Speaking later, on the subject of whether or not we need a new name for media agencies, he said: “I’m not suggesting we need to stop calling ourselves media agencies. But the moment a client pushes you to provide certain assurances and guarantees, it affects your neutrality. It forces you to think in ways an agent doesn’t think. And it evolves the relationship in a different direction. And by the way, we’re grown-ups. We willingly accept the terms. But you can’t have it both ways. Once you assume business risks, things change.”
Which is the nub of the raging argument about media rebates. It’s all very well clients demanding that they get all the rebates from media owners but when they’re asking the agencies in question to assume all the risks – not just as legal principals but also guarantors of prices and delivery – then the game changes. If the media agency has to cough up when targets are missed then it’s not an agency it’s a broker, that dreaded word. And, in most such businesses around the world, the broker picks up the profit as well as taking the losses.
This has been causing quite a stir in the UK too. The most contentious pitch was the one where Dixons Carphone consolidated its £60m media business in Publicis Groupe’s Walker Media (now rebranded as Blue 449). Walker, Publicis Groupe in effect, pitched against CHI’s m/SIX media agency. M/SIX, like CHI, is 49 per cent owned by WPP and uses GropupM trading deals.
Insiders say that the business was set to head to m/SIX, which had offered rock bottom GroupM rates before Walker came back offering to save something like £20m on a £60m account. Dixons Carphone, which has promised the City about £80m in savings from the merger, had originally been looking for £3-4m off its media bill. It’s hardly surprising that the company changed its mind, this must have been the equivalent of manna from heaven.
And there’s no wonder GroupM was enraged by the outcome. Such savings, in the normal course of things, are impossible. The money has to come from somewhere else, most likely Publicis Groupe coffers.
Publicis Groupe wanted a third media network, it had forked out £30m to M&C Saatchi for 75 per cent of Walker as the cornerstone Blue 449 so, maybe, the extra money it found for Dixons Carphone was a further investment in Blue 449.
But, in essence, this is a media company (not agency, not really) offering a big bundle of media to a client at a fixed price. It’s not about cheaper agency commission levels and handing back media rebates at all.
So Irwin Gotlieb has a point. In the US there’s a ‘task force’ of clients and agencies looking into the issue of ‘transparency.’ But that cuts both ways. Clients need to be open about what they’re really looking for too.
This is a corrected version of an earlier post.