The US Association of National Advertisers has given agencies, especially media agencies, a fair old kicking over the past couple of years with its report into media transparency in particular (a new one is due out this week) but there’s a bit of good news at last.
According to a new “compensation” study by the ANA a small but significant number of advertisers are reverting to commission rather than fee-based payments, up from three per cent in 2010 to 12 per cent now.
This mainly seems to affect media agency payments as the driver is the fiendish difficulty of paying for digital media buying, including programmatic. In theory this is carried out by computers – so should be simpler and cheaper – but there are also substantial technology and labour costs. Plus (possibly undisclosed) agency mark-ups of course.
One media agency boss told me recently he’d considered giving up the business because of all the rigmarole of digital media buying: endless spreadsheets and more key performance indicators (KPIs) than you could shake a stick at. The upshot, apart from anything else, being that digital was markedly less profitable than when media buying was carried out in person or on the phone.
So commission payments should be a relief – that’s until procurement get their hands on them, of course.
Some greybeards in creative agencies can still remember the time when they were paid on media commission, even though media spends doesn’t necessarily equate to creative effort. In the full service era 15 per cent of a big TV budget for running the same campaign in year two was indeed manna from heaven.
There’s no doubt that fee-based payments across the board have become unreasonably complicated, wasting endless amounts of time and money and, accordingly, open to abuse.
A more widespread reversion to commission might be in everyone’s interest.