audience Development
and Search Engine Marketing (SEM) for such clients as Intel, Avon, Bristol
Myers Squibb, REI, SGI, Sony, Macromedia and Time Warner. He co-wrote
Net Results, a leading web marketing text, as well as the Auction-App,
about business use of online auctions. The Mediasmith approach will
focus on evolving the strategic role Search can play in meeting larger
marketing goals. You can contact Bob at BHeyman@mediasmithinc.com.
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As a result of the above, clients are
left with three choices: Hire a separate Interactive agency, go with
their (underfunded and underserviced) traditional agency and hope that
they magically get it eventually, even though the resources are not
there, or, go in-house. Going in-house is purely a defensive measure
and not the best long-term solution, yet clients do it so that enough
resources are placed against Interactive. Why is going in-house a bad
idea?
It seems great when short-term gains are made. But there is a reason
for the agency model. Agencies have process that has been honed over
a long period of time. They have the ability to apply elasticity to
staffing. They can put more people on a job to get it done without a
long-term commitment to those people on the client. In this way, the
client can have their base team but get extra help whenever and for
whatever purpose. Then there is the issue of cross training. Good agency
people learn to solve problems in many areas. And they are especially
good at coming into a client situation and applying learning from other
clients. When a client is in-house, none of these benefits accrue and
the thinking often gets stale.
The difficulty of the tasks in Interactive can be overwhelming at times.
Short lead times (because we can), quick turnaround on changes (because
we can), weekly reporting, understanding the latest technology, continued
lack of standards (although we are making improvements) all make this
business hard. |
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Mediasmith Morsel. . .
In a recent report by eMarketer,
a study by Harris Interactive & MSN suggests that people find Web
Searches to be the fastest way to find information.
Whether because of curiosity, boredom or perhaps the need to find someone
from one's past, many people use search engines to find out about the
activities and whereabouts of friends, family and ex-boyfriends or girlfriends
(the practice is widespread enough that it has acquired a name — "googling"
someone — though the sponsor of the survey, MSN, probably hopes to change
that with its recently revamped search engine). The most popular person-search
of all, however, is users looking up themselves. Just under 40% of respondents
have done a query on their own name to see where they pop-up. Searches
for friends and family polled a bit lower, and, surprisingly, only 17%
have searched for an old flame (or at least admit to it).
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What's the solution?
- We need open dialogue between all parties. Agencies that have separate
silos for financial reasons need to remember that it was the client
who brought them to the dance. And that the client wants integrated
solutions.
- Agency management needs to understand that their Interactive people
are under great pressure to understand clients, media, creative AND
technology. They need support to accomplish these tasks. This comes
in the way of resources. And a dedication that all personnel in an
agency will learn to deal with Interactive. If Interactive for all
media is the future, agency management and those at all levels need
to get on board and learn.
- Clients need to find a way to meet the agencies half way and work
together for an adequately compensated package. After all, we remain
"in process" relative to the reworking of media and messaging. Commodity
pricing cannot work here.
- And Interactive people, whether in account service, media, creative,
production or technology need to be upfront with their management
about their staffing needs and the barriers they need to overcome
to meet expectations. After all, many of those in management have
not worked hands on with the technologies you deal with every day.
They don't realize that pulling a regular report is a lot more than
pushing a button.
We are in the midst of great change. Let's all recognize that there
is more going on than any one person can absorb. Good communications
from all members of the team can improve the situation. Start by forwarding
this article to others on your team. Good luck with the dialogue. |
Mediasmith
Morsel. . .
Continuing from eMarketer:
Aside from searches based on personal relationships, a wide variety
of topics prove popular depending on the demographic group surveyed.
The popularity of each topic relative to each group is often logical
and sometimes telling. For example, respondents in LA are most likely
to search for entertainment news, while New Yorkers are the biggest
searchers for financial news. Adults ages 59 and older tend to look
up information about their family ancestry, as well as their investments,
while baby boomers are more interested in topics like health, weather
and recipes. Generation X tends to search the Web for online dating
and relationship topics. Men are more likely to search for information
on cars, technology and science, while women prefer information on health,
fashion and celebrities.
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David L. Smith is CEO and Media Director
of Mediasmith,
Inc.
Karen T. McFee is Executive Vice President of Mediasmith,
Inc. |
