Media Forum: Are web pitches bad for media?

Are online auctions beneath the dignity of media agencies, Alasdair Reid asks.

As if agencies didn't have enough on their plates. A few weeks back, we had at least one client admitting what everyone in the business has known for years - advertisers don't pay media agencies enough. Sometimes, in effect, they don't really pay them at all.

This admission came in the wake of a curious scandal as Interpublic decided to hand back all sorts of previously undeclared volume discounts to the clients of its media buying agencies.

But there's growing pressure on the system. It would be bad enough if agencies were just facing the prospect of handing back more discount to clients - but this is happening at a time when there seems to be more downward pressure on price. Now we're even seeing pitches reduced to brutal auctions conducted online.

And this isn't just coming from the advertisers who want utility media by the yard. It's also coming from advertisers who want all sorts of clever stuff in terms of communications strategy.

Take, for instance, the shenanigans surrounding the recent £25 million Abbey pitch. The Abbey marketing team was keen to reassure agencies that it wants to appoint a genuinely strategic business partner. And, indeed, the pitch process kicked off with a marketing communications stage where prospective agencies were invited to discuss all sorts of holistic strategic communications goals with the marketing team.

Then the procurement people came in and broke the news that the contract was actually only for one year and that it was to be awarded on price considerations alone. And, oh yes, the rest of the pitch would take place in the form of an online auction.

Is this a new low point for the media business? David Pattison, the president of the IPA, says trade bodies such as the IPA and its counterpart on the client side, ISBA, can only give guidance - they can't, nor should they wish to, lay down the law. "It is up to individual clients and agencies to decide how pitches are conducted and what it is that is being pitched for," he says.

But Pattison must be aware of the deep disquiet in certain sectors of the industry about the way the market has been shaping up this year. After all, it is believed that his agency, PHD, declined to take any further part in the Abbey pitch when the auction was proposed.

Many believe that its rivals should have followed its example. On the other hand, it might just be that we've entered a particularly desperate phase in the business cycle. We've just emerged from a period of aggressive consolidation and the new behemoths, some might argue, are protecting their market share by effectively "buying in" bits of plum business.

But, basically, agencies are coming under ridiculously extreme pressures during pitches, aren't they? Get used to it, Neil Jones, the managing director of Carat UK, responds. He states: "Procurement people are increasingly prevalent in the business and I know some people argue that all they are interested in is more for less. But, if you work with them, there are ways to gain revenue in terms of performance-related fees, if you can find ways of quantifying your performance against certain metrics. And we're going to see a lot more online pitches too - there are several big blue-chip global multinationals that are already following this model. Online pitches can be a good thing too. They are transparent for a start. Sometimes, with all the politics surrounding a pitch, you don't know why you've lost it. In an online pitch, it will be absolutely clear."

Paul Phillips, the AAR's director of advertising and media services, tends to agree. And, on the broader question about whether agencies are being asked to do too much, he says perhaps agencies have to learn to say no more often. He states: "Sometimes an agency will know a pitch isn't for them and they will confess as much afterwards."

And Iain Jacob, the chief executive of Starcom, is also from the caveat emptor school of business philosophy. He concludes: "I think we are in a market where buyers and sellers have to be much more frank about what they do or do not want out of a relationship. The danger comes when one party believes that the normal rules of business relationships don't apply. If the main priority for an advertiser is cost-reduction, it is a totally legitimate aim, and, if they are clear about it, they will get it. If they want brain power, they know they have to pay accordingly."

MAYBE - David Pattison, president, IPA

"As an industry we can remind clients there is a variety of ways in which media agencies can add value to their businesses. I would encourage clients and agencies to use the pitch guidelines the IPA and ISBA have put in place."

NO - Neil Jones, managing director, Carat UK

"Procurement people are more involved these days. The analogy is with the arrival of auditors ten years ago. Everyone hated them back then but today no-one would argue a client shouldn't appoint an auditor."

NO - Paul Phillips, director of advertising and media services, AAR

"Online pitches are clearly a new phenomenon in this country. From a client point of view, if it is preceded by a stage where the strategic offerings are assessed, then it can be an efficient way to reach a decision."

NO - Iain Jacob, chief executive, Starcom

"The internet auction thing is a bit of a red herring. It's just a mechanism - and, if the client is clear about what it wants, it stands a chance of getting it. The real problems arise when one side says one thing but expects another."

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