Mediabrands Adopts Pay-For-Performance, Seiler Calls Other Models 'Horrible Disservice'

by , Jan 16, 2012, 3:45 PM
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Matt-Seiler-IPG Mediabrands will move to a pay-for-performance model that links the agency's performance and compensation to the clients' business outcome, according to global CEO Matt Seiler. Other ways create a "horrible disservice" to clients, he said. "It's simple, if our clients don't achieve their business plan, we don't get paid."

Last year, IPG Mediabrands hired McKinsey & Company to start shifting the business mode. "Frankly, we are happy to move the whole industry in that direction, too," Seiler said.

The move means tying IPG Mediabrands' pay-for-performance business contracts directly to the emerging technology focus spearheaded by IPG Media Lab, which continues to rise in applications, about 600 in its database total. The physical IGP Media Lab in New York highlights 50 applications, helping brand execs better understand emerging technologies by touching and feeling the apps.

Agencies might not have a choice about using emerging technologies in campaigns, even when they come from well-known brands like Motorola and Sony. On the hook to deliver results, agencies will need to give clients the best content or they won't survive, said Quentin George, chief innovation officer at IPG Mediabrands.

The pay-for-performance model isn't new. Marketers built search engine marketing metrics on performance, such as  clicking on a text ad. Paid-search marketing and Facebook Ads rely on a pay-per-performance model, confirms aimClear President Marty Weintraub. Datapop head of sales and marketing Frank Lee points to affiliate marketers using remnant display and email marketing.

Attempting to connect Madison Avenue with hardware component suppliers, engineers at one of the world's largest electronic component distributor, Avnet, has begun working with ad agencies to design technology for use in ad campaigns, according to one source familiar with the relationships. These types of partnerships, using technology to connect behavior, will require a pay-for-performance model, another ad executive said.

Seiler said there is an intentional relationship between what IPG is doing in the lab vs. the performance model.

Last week, the company published a list of technology its execs believe will impact advertising this year. The list includes technology from Fulton Innovations, 3D system's Cubify Platform, LG Televisions, Kia's Users Centered Driving Display, MOTOACTV, 3M Multitouch Screen like the one built into the Lenovo laptops, Sony Xperia Near Field Communications Tag; and BodyMetrics.

5 comments on "Mediabrands Adopts Pay-For-Performance, Seiler Calls Other Models 'Horrible Disservice'".

  1. Norm Page from Same Page Capital, LLC
    commented on: January 17, 2012 at 10:38 a.m.
    This news I assume has far greater impact than the Mediabrands agencies buying - and being compensated - on a CPWhatever basis. It has to do with extending technologies into what were formerly considered largely unmeasurable areas of advertising impact - consumers' brand preferences, emotions, and even physical reactions. Mediabrands are going one step beyond making "brand metrics" measurable and accountable. This announcement strikes me as art meets science in advertising.
  2. Mark Evans from Addion
    commented on: January 17, 2012 at noon
    Laurie Sullivan and editors: ***Great headline, but, what is this article actually saying?!?*** OK, IPG MB is moving to PFP -- but how? With current AND new clients? All or some clients? What is the structure -- linear starting at 0% achievement = 0% pay? X% of pay for some performance floor? How does comp scale above the floor? What do these completely undefined "applications" have to do with PFP? Is PFP just for them? Does "applications" mean smartphone apps, Flash apps, or a variety of stuff like the laundry list in the last paragraph? (And why would a brand exec have to get a guided in-person tour of an application to feel better about it? Users certainly won't get such an experience...) How is Avnet involved? A components distributor's tech team is leading the charge for agency software?!? Or are they just a client? Or what? If the main thrust is "IPG MB moves to PFP", then the technology aspects of this story are just distractions. Instead (actually, even if it is limited to technology aspects), get the answer to the obvious next question: what do clients and prospects think about this?
  3. Laurie Sullivan from lauriesullivan
    commented on: January 17, 2012 at 1:03 p.m.
    Excellent questions, Mark. Dear Matt Seiler, can you answer them, please. I can't take credit for the "great" headline, but I can tell you I thought it interesting engineering departments at electronic component distributors have begun working with agencies to design products for use in campaigns.
  4. Lauren Snyder from IPG Mediabrands
    commented on: January 24, 2012 at 5:07 p.m.
    In answer to the many questions posted as a response to Laurie's article, I have gathered Matt Seiler's thoughts. The only question not addressable by IPG Mediabrands is the reference to Avnet. That may have been an example Laurie used...but it is not relevant to us or our clients. "We have over 20 large scale clients currently working with what we would consider full-fledged pay for performance contracts-ones that tie work performed with overall business outcome vs. simple media cost savings. Our favorite models do start with a zero pay until agreed outcome is achieved. Then, a significant upside for exceeding the goal. We all partner better when we are compensated just like our clients. We must be, and are, willing to put real skin in the game. That said, we have many variations with more or less skin depending on the clients’ tolerance for risk and related accrual. Metrics are an obvious and critical element to these arrangements. When you don’t define success as yours, but rather your clients’, you are always on the prowl for solutions that will help them achieve their desired outcome, and of course our related compensation. This gets us out of the more typical agency silo-ed world. The IPG Media Lab is set up to expose clients to new technologies, platforms and applications or new uses of them to create solutions and utility against their challenges and business objectives. Many of the picks from the IPG Media Lab team from CES come into play when designing highly effective ways to connect with targeted consumers. Since we never arbitrage media – we are always focused on delivering messages and motivation to deliberate consumer groups and individuals – many forms of media re considered when creating an optimal plan for clients. This way, we can ensure a greater control over media placed, results of real time measurement and effect on sales outcome. We have yet to meet a client who wasn’t passionate about growing his or her business. Their recognition of our commitment to that end, to finding the best solutions without bias, has led to ever stronger relationships with our clients, and again, a move to compensation that better aligns our delivery with their outcome. Further, we have found great enthusiasm, and frankly a degree of relief in having the overly complicated world of technology expressed in simple terms of utility." - Matt Seiler
  5. O. Liam Wright from True Interaction
    commented on: September 11, 2012 at 10:06 a.m.
    There are still hundreds of global legacy sites out there that may not be associated with future performance metrics worth updating since many of them are branded properties with script errors, server errors and broken links. As we move forward building more volume we also need to clean up and simplify systems.

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