Can AI Bots Solve the Agency Remuneration Issue?

21 Mar

Commodorergb1-243x300It was a simpler time in 1864, or so it seems, when the “Commodore,” James Walter Thompson, founded his namesake agency.

As the ad industry grew over the next several decades, a commission based compensation system was the predominant means of remuneration. Simply put, full-service agencies kept 15% of the gross media rate charged by media owners from whom agencies purchased advertising for their clients. At some point in the 1960’s commission based remuneration began to give way to labor-based fees that were predicated on an agency’s direct labor and overhead costs and a reasonable level of profit.

It wasn’t long afterward that the agency “holding company” was born and full-service agencies gave way to agencies that specialized in a particular area such as creative development, media planning and placement and sales promotion. Both of these trends directly impacted “how” and “what” agencies charged clients for their services. As importantly, advertisers became more acutely interested in understanding more finitely the details behind the composition of their agency partners’ fees. This in turn created anxiety and concerns on the part of ad agencies and clients alike. Advertisers sought to reduce the level of fees that they were paying and the agency community sought to protect their profit margins and maintain some level of privacy surrounding their financial operations.

Fast forward to 2017 and the topic of “non-transparent” agency revenue sources such as rebates, kick-backs, float income and media arbitrage has been at the forefront of contract and compensation discussions since the Association of National Advertisers (ANA) completed their landmark “Media Transparency” study in 2016. Rightly or wrongly, many in the industry feel that client procurement tactics, focused on squeezing agency compensation led to the rise in non-transparent revenue. Agencies for their part, feel as though they are overworked and underpaid, while clients continue to sense that they are paying too much for the resources being proffered by their agency partners.

Challenging times to be sure. Add in the shift from traditional media to digital, the attendant impact on workflow and resources, the rise of new competitors to ad agencies that include consultancies, publishers and ad tech providers and the rapidly increasing impact of technology on operational efficiencies and the topic of agency compensation becomes even more vexing.

And while agencies wrestle with their organizational, talent and cultural issues, the industry is poised for a giant leap forward in operational efficiency. Algorithms that can place media and inform resource allocation planning and artificial intelligence bots that can actually create advertiser content and oversee the production of creative materials have the potential to displace agency personnel across multiple functions. The question is: “What is the impact of these technology trends on agency remuneration systems?”

For an industry that has relied on labor-based fees linked to marking-up employee salaries and selling their time to advertisers, the notion of automation and doing more with less can certainly be daunting. As IBM Watson Chief, David Kenny, once said:

“If you are using people to do the work of machines, you are already irrelevant.”

Thus it is time for the ad agency community to rethink both how they organize themselves to deliver client services and how to evolve from labor-based compensation models to outcome based remuneration systems.

Wonder if there is an AI bot that can assist with this transition?

If you’re an advertiser and interested in learning more about how to compensate your ad agency. Contact Cliff Campeau, Principal, AARM | Advertising Audit & Risk Management at ccampeau@aarmusa.com for a complimentary consultation on this important topic.

 

 

 

Does Anyone Really Want Advertisers to Solve the Attribution Dilemma?

14 Mar

conspiracyIt has been decades since the concept of Marketing Mix Modeling (MMM), the forerunner to Attribution Modeling, was introduced. The concept was relatively straightforward, marketers would apply statistical analysis to sales and marketing data to quantify the impact that each element of the marketing mix had in driving brand sales and profit. Once the causal relationship had been modeled, marketers would then be able to accurately forecast outcomes and inform resource allocation decisions.

While the concept may have been straightforward, the solution, for most marketers, has been elusive. Why? First and foremost, MMM has some inherent challenges, particularly when it comes to quantifying the impact of longer term brand equity development tactics versus those focused on short-term sales. Secondly, these models have not fared well in accurately assessing the impact of various media types on outcomes to assist in refining allocation decisions.

Fast forward to the late ‘90’s when we experienced an explosion in online media, the birth of e-commerce and the introduction of “Big Data.” The emergence of digital media and the attendant level of data that marketers where now able to gather led to the launch of “Attribution Modeling.” The goal, to assess and quantify what marketing and media touchpoints influenced an advertiser’s target audience, and to what extent, across the purchase funnel in an effort to optimize media spending across the ever expanding gamut of media alternatives.

While there are multiple variations of attribution models to consider, most marketers have relied on single-source attribution models, often using a “last click” approach which assigns responsibility for an outcome to one event. While simple, this flawed approach to attribution modeling gives too much credit to digital media, at the expense of traditional media and other marketing touchpoints.

Sadly, for advertisers that are doing both MMM and Attribution Modeling, it is rare that the feedback from these related, but different approaches synch. Further, there remain audience delivery measurement (i.e. cross-channel measurement), multi-touch attribution challenges that introduce a layer of complexity that drives up the cost of attribution modeling.

That said, since the onset of these two modeling tools being introduced, the industry has dramatically evolved its data gathering capabilities, enhanced CRM and DMP capabilities, conceived of and launched programmatic media buying, where algorithms have replaced media buyers and now we’re seeing the use of artificial intelligence bots, such as Adgorithms’ “Albert” that can plan and place media and create content. Heady stuff to be sure.

This got the cynic in me thinking; “Well if we can master all of this from a technology perspective, surely we should be able to cost efficiently and effectively master attribution modeling.” That led to idle speculation about whether or not the ad industry really wants advertisers to solve the attribution modeling dilemma?

After all, what if John Wanamaker was wrong? What if more than half of his ad spend was wasted? Remember, the marketing and media choices available to him in the 19th century were considerably more limited than those available to advertisers today. Would accurate attribution models eliminate some of the following marketing and media options from consideration?

  • Television
  • Radio
  • Magazine
  • Newspaper
  • OOH
  • Cinema advertising
  • Product placement
  • Direct mail
  • Email
  • Sponsorships
  • Online display
  • Online video
  • Podcasts
  • Paid search
  • Organic search
  • Mobile
  • Social media
  • Native advertising
  • In-store advertising
  • In-store displays
  • On-package advertising
  • Trade promotions
  • Price promotions
  • Couponing
  • Affinity marketing
  • Affiliate marketing
  • Applications
  • Earned media

Crazy. Right? Reminds me of a quote by the American journalist, Gary Weiss:

“One problem with the focus on speculation is that it tends to promote the growth of the great intellectual cancer of our times: conspiracy theories.”

What do you think…

 

4A’s Appoints New CEO/ President

26 Feb

4as_logofinalCongratulations to Marla Kaplowitz, CEO of MEC North America, who was recently selected as the Chief Executive Officer and President of the American Association of Advertising Agencies (4A’s).

An advertising industry veteran with 29 years of media and communications experience, she is also a member of the 4A’s Media Leadership Council and She Runs It.  Commenting on her appointment, Ms. Kaplowitz stated that; “As a passionate member of this industry for nearly 30 years, I’m thrilled to join the 4A’s at this exciting and pivotal time for marketing and communications.”

We certainly wish Ms. Kaplowitz success in her new role and thank outgoing 4A’s CEO Nancy Hill for her nine plus years of service.

Has France Solved the Media Transparency Issue?

24 Feb

dreamstime_xs_13261288Earlier this month the French government passed a new edict extending the coverage of Loi Sapin, their anti-corruption law passed in the early 90’s which made the process of buying media more transparent.

There are two key tenants of Loi Sapin, which afford French advertisers a level of protection related to certain non-transparent revenue sources which the Association of National Advertisers (ANA)/ K2 2016 media transparency study showed were prevalent in the U.S. (and elsewhere around the globe). Specifically, we are referring to the practice of media owners and publishers paying rebates to the agency and the use of media arbitrage, where agencies purchase inventory on their own to be resold to their clients at a higher rate.

Loi Sapin prohibits agencies from selling media to their clients that the agency had purchased in its name. In today’s parlance, it prohibits media arbitrage or “principal-based” media buys. Secondly, the law clearly stipulates that the ad agencies cannot derive revenue from a media owner, stating that agencies can only be paid by advertisers.

To France’s credit, the new decree, which will take effect in January of 2018, expands the coverage of the anti-corruption law to include digital advertising and digital advertising services. Of note, this includes agency trading desks, which sometimes buy and resell digital media to their clients. Yes, agencies will still be able to provide programmatic media buying services through their trading desk operations to advertisers, they will simply have to disclose to their clients, upfront, those affiliates or entities where they or the agency holding company have an ownership interest.

Interestingly, the decree will also require the media owner to direct bill the advertiser and compels them to provide detailed information about the services that they provided to the advertiser. This particular aspect of the law will further enhance advertiser transparency and virtually eliminates the ability of an ad agency to blindly mark-up said services.

As U.S. advertisers and the Association of National Advertisers (ANA), continue to evaluate the most effective means of improving media transparency, France’s anti-corruption law and its new decree covering digital media services certainly provides some interesting food for thought.

What if You Discovered That Your Digital Dollar Netted You a Dime’s Worth of Digital Media?

12 Feb

dreamstime_xs_2601647In 2014, the World Federation of Advertisers conducted a study which demonstrated that “only fifty-four cents of every media dollar in programmatic digital media buying” goes to the publisher, with the balance being divvied up by agency trading desks, DSPs and ad networks.

Fast forward to the spring of 2016 and a study by Technology Business Research (TBR) suggested that “only 40% of digital buys are going to working media.” TBR reported that 29% went to fund agency services and 31% to cover the cost of technology used to process those buys.

Where does the money go? For programmatic digital media, the advertiser’s dollar is spread across the following agents and platforms:

  • Agency campaign management fees
  • Technology fees (DMP, DSP, Adserving)
  • Data/Audience Targeting fees
  • Ad blocking pre/post
  • Verification (target delivery, ad fraud, brand safety)
  • Pre-bid & post-bid evaluation fees

It should be noted that the fees paid to the above providers are exclusive of fees and mark-ups added by SSPs, exchanges or publishers that are blind to both ad agencies and advertisers. What? That is correct. Given the complex nature of the digital ecosystem, impression level costs can be easily camouflaged by DSPs and SSPs. Thus, most advertisers (and their agencies) do not have a line-of-sight into true working media levels…even if they employ a cost-disclosed programmatic buying model (which is rare).

Take for example the fact that a large preponderance of programmatic digital media is placed on a real-time bidding or RTB basis, and a majority of that, is executed using a second-price auction methodology. With second-price auctions, the portion of the transaction that occurs between a buyer’s bid and when the clearing price is executed without advertiser or agency visibility, thus allowing exchanges to apply clearing or bid management fees and mark-ups as they see fit. So for example, if two advertisers place a bid for inventory, one at $20 per thousand and the other at $15 per thousand, the advertiser who placed the higher bid of $20 would win, but the “sale price” would be only one-cent more than the next highest bid, or $15.01. However, advertisers are charged the “cleared price,” (could be as high as $20 in this example) which is determined after the exchange applies clearing or bid management fees. How much you ask? Only the exchanges know and this is information not readily shared.

Earlier this month Digiday ran an article entitled, “We Go Straight to the Publisher: Advertisers Beware of SSPs Arbitraging Media” which profiled a practice used by supply-side platforms (SSPs) that “misrepresent themselves.” How? By “reselling inventory and misstating which publishers they represent.” The net effect of this practice allow the exchanges an opportunity to “repackage and resell inventory” that they don’t actually have access to for publishers that they don’t have a relationship with.

Let’s look beyond programmatic digital media. Consider the findings from a Morgan Stanley analyst, reported in a New York Times article in early 2016 that stated that, “In the first quarter of 2016, 85 cents of every new dollar spent in online advertising will go to Google or Facebook.” What is significant here is that until very recently, these two entities have self-reported their performance, failing to embrace independent, industry accredited resources to verify their audience delivery numbers.  

The pitfalls of publisher self-reporting came to light this past fall when Facebook was found to have vastly overstated video viewing metric to advertisers for a period of two years between 60% and 80%.  

By the time one factors in the impact of fraud and non-human viewing, and or inventory that doesn’t adhere to digital media buying guidelines and viewability standards, it’s easy to understand the real risk to advertisers and the further dilution of their digital working media investment.

Advertisers have every right to wonder what exactly is going on with their digital media spend, why the process is so opaque and why the pace of industry progress to remedy these concerns has seemingly been so slow. Sadly, in spite of the leadership efforts of the Association of National Advertisers (ANA), The World Federation of Advertisers (WFA), The ISBA, The Association of Canadian Advertisers and the Interactive Advertising Bureau (IAB) there is still much work to be done.

The question that we have continually raised is, “With advertisers continuing to allocate an ever increasing level of their media share-of-wallet to digital, where is the impetus for change?” After all, in spite of all of the known risks and the lack of transparency, the inflow of ad dollars has been nothing short of spectacular. According to eMarketer, digital media spend in the U.S. alone for 2016 eclipsed $72 billion and accounted for 37% of total media spending.

There are steps that advertisers can take to both safeguard and optimize their digital media investment. Interested in learn more? Contact Cliff Campeau, Principal of AARM | Advertising Audit & Risk Management at ccampeau@aarmusa.com for a complimentary consultation. After all, as Warren Buffett once said:

“Risk comes from not knowing what you’re doing.”

How Well is Your Agency Compensated?

30 Jan

do advertisers get what they pay forThe answer to this oft discussed question is easy; “If you’re an agency CFO, not well enough. If you’re a client-side finance executive the answer is likely too well.” Thus it is no surprise that agency remuneration remains a hot topic as we enter 2017.

Make no mistake, both agencies and advertisers alike want to address this topic in a manner that works for both sides. So why is this such a difficult item to resolve? There are three reasons:

  1. There are no industry norms in this area and haven’t been since the days of a standard 15% commission. The net result of this is that there are few benchmarks for advertisers when establishing remuneration guidelines. No standard commission rate ranges by media type, no normative data on agency overhead rates and no clear standards for assessing agency direct labor rates by position and little insight into agency direct margins. This makes it difficult for advertisers to gain a comfort level into the relevance and competitiveness of the rates that they are paying their agency partners.
  2. While agencies want to be compensated fairly, they remain hesitant to fully disclose the financial dynamics that drive their businesses and impact account profitability. This may have something to do with the contribution of non-transparent revenue sources and or the fact that actual direct labor and overhead costs simply don’t allow agencies to optimize their fee income.
  3. Agencies generate revenue by selling time-of-staff. Assembling a team, calculating utilization rates and full-time equivalent standards and applying a multiplier to direct labor costs to cover overhead and a desired profit margin. Whether these variables are transparent to a client or not, this is the basic approach for the pricing of agency services. It is important to understand this dynamic, because very few, if any, client/ agency relationships are able to directly link remuneration to SOW outputs or deliverables.

As an aside, the one collaborated piece of information that we do have specific to compensation relates to acceptable profit margin ranges. The 4A’s and ANA’s compensation surveys have suggested that an acceptable profit margin range to both clients and agencies is between 14% – 17%.

So, without an industry guideline to follow, advertisers and agencies will likely continue to negotiate remuneration schema the same way that they have over the years. Both parties will look at the relevancy of the prior year’s billable rates and SOWs, fine tune those items and adjust the overall fee up or down accordingly.

If both parties are looking for a better balanced, more transparent approach to establishing a remuneration program, we would suggest the following steps:

  • Negotiate a tight, descriptive statement-of-work (SOW) which clearly identifies client expected agency deliverables. An obvious, but oft overlooked component to crafting a fair and balanced remuneration program.
  • Allow the agency to establish a staffing plan, reflecting the resources required to execute the SOW. Review, discuss resource levels in the context of hours by department/ function and the level of experience necessary (junior vs. senior level staffer) based upon the deliverables.
  • Independently review and validate the agency’s direct labor costs for the agreed upon staffing plan. This will give clients confidence in the accuracy of the agency’s labor expense, without divulging employee salaries.
  • Negotiate a definition of overhead and those items that should be included as part of these indirect costs/ charges.
  • On a periodic basis, have the agency’s financial accounting firm verify the overhead charges specifically attributable to the management of the client’s account.
  • Negotiate a profit margin to be applied to the sum of the agency’s direct labor costs plus overhead assessment.
  • Negotiate a bonus/ malus incentive compensation program if desired. The goal should be to maintain a simple, straight forward set of criteria that allows both parties to efficiently track progress against goal attainment.
  • Reconcile fees based upon actual agency direct labor costs at the end of each contract year.

In this context, we believe that advertisers should focus on operating agency account level costs and profitability and not focus on agency holding company financials.

Why? Because at a holding company level, profit represents the difference between agency client revenues (from media commissions, mark-ups, fees or other forms of client compensation) and holding company operating expenses. As we know, the level of centralized support provided to each operating agency will vary from one agency group to another, from one year to the next. Further, agency holding company expenses include items ranging from merger and acquisition expenses to re-branding costs, technology development and business development… categories that don’t directly benefit a client.

In so doing, while it may be difficult for advertisers to assess how “competitive” their agency compensation program is relative to the market, they will have the peace of mind in knowing that they have secured a fair and transparent remuneration program that works for their organization and for their agency partners. As American educator, Michael Pollan once said:

“I think perfect objectivity is an unrealistic goal; fairness, however, is not.”

Advertisers: Buying Guidelines Matter

25 Jan

compliance-rulesAdvertisers and their media agency partners spend countless hours, invest significant energy and apply a wealth of creativity in crafting their initial media plans and updating those plans to address internal issues, marketplace opportunities and or competitor moves over the course of a budget year.

The question is: “Do advertisers and their media agency partners spend enough time ensuring that those plans are actually executed to their fullest during the investment phase of the media buying cycle?”

In our experience, the direct answer is “No.” The hand-off from media planning to media buying and the accompanying media process controls, forms and reporting are often inadequate as is the level of oversight applied on a post plan approval basis.

Advertisers, if you’re wondering whether or not this is the case with your organization, it may be worth reviewing the following processes, forms and reports for their thoroughness and the extent to which they are reviewed and monitored over the course of a media campaign:

  • Buying Guidelines – When was the last time you reviewed your organization’s buying guidelines? Did you approve them? Are they current? Are they comprehensive enough to safeguard your interests and optimize your message reach? Have they been created for each media channel purchased or for TV only? How are these guidelines communicated to media sellers? Does your agency monitor and or report on buying guideline adherence? What are the consequences to the agency and or the media sellers if these guidelines are not complied with? Too often we find that this important communication bridge between media planning and media buying has not been satisfactorily completed or is so lacking in detail and or coverage across media that it is ineffectual. This is a critical mistake. Buying guidelines represent the explicit instructions from the agency planning team to their associates in buying and ultimately to the media sellers for how the client-approved plan is to be executed, stewarded and its performance assessed. Shortfalls in this area negatively impact media delivery and marketing ROI in a very direct manner.
  • Request for Proposals (RFPs) – Whether sent manually or digitally by the agency to media sellers, this process is often fraught with shortcomings. These include insufficient time afforded publishers to effectively respond to the RFP requests; and not enough information provided on the advertiser and or their specific goals to facilitate the publisher to tailor their proposal to the advertiser’s needs. From an advertiser’s perspective, often times these documents fail to ask for feedback on important issues such as whether or not digital publishers employ third-party vendors for website traffic sourcing. In other instances, RFPs fail to communicate critical performance standards such as viewability standards for digital media or in establishing the advertiser’s position on whether or not they will pay for non-human or fraudulent traffic. It would be a worthwhile practice for Advertisers to periodically review the level of detail contained in their media agency’s RFP templates and review completed RFPs to understand the basis for why certain RFPs were accepted or acted upon and others rejected.
  • Insertion Orders & Buy Confirmation Letters – The primary focus with these important control documents is to establish the specific tenets of the deal (i.e. audience delivery, performance guidelines, basis for evaluating performance, make good policies, etc.). Unfortunately, in our media agency compliance audit practice, we regularly discover incomplete documentation in this area that fails to establish enforceable delivery thresholds or basic qualitative standards to safeguard an advertiser’s media investment. In this era of “Big Data,” it is important for agencies to assert their clients’ data access and ownership rights. This relates generally to the audience modeling and transactional data generated as part of their media investment, and in the case of programmatic media buys, specifically to items such as winning bid log files and the associated meta data from all suppliers, including DSPs. Ensuring these types of data access and ownership rights are essential for advertisers if they want to have a clear line-of-sight into impression level pricing prior to the addition of the myriad number of fees and mark-ups charged by third-party suppliers. These documents also present an excellent opportunity for agencies to reinforce the agreed upon advertiser data protection guidelines such as how an advertiser’s data will be siloed, how long it will be stored and the extent to which the suppliers will limit other advertisers and third-parties access to such data.
  • Post-Buy Performance Reporting – There are three primary concerns in this area, aside from whether or not performance reporting is even being conducted. First, how are media buys monitored and stewarded while underway? What is the agency doing to monitor campaign delivery and to optimize performance in-flight? Second, is the agency monitoring performance across all media? More often than not we find agencies conducting television post-buys or digital media performance analysis, but totally ignoring other media elements altogether. Third, are the post-performance reports provided in a timely manner and include the level of detail necessary to hold media sellers accountable and provide meaningful insights that shape future media plans and buys?

Without a solid media stewardship process that incorporates sound control documents, continuous monitoring and comprehensive post-performance analysis, even the most thoughtful and compelling media plans will fall short of their potential. Advertisers could well benefit from conducting periodic reviews of their media agencies approach and performance during this phase of the media investment cycle. In the words of W.B. Sebald, twentieth-century German academic and author:

“Tiny details imperceptible to us decide everything!”

 Interested in learning more about the role of media buying guidelines and controls in safeguarding your media investment? Contact Cliff Campeau, Principal at AARM | Advertising Audit & Risk Management at ccampeau@aarmusa.com for your complimentary consultation on this topic. 

 

What is Missing in Client-Agency Relationships Today?

28 Dec

What's Missing Question Words Puzzle Holes Gaps Incomplete PictuOne can’t help but marvel at the length of some of the most enduring and successful client-agency relationships. Unilever and Lowe & Partners have been together for 117 years, Unilever and J. Walter Thompson for 114 years, General Electric and BBDO for 96 years and FCB and Levis Strauss for 43 years. In an age where the average lifespan of client-agency relationships is less than 4 years, you certainly have to tip your hat to these partnerships.

What is it that they know or are doing differently that has eluded others in their pursuit of long lasting, stable and productive relationships?

While there are certainly many contributing factors, I believe that the most important ingredient in these long lasting relationships is the principal of “fidelity.” In short, these organizations obviously share a commitment to the quality of being faithful to one other. This can be evidenced by their ongoing loyalty and mutual support for one another, an intangible but valuable trait that has served them well. As the late German actress, Lilli Palmer once said; “Fidelity is a gift, not a requirement.” But as can be evidenced by the length of these unions, this gift can yield meaningful benefits.

Experience has taught us that successful client-agency relationships are more often than not predicated on marketplace performance… building enduring brands, driving revenues and expanding market share. Great work and great outcomes are clearly an integral part of achieving success when it comes to enduring partnerships. Such work is also a byproduct of one of the keys to achieving and maintaining fidelity, a shared sense of purpose. This shared sense of purpose is truly the glue that holds relationships together. Whether that is between an organization and its associates or between advertisers their agencies and their third-party vendors.

In a complex, ever changing global marketplace the best way to instill a shared sense of purpose is to gain alignment on five key components of a client-agency relationship:

  1. Client Business Goals – For an agency, understanding the client’s overall objectives is a necessity for generating break-through ideas and developing work that will move the proverbial needle. It is also a pre-requisite to earning the respect of the C-Suite when providing strategic counsel and advice. The client organization also benefits exponentially when its personnel and business partners have a clear line of sight into the enterprise’s goals. Thus, client-side CEOs might benefit from the wisdom of George F. Burns, who said, “Define your business goals clearly so that others can see them as you do.
  2. Agency Deliverables – Establishing the agency’s role and overarching responsibilities is a necessary first step in identifying a specific set of deliverables, which in turn are designed to support the marketing objectives that will contribute to the attainment of the business goals. In turn, these deliveries will also provide the impetus for both the agency and the client to assess what level of resources they need to allocate to satisfy these expectations during the fiscal year.
  3. Resource Requirements – While we normally think about resource commitments in the context of agency time-of-staff, technology, data resources and the like, both the agency and client must ask themselves what level of resource investment is required to execute these deliverables in an efficient manner. Too often, client organizations may not be adequately staffed to provide timely and or relevant feedback on day-to-day decisions or in the context of providing sound strategic direction at the onset of campaign planning. Thus, both parties must carefully assess the amount of time and level of subject matter expertise each will require to support one another.
  4. Communication Protocols – One of the realities of client-agency relationships is the constant grind of daily tasks and unforeseen activities that sap resources, energy and potentially creativity. However menial these tasks might be, they are necessary. That said, it is equally as important to establish client-agency contact plans that allow for periodic contact between executives of both organizations to discuss business performance, opportunities and exchange ideas on how the agency can better assist the client in pursuit of its goals. Similarly, outside of the weekly status updates, monthly performance tracking discussions and financial management reporting it can be very helpful to establish regular quarterly business reviews (QBRs). These QBRs should be attended by cross functional representatives from each parties marketing, finance and procurement teams and should address both year-to-date status updates (i.e. project tracking, budget management, agency time-of-staff/ fee tracking) but also allow for meaningful discussion on potential shifts in strategy or tactical support to address competitive actions or market opportunities.
  5. Performance Measurement – Simply put, what criteria will the client use to assess the value of the agency’s contribution to the attainment of the organization’s goals… and the timely, efficient execution of its deliverables. Discussing these expectations upfront, monitoring progress on a monthly basis and making the requisite course change decisions if and when necessary can be helpful in driving consensus on how the agency and client teams are performing.

Focusing on these components of client-agency relationships will not only instill a sense of shared purpose and fidelity, but will strengthen the level of respect both organizations have for one another. In the end, this is the key to transcending the organizational changes that will inevitably occur on both sides of the aisle and nourish a long-term, mutually beneficial relationship.

When one considers the strains on today’s client-agency relationships there may be no truer words than those spoken by the 35th president of the United States of America, John F. Kennedy, when he said;

“Efforts and courage are not enough without purpose and direction.”

 

 

 

May You Live in Interesting Times

23 Dec

confuciousOften referred to as the “Chinese Curse” this popular saying derives from the English Politician Sir Austen Chamberlain in the early twentieth century. Used ironically, the phrase has been used to suggest a set of outcomes that are a little more ominous, “May you experience much disorder and trouble in your life.”

As we reflect on what has been a tumultuous 2016, those working in the marketing and advertising industry most certainly would agree that we are living in interesting times. Recent news suggests that the industry’s troubles will not abate much in the coming year. The year began with evidence suggesting that the level of digital ad fraud would eclipse $8.0 billion in 2016, this was followed by the blockbuster findings from the Association of National Advertisers (ANA) / K2 study on “Media Transparency” which rocked the global ad industry.  Sadly, the industry is winding down 2016 with a litany of additional actions and outcomes that pose serious threats to the level of trust, already shaken, between stakeholders in the $540 billion global advertising marketplace.

In the last two weeks, the industry heard once again from Facebook that it had made yet another audience reporting faux pas, its third of the year, which many in the ad agency community have been all too willing to forgive. Who could possibly be surprised with advertisers for being genuinely perplexed as to why the media agency community hasn’t more thoroughly scrutinized Facebook’s audience measurement reporting or pushed more aggressively for independent verification of those results.

Concurrently, halfway around the globe, Australia’s three largest magazine publishers (News Corp, Bauer Media and Pac Mags) decided to cease their participation in the Audited Media Association of Australia’s (AMAA) magazine circulation service leaving advertisers no other choice but to rely on these publishers’ self-reported “readership” numbers, rather than audited circulations figures.

In the United States, the federal government’s Department of Justice has subpoenaed agencies from four of the world’s largest holding companies; WPP, Omnicom, IPG and Publicis as part of its investigation into illegal bid-rigging for commercial production jobs. It is alleged that these agencies coerced and or rewarded independent production houses to submit inflated bids, ostensibly to manipulate the process in favor of agency in-house production resources. Many believe that the DOJ’s investigation will have a profound impact on both the estimated $5 billion production sector and potentially the rest of the business. Let’s not forget, the DOJ has not yet weighed in regarding agency practices identified in the ANA/ K2 study on media transparency.

Most recently, WhiteOps, a U.S. a cyber security firm providing ad viewability and fraud detection supporting the advertising industry, announced that it had uncovered a Russian led digital fraud effort that was literally stealing up to $5 million per day from advertisers. It was reported by the NY Times that the fraudsters impersonated more that “6,100 news and content publishers” while delivering up to 300 million fake ad views per day. How were they able to do this? By creating over one-half million bots that replicated the web surfing patterns of humans, starting and stopping videos and moving and clicking the cursor. 

If client organizations were experiencing a “crisis of trust” hangover following 2015, it certainly wasn’t remedied in 2016. Going into the New Year advertisers have every right to step back and ask, “Who can we trust?” Our agency partners? Ad tech vendors? Media Owners? Measurement Services? And who would blame advertisers for taking matters into their own hands and make a New Year Resolution to more directly deal with these issues. After all, it is their monetary inputs that fuel the entire industry and they certainly deserve better that what they’re getting right now. In the words of the iconic American actor, Clint Eastwood: Sometimes if you want to see a change for the better, you have to take things into your own hands.”

 

Big Data. Big Deal. You Bet.

5 Dec

digital trading deskThe evolution of media channels, ad targeting and the role of ad tech have significantly reshaped the media marketplace, allowing advertisers to select inventory and direct their messaging with an incredible level of precision. These developments have long been hoped for and yet, now that they are here, there is much that advertisers don’t understand about one important bi-product of the ad tech revolution… the disposition of the data gleaned from their investment at all levels of the media investment cycle.

In our contract compliance auditing practice, it is not uncommon that we find contract language gaps relating to issues such as:

  • Who owns the data?
  • Where is the data stored?
  • For how long?
  • How secure is the data?
  • Is the data kept separate from that of other advertisers?
  • Is your data being used to aid other advertisers?

These are important questions that heretofore have yet to be addressed by many advertisers within their agency agreements. “Big data” represents a potential treasure trove of information that can drive marketing strategy for advertisers by leveraging the insights gleaned from media transactional and customer behavioral data. That is, if and only if they are in receipt of the layers of data available to them and that they have the rights to use the data.

Rights to use their data? As odd as that may seem, data ownership is not automatically ceded to an advertiser. In spite of the fact that without an advertiser’s investment there would be no media buy and no corresponding data stream. Yet, many within the media chain have taken aggressive actions to claim that data as their own. Ad agencies, trading desks, publishers, demand side platforms (DSPs) and third party ad servers to name some of the entities that desire to own, or at a minimum, have unrestricted access to that data.

This jockeying for data ownership and access carries additional risks for advertisers in and around the topic of data privacy and security. Particularly as it relates to first-party data that may be utilized in the planning and placement of programmatic digital and addressable TV buys. Why? Because the unregulated, unsupervised use of an advertiser’s first-party data could be in violation of their users’ privacy rights.

Ownership and access rights to third-party data, which is often accessed on the advertiser’s behalf by its agency and or ad tech providers such as data management platform (DMP) and ad platform providers are generally clear and typically spelled out in licensing agreements between the various stakeholders. Then there is second-party data, which can best be described as information that users didn’t give you directly but was acquired through an advertiser’s relationship with another entity, such as an SEO platform or that was acquired via feedback from a behaviorally targeted digital display ad campaign. Advertisers must ensure that the use of and or sharing of second-party data is done in a privacy compliant manner to safeguard the interests of the user.

Complicated. Yes, and often little understood by those crafting client/agency agreements. It would certainly be appropriate for advertisers to revisit their agency agreements, with the goal of ensuring that their data ownership rights, privacy considerations and third-party access rights are clear and consistent in this emerging area. It is important to note that industry best practice templated language is still evolving and should not be relied on as an advertiser’s sole source for securing ownership/access rights and protections for agency agreements.

When it comes to advertiser data ownership, we share the beliefs of American businessman and politician Jim Oberweis, who stated:

“I am a strong believer that intellectual property rights need to be protected.”

Want to learn more about evolving your organization’s agency contract language? Contact Cliff Campeau, Principal at AARM | Advertising Audit & Risk Management at ccampeau@aarmusa.com.

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