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Media Agencies Fret About Compensation

It is getting more common for marketers to extend or delay their payments to media owners, resulting in media agencies holding the bag and incurring significant risks. Mainardo de Nardis, global CEO of OMD Global, says his biggest concern is "clients asking for unreasonable terms of business." Many agencies also concede privately that they're working for profit margins of less than 1%.

In a session at last week's 2009 Festival of Media in Valencia, Spain, four global CEOs discussed compensation problems. Jack Klues of Vivaki said that media agencies need to reframe the client/agency relationship and compensation structure to an outcome-based model. At the same time, both agency and client "must make sure we have the [right] data to base such remunerations," he said.

With longer payment terms, the agency can finance the payment or share part of it with the media owners. Both options are risky, says Maria Luisa Francoli, global CEO of MPG. If an agency can't find a media owner willing to share, she suggests getting recognition for the risk assumption from clients in other parts of the compensation agreements. If that doesn't work out, she says her agency offers clients a "pre-payment plan, which is the same thing as having the client pay directly."

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