ID Comms’ John Billett reveals the changed reality of today’s media buying marketplace

This week media industry veteran and sage John Billett (below), now chairman of media consultancy ID Comms, addressed the Worshipful Company of Marketors (no less) on the thorny issue of the changing media marketplace, the subject of, among other things, the current investigation by the US Association of National Advertisers into undisclosed media rebates. This is being investigated by Ebiquity and corporate security firm K2 at the ANA’s request.
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In an enlightening lecture (full text to download at ID Comms) Billett laid bare the current issues while explaining how things had come to this – through the changing nature of media commissions and payment over a hundred years or so. Essential reading for any advertiser.

Here are a couple of excerpts in which he explains why, now, the agencies have become the media owners:

“The fundamental change taking place across the marketing services business is that the agencies, who for a long time were the agents working on behalf of advertisers acting as custodians of the advertisers’ best interests, have now become the media owners.

An alternative title for this lecture ‘The Agencies have become the Media Owners’ could be ‘The Lunatics have taken over the Asylum.’

And whilst hyperbole has entered the equation, the facts are stranger than most good fiction writers could have dreamed up.

This development is not a sudden eureka phenomenon. It has gradually emerged and developed over some 15 years or so. But only recently has the matter reached such proportions that it’s difficult to see how things can be reversed.”

And:

“Faced with declining fees from their advertiser customers, the media agencies, quite understandably, turned their attention to the media owners as sources of additional income.

Not content with becoming portfolio managers of media owners’ inventory, the media agencies engineered a fundamental change in relationships.

It has been argued that if advertisers had not forced down agency fees to unsustainable levels, agencies would have had less need to resort to the media to substitute the lost revenue.

Indeed the source of the current difficulties for advertisers could be most correctly described as self-inflicted

Media owners, faced with the double whammy of intense audience fragmentation and falling entry costs for new media as digital communication started to take hold, found it increasingly difficult to staff, train and retain quality sales executives. And furthermore could not justify the costs of operating such significant sales overheads.

The grouping of shared inventory, such as all of ITV, all of Hearst publications, all of Global Radio (to mention just three among many UK examples) was a response that increasingly moved media selling away from opportunity specific options towards a commodity approach.

The media owners increasingly looked towards the media agencies for these selling skills. The media owners began to find contact with senior marketers increasingly difficult as other business pressures took priority over how advertising budgets were allocated.

Faced with major scale players as media buyers, and finding themselves less able to represent individual media opportunities, the vendors came to rely on the media agencies to do their work for them. Of course the media agencies were enthusiastic to take on these additional inventory management roles and in exchange demanded service fees for their labours from the media owners

The net result has been a significant increase in revenue for media agencies; many now part of major international public companies. The media agencies now find themselves in a wholly changed environment.

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Originally charged with protecting advertisers’ best interests and being paid by the advertisers accordingly, they now enjoy the considerable majority of their income from the media owners, whilst still vowing to work for advertisers and bring the media owners even more new opportunities.”

 

I don’t know about you but we didn’t know this. We knew that there were media rebates swishing around on a grand scale but not that the media agency business model actually depends on them. Which suggests that a new agreement – the so-called ‘transparency’ the ANA, for example, is looking for – looks, frankly, unreachable.

Partly because the media owners – very large media owners in some cases – need the current smoky reality to continue too. As for clients, their focus on cutting costs rather than achieving value has helped to create what they’ve belatedly realised is a very large problem.

Which may account for the marked reluctance of client bodies outside the US to take a public interest in the matter. The plot, as they say, thickens..

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About Stephen Foster

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Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.