Tom Denford and David Indo from ID Comms: the decline in agency incentives

On this week’s #MediaSnack Tom and David continue their countdown to the one-year anniversary of the ANA’s media transparency report, looking at the significant areas of change in the industry that we believe have been impacted by the ANA’s findings, this week is looking at Media Terms of Business.

Tom is in San Diego this week attending the ANA’s big marketing procurement conference called ‘Advertising Financial Management’ and reviews some of the early conference sessions.

Firstly, he reviews a new report in this area issued by the Association of National Advertisers, the US marketers trade body, representing 750+ brands, $200bn of media investment and a strong proponent of greater agency accountability.

The findings are equally insightful and puzzling:

· The report suggests a decline in the use of performance-based models. Tom disagrees with that trend based on ID Comms’ experience working with large advertisers around the world in the last 12 months.

· There is greater senior executive involvement in decision making around how to pay for external resources, a positive move that Tom believes will lead to more progressive payment models and more scrutiny given to how external agencies are performing and held accountable for performance.

· One alarming statistic suggested that 50 per cent of ANA members were not aware of the 2016 media transparency report. Perhaps the data is not truly reflective of sentiment, Tom says the ANA needs to qualify this, it got a lot of attention and an update of how effective the report has been would be helpful.

· The report suggests a rise in commission payments for media agencies, but this is from a low base and likely to be driven by the way advertisers are paying for some programmatic media buying services. The rise doesn’t suggest advertisers are shifting from fee to commission as a trend.

Finally, Tom and David review news that the world’s largest advertiser P&G has concluded its long-running media agency pitches across Europe. There were no huge changes but this review was the focus of huge scrutiny not just because of P&Gs scale and influence but also because this was the first test of the media agency community since P&G’s Chief Brand Officer Marc Pritchard laid out his Media Transparency Action Plan in January.

In addition, it was to be the first major test in Europe of Omnicom’s new media agency Hearts & Science (which was created around P&G’s brief in 2015 in US). As it transpired Hearts & Science was not successful in exporting their US model into Europe and P&G opted to consolidate media in the UK into Publicis Media which is actually a cross-group solution including a number of Publicis media, creative, digital and data companies.

This is a major victory for Publicis (and perhaps a perfect swan song for departing CEO Maurice Levy) and a huge blow to Omnicom’s Hearts & Science because it calls into question the validity of its “groundbreaking” agency model.

Hearts & Science was developed in the US for P&G, and for them to now reject that model in Europe suggests there’s maybe nothing special (or especially innovative) about the model after all. Either that or Publicis has managed to iterate the innovative agency model further in a way more convincing to the world’s most influential and demanding advertiser.

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