The past 18 months or so in media have been characterised by an endless cycle of pitches, which, to many, represents a dangerous downward spiral rather than a magic roundabout of opportunity for media agencies.
Not only have some of the world's largest advertisers, including Unilever and Reckitt Benckiser, reviewed their media agency arrangements to gain efficiencies, but even those that haven't, such as Procter & Gamble and Kimberly-Clark, have made loud noises about extracting greater value from suppliers and talked about media as a key area in which to apply pressure. All of which has heightened the sense that media has become little more than a commodity, to be haggled over by client procurement departments along with the price of spare machinery parts and industrial paper.
The economic downturn has clearly been a key factor in all this, putting greater pressure on advertisers to achieve savings, and agencies have seemed only too pleased to play ball: often proffering eye-watering deals in order to land business and build market share in a highly competitive agency marketplace.
Some in the industry are already decrying the negative impact of all this, arguing that identifying media as a mere cost rather than investment will have detrimental, long-term effects for advertisers, agencies and media owners. And potential fissures in relationships and advertising effectiveness certainly seem to be appearing.
The spectacle of a serious blue-chip client such as Vodafone conducting not one but two media reviews within a year seemed ridiculous. Then BT moved its account to WPP's Maxus just two years into a three-year contract with Publicis Media Groupe.
Agency promises made in pitches are also leading them to make increasing demands for cost reductions from media owners, with frequent stand-offs occurring if media owners refuse to play ball. This has left media owners wondering how long they can continue to invest in quality content when agencies, on behalf of clients, are so focused on cost above anything else. In turn, some media owners argue, advertisers are suffering because the obsession over price means that they are not getting the media choices they deserve when campaigns run in media properties that aren't suited to a brand.
Though the economic gloom may have lifted slightly, it seems likely that the events of recent years have changed the media business irrevocably. In light of this, Campaign brought together senior agency figures, clients, a media owner and intermediaries to discuss what they have witnessed recently, draw their own conclusions and offer solutions for the media business going forward.
Claire Beale, Campaign's editor, kicked off the debate by asking: "It seems to us that the business has ground itself into a very commoditised industry, but how are you feeling about where the business is going? Are we over-dramatising the situation?"
The discussion began with the panel's thoughts on where the recent behaviour of advertisers and agencies has left media and what impact the forces of recession and globalisation have played in putting pressures on the media model.
Phil Georgiadis: "Personally, I think that whatever the situation is, we are responsible for it. It's quite simple - if the process can be commoditised, and I don't think it always is, that's because we've allowed it to be. So the solution is in our hands. If we can't articulate the value of media or of a service, then it's our own fault. For me, the issue lies in that over the past two decades, we've over-exaggerated the value of media agencies - we've oversold the promise and under-delivered the reality."
Nick Manning: "One of the big elements in this is that so much is now done on a global or multi-regional basis. The more international the pitch, the more likely it is to be judged on the basis of crude tangibles, so increased commoditisation is bound up in the globalisation of the industry."
Jed Glanvill: "But does pitching affect the quality of the media plan? Because you have a commitment to deliver certain things that were right at the time of the pitch and, six months later, or whatever, things have changed pretty quickly, so do you deliver the contract or do you deliver what's right for the client right now? And, sadly, there's been a period of time for the past 18 months when it's been the spreadsheet and the e-auction as a hurdle, and if you don't get over it, then you don't get to see the client."
Paul Phillips: "I think that's just the circumstances of the economy over the past 18 months. Emotionally, media has become a cost, not an investment."
Glanvill: "Just for debate, do you think that some aspects of what we do are commoditised and that is part of the issue? We all offer quite a broad range of services - from buying to planning to search to content ideas - and I accept that it's hard to put a value to all of those across an entire region of the world, but what happens is the process is simplified down to what can be measured and what, you could argue, is close to a commodity: the purchase and the buying of space to put ads in. The context is a global recession in which our clients all have greater focus on costs and are looking to make their business more efficient, so you can kind of see why this happens."
Georgiadis: "But with inflation coming back into the market, people won't hit their plans. It will be good as we'll have to explain why prices are going up."
Manning: "People have made a bet on the market and are finding themselves under-delivering dreadfully."
Nigel Gilbert, who ran a large media pitch for Lloyds Banking Group last year, then put the case that some of the onus rests on the shoulders of the client: "When I ran a pitch last year, I assumed that having one rather than two, or more like six, agencies would result in some savings, but I didn't predicate the whole process on the savings. I said to the agencies: 'I want this to be the best pitch you've ever been in.' By that, I didn't mean it was going to be easy but that it was going to be the best process they'd been through, making it as clear and fair as possible. Those four agencies were put through the wringer but we didn't hire the cheapest agency and there were some pretty wild offers, all of which I rejected because I used procurement to find out if they meant anything and they didn't. So, actually, we got to a point where we knew, pretty much, what was deliverable. It's my responsibility to do this."
Manning: "But there are plenty of clients where this process does not happen - sometimes you're trying to persuade the client not to take the lowest offer but they've still taken it because they have people in their organisation wanting to take that route."
Paul Hayes then provides a perspective that clients are suffering because agencies are priced out of using the most impactful media: "This industry, and agencies, are in danger of identifying value in terms of price only - we announced a pay-wall on our website because we believe in our journalism being valued and then we have conversations with people who say: 'It's all about the price.' Price, price, price results in bad media, leading to bad outcomes. We invest hundreds of millions in content and where does that leave us? You then get into a stand-off because we're not going to sell for a certain price, so the people who are losing are the clients because they're not getting the marketing communications that they deserve."
Glanvill: "All media owners are party to this because you do negotiate on share and once you get into a debate around share of something, you are going the route of commoditisation ... once you take that view of how to trade, then you, as the media owner community, are part of the problem."
Hayes: "We've been in positions where price guarantees have been made to clients without any consultation with us and we're told 'if we don't deliver price x, then we don't get our performance-related fee', but we would never do that price so why (is the agency) guaranteeing that price? It happens that we're a strong media owner, but if there is a stand-off, how is that in my interest or that of the client? Do we have a situation where we have media negotiation by stand-off? If so, that's a pretty depressing state to be in."
Georgiadis: "The thing that you need is more commitment, from agencies and advertisers, to say no. It's in the hands of strong media owners to say no and I think they could be more extreme, and it is in the hands of advertisers to be more intelligent with their agencies. But not enough advertisers care enough and if you care enough, you get a disproportionate advantage. Those that don't and get the rough end of the agency deal and bad planning, deserve what they get."
Glanvill: "Are agencies and procurement causing all this pain for the media owners? Is that us doing it or to what extent is the tough time that you're having driven by the market and deflation and recession, or is it the number of pitches?"
Hayes: "I think that you can say no but it's easier to say no if you're a more powerful media owner. But my issue is when we make investment in our product which we want to monetise through coverprice and advertising so we must sell on the merits of the titles we represent. One of the worst accusations that can be levelled at media owners is that you're selling the value of the relationship with the agency rather than the value of the product."
Gilbert: "It is a problem that if you're a group marketing director for a bank, then the CEO will see in the FT that the price of television has dropped by 25 per cent, so says: 'Why aren't I spending 25 per cent less?' It's a daft argument but then it's incumbent on the media owner, the client and the agency to explain why that is not the case and that, yes, we could actually spend less to achieve the same amount but we could spend the same amount and achieve a hell of a lot more. But that's about the quality of thinking and the engagement with the process."
Americo Campos Silva, who has global experience of agency relationships at Shell, then puts a case for building longer relationships with agencies where possible. Shell has worked with its agency MediaCom since 2003 and, in 2008, renegotiated a new contract that runs until 2012: "The temptation to go to market was big but we decided not to go. We knew MediaCom was doing a good job on the buying side because we worked with auditors and they (MediaCom) added a lot of value to Shell on the strategic side. Of course, that negotiation was tough because the market was going down and we had procurement on top of us, as well as being part of an organisation that was trying to drive costs down. But we are lucky in Shell because we have some key persons with brand communications backgrounds, so they understand that price is not everything and that by having a nice relationship with the agency, you can get much more than 1, 2 or 3 per cent off ratecard.
The value you can create from a good relationship is fantastic and the procurement people we have at Shell understand that. But don't underestimate the importance of cost - we made our decision because we are really confident that MediaCom is doing a really good job on cost as well and we're confident they will continue to do this."
Phillips: "One of the benefits of recession has been that agencies have made sure they do everything possible not to lose incumbent business and have hopefully cemented those relationships for a few more years."
Georgiadis: "You've got people from the AAR and Billetts in this room and I'm sure they'd be as happy to manage existing, healthy relationships as to broker new relationships. Marriage guidance as a mantra would be good for all of us, but that wouldn't make headlines in the trade press. Pre-emptive relationship management should be something we all work harder at, but we're all chasing new business."
Georgiadis talks of one client with whom he has worked to achieve cost savings but says that over-supply in the agency market contributes to the number of pitches that take place: "We worked together to achieve that challenge. The problem arises when agencies are pitching in the dark and have a fear of failure. There's this thing that if you don't win the business, it's a personal failure - objectivity goes and it's completely subjective so, if you're shooting in the dark, that's where the trouble comes. The big issue, that can only be an agency issue, is that fear of failure drives people to make silly promises and who can be to blame but the agencies? We live in a world of fear: fear of not being important and missing out on market share through new business, and that must mean there is too much competition."
Manning: "To say there is over-supply is not strictly true - it's a savagely competitive business with lots of players in it beating each other up on a daily basis, and in a pitch situation, everybody goes mad. But you're seeing senior network bosses now saying 'We ain't going to do that again' because it was a stupid thing to do to chase billings that were unprofitable and you get no credence from your worldwide CFO for delivering those billings if they are unprofitable. I hope and pray we won't see a double dip - and I don't think we will have a 2009 situation again. My view is that we will see the pendulum swing towards effectiveness-driven because you can only take so much out of cost and clients coming out of recession will have to spend."
Gilbert: "The thing that I think is missing, and people talk about cost, is effectiveness - there's not enough talk about effectiveness."
Phillips: "Far too much attention is put on the inputs of what agencies do rather than the outcomes of what agencies do. It should be the responsibility of all marketing services agencies to put more focus and investment into drawing as straight a line as possible between how money is spent and the impact on a client's business. Then I think you are able to move away from the sole focus on the metric of price. But I don't think there's an oversupply of agencies - I think clients get what they deserve and agencies get the clients they deserve. Some are more than happy to pay a few percentage points more because they're dealing with somebody that they like and better service. But a bit more focus on the impact of what's being delivered would benefit clients, and agencies need to start charging realistically for their services. Therein lies a big challenge."
Manning: "It is about effectiveness and it's incumbent on agencies to drive the effectiveness agenda because they could do that better and more comprehensively than anybody else in the industry, but agencies have not been pushing that agenda. It doesn't really feature heavily in any of the agency presentations that we see."
Hayes: "The market has never been more complicated; clients are crying out for good advice, yet the whole industry is going in a different direction."
Georgiadis: "I think it's hard for the media agency to claim to be responsible for the effectiveness. Advertisers want effectiveness and there has been this assumption for a long time that we're the authors of the response, but I don't think we are. You can say we're in communications planning and this that and the other but, essentially, we're in advertising and a great advertising campaign with crap media is still going to be more effective than a crap advertising campaign with great media. The assumption that we can, time after time, prove effectiveness is a really hard one. Effectiveness for agencies seems to be dressing things up to prove they have done a good job. If the outcome is that we should all be focusing on outputs rather than inputs, then we should do this collectively and in an intelligent, grown-up way involving the media owner, but if the outcome is that media agencies put econometrics at the heart of what they do, it would be the same as everybody putting on T-shirts and saying: 'Creative media is at the heart of what we do.'"
Glanvill: "If you're in a digital, data-driven world, manipulating information on what people actually do and how they behave, then that is where we're going. You can't not do that. Digital helps us to get into the effectiveness debate - because in an ad-served world where you are tracking, you are in a measurable conversation around response, action and all that kind of stuff on the back of TV, so that allows you to have a more robust conversation about the value you are creating with marketing and procurement. In those areas that are the minority pieces of the plan but will become the majority pieces, it changes the nature of your overall relationship - accepted norms on fees are higher owing to the time, systems and data requirements. So, from my side, it's not all doom and gloom - I do see digital and that new world creating an opportunity for a different conversation, but we're not there yet. We're in this whole period of transition where, for big advertisers, digital is only around 5 per cent of the plan, so it's not that relevant as the majority of the budget is still on TV."
The debate moves on to how media agencies can work at developing their offerings and surviving downward pressures on their services. The issue of whether they are confident and differentiated enough soon surfaces, as does whether both agencies and clients spend too much time focusing on "the latest fads". Agency chiefs seem only too aware that their offerings are barely differentiated in a very competitive marketplace and are seeking to identify the best ways in which they can make an impact with clients.
Georgiadis: "The only way I can say we're different is by what we don't have - we've spent the past 12 years saying we don't have a research department, we don't have a metrics thing because, in having them, we'd be the same as everybody else."
Manning: "Agency groups have not invested as much as they should in the recruitment and retention of their people. And most good ideas are not actually now coming from the agency; they are coming from the media owner, which has invested in whole teams of people trying to make the most of the media they've got."
Hayes: "It's about accountability and investment. If new things are happening, are media agencies prepared to put up their hands and say: 'I'll tell you what, I'll share some of the risk and we've done a good job on your business?' But the way it's going, the media owners may get there first and where does that leave media agencies? It's all about price. Media owners getting screwed by agencies isn't the future. We've done some great work with agencies and that's when we can sit down in a room with a client and they really like it because we're actually thinking about their business."
Georgiadis: "We need to celebrate success and clients that are successful and recognise that there are many different ways to do it and accept those differences - we just tend to chase the latest fads. And we should make people aware of when things go wrong. If I were ISBA, I would spend more time letting my members know what went wrong, on best practice, because this is serious money you're talking about and, at the end of the day, clients and agencies share the responsibility.
Phillips: "But I think the client community chase the latest fads as much as the agencies."
Campos Silva: "Sometimes you have a great salesman at the PR agency with a very interesting story, but then the media agency has a very boring story about reach and frequency. The PR agency is talking about augmented reality, and you think: 'This is cool. Why can't I do this stuff?' It's much more exciting to talk about the 5 per cent of the media plan that is attached to new things than the 95 that is the basics."
The discussion concludes with assertions that media agencies can escape the commodity trap with greater investment and confidence in what they do well.
Glanvill: "Because the buying of media is being commoditised, I have to spend my investment on things that others can't provide and that is things like modelling and content ideas as the market moves that way."
Manning: "The trouble is, if you're working towards a fixed margin on your income and your income goes down because your rebate has gone down and you're more transparent than you used to be, it does make the argument for investment harder."
Gilbert: "I wrote down three words - 'respect', 'responsibility' and 'results'. Of course, you have to respect the people you're working with and agencies have to earn it and have to take responsibility for what they do. You are hard on yourselves, but you're right - it's the creative agency that has the idea and media agencies are more about executing that strategy. But where you can really deliver is on results and you should really embrace this, not say: 'We're not going to invest in this.' You've got to bring that into your argument."
Claire Beale, editor, Campaign
Jed Glanvill, chief executive, Mindshare
Americo Campos Silva, global marketing communications manager, Shell
Ian Darby, media editor, Campaign
Nick Manning, chief operating officer, Ebiquity
Phil Georgiadis, chairman and chief executive, Walker Media
Nigel Gilbert, former marketing director, Lloyds Banking Group
Paul Phillips, managing director, AAR
Paul Hayes, managing director (commercial), News International
MEDIA PITCH FRENZY
December 2008 - Kellogg consolidates its £400 million pan-European media account into Carat after a pitch against Mindshare.
January 2009 - Vodafone appoints Carat to handle its £70 million UK account, moving the business out of OMD UK. Omnicom Media Group beats Mediaedge:cia in a battle for the $1 billion global HP account.
March 2009 - Mindshare wins the global InterContinental Hotels business.
May 2009 - Sony PlayStation consolidates its £72 million international media into OMD, while a review of Nokia's £300 million global media business ends with the appointment of Carat. Starcom MediaVest Group wins the consolidated £50 million global RSA business.
July 2009 - Axa appoints MPG to handle its £150 million account after a pitch against Mindshare.
September 2009 - OMD lands the £800 million global Vodafone account after a pitch against WPP's Group M and Carat, which had won the UK business from OMD just six months earlier, a decision that is now reversed. Mediaedge:cia nets the £80 million Lloyds Banking Group after a final pitch against ZenithOptimedia.
Coty, which just months earlier had reappointed OMD UK as part of a review of local markets, opts to review again - this time on a global basis.
November 2009 - Reckitt Benckiser appoints Havas Media and ZenithOptimedia to its £800 million global media account after a lengthy pitch. ZenithOptimedia takes the £90 million UK account from OMD.
January 2010 - Aviva's £150 million media is consolidated into ZenithOptimedia.
February 2010 - Group M's newly created agency M4C wins the £250 million consolidated COI business. Unilever's £3 billion global review is over and Mindshare retains the business in Western Europe and the US, while PHD scoops the account in China.
March/April 2010 - The frenzy looks set to continue as O2, SCA Hygiene, Arla Foods and GlaxoSmithKline all call international media reviews.