26 Sep 2011

Part Two: The Media Agency / Client Relationship – When Vendors Become Agencies


In part one of this series I discussed how clients are taking control of their digital marketing programs by bringing technologies like ad serving in-house. Whilst it may seem trivial, it frees the brand to switch agencies or work with multiple agencies because they own their own data. The shift has been rapid too, with my estimation of ad serving contracts being 90% held by agencies just 5 years ago to perhaps only 30-40% today.

But technology today also includes many aspects of the media buy itself, especially within the world of direct response display.

About a year ago when I was on the agency side, one of our clients was a large online/offline retailer. Being tasked with generating new customers and ROI we invested in a lot of techniques such as site retargeting and behavioral targeting. The relationship had its challenges, but it worked, and we provided the knowledge to know how to structure their spend, which providers to use and how to get everything to work together.

And then one day we took a call to say that the client was going to take one of their behavioral targeting campaigns in-house, cut us out of the equation. The reason? We “weren’t adding any value to the relationship”. As the agency, that sucked of course, particularly for my media planner who had suggested the vendor in the first place; you can’t help but feel cheated in those scenarios.

A year on though I can look back and give a more subjective response – I don’t blame the client, and they were entirely correct to do what they did. After the vendor was selected, setup and integrated into their processes, there probably wasn’t much we could have added. The vendor had a good relationship with the client, they had their pixels all over the site and they were doing the granular optimization day to day. We could monitor and give input, but it wasn’t really worth 12% of a $3m annual spend.

Was it fair that the client cut us out of the equation and slashed our potential to earn revenue from them? No, of course not, but who said anything had to be fair. It is another example of how the typical relationship between a client and a media agency is fundamentally broken. What we should have done was had clauses in our contracts that took such a scenario into account, but as the challenger agency brand, we didn’t have the power to negotiate for those.

I remember another example where a long standing travel client asked us to build the media plans for another season, which we did expecting an auto renewal on the contract, only to watch them take those same plans, hire a media planner for $60k and execute everything themselves. I tried to show anger to the vendors we had chosen for their media plans, but who can blame them for taking the revenue?

And now as a media vendor, that’s a common problem we face – who do you take money from and when?

Whilst this situation has always happened in advertising, the site retargeting vendors seem to have led the way within the digital space. It is a technology play more than a media play, requires very detailed setup and frequent optimization. They build complex algorithms to match creative to placement to cookie to time of day, and they often use their own dynamic creative engine. To remain competitive against other types of spend they rolled out performance models to replace the typical CPM, charging only for incremental performance they drove. And of course to manage all of these moving parts they hired account managers to liaise with the client (be a brand or an agency) who hold weekly calls and status meetings……

How is that any different from what an agency does? Reality is, it’s not. In these scenarios, the line has disappeared between an agency and a media vendor, and both are trying to find their new ways of operating.

For the agency the threat is clear, they risk losing repeatable revenue from some of the most popular techniques like site retargeting and search retargeting, and they must find a new way to stay relevant, (which we will explore further in this series).

For the vendor it’s a love/hate situation.

When you get a smart client and you have smart client-facing people, it is to the vendor’s advantage to act as much like an agency as possible. Primarily it reduces the risk of being cut from a media plan, but additionally the better relationship leads to better revenue opportunities and deeper integration.

However, get a client who is not so… experienced … then it is the worst situation for the vendor. They must now provide the campaign AND hold the brand’s hand just as the agency would. All the calls about pixels and tagging fall on their shoulders, and they must provide the same weekly calls the brand expected from the agency - but without the nice 12% management fee on top! And within a competitive space like ours, where so many of us are younger companies fighting for the sunlight, we must do this at the sacrifice of some margin.

As vendors we also risk upsetting an agency. In a recent example, a known retailer that we were working with through a large agency decided to terminate that agency relationship and bring the business to us directly. Both relationships mattered to us and so it was a difficult situation. Our relationship with the agency was strong though, and so a simple conversation and an arrangement on another client was all it took to make sure everyone stayed happy.

In short, the brand’s have taken control and are causing media agencies and vendors to redefine their behaviors, whether they realize it or not. Right now it is to the brand’s advantage as they are often getting good service for less cost, but at some point, the brands are ultimately the ones who will have to pay. For us as a vendor we play fair of course, following ‘rules’ that resemble those from adolescent dating – we sometimes don’t know who is really interested, whether they “like us” or “like us, like us” and we particularly don’t date our friends ex girlfriend – not unless they tell us its ok of course!


Look out for future parts of this series:

Part Two and a Half: The Media Agency / Client Relationship - When Agencies Become Media Vendors

Part Three: The Media Agency / Client Relationship - The Unrealistic Client

Part Four: The Media Agency / Client Relationship – Choosing The Right Agency for Added Value


1 comment:

bella said...

nice post ... i like the blog so much ... :-)