• by Scott Neslund , Op-Ed Contributor, July 13, 2015

With the record number of AOR media agency pitches taking place this year, one has to wonder if our industry is experiencing the typical cycle for agency turnover and new business wins, or is this the harbinger of a more fundamental shift in the media landscape? The total media spending from advertisers conducting these agency reviews equals just under 10% of the total media U.S. marketplace. A lot has been written on this topic, for good reason: these pending changes may impact the industry for decades to come.

The Same Old Cycle?

One possible outcome of these pitches could be “more of the same.” Advertisers want more value for their media investment. Contenders promise or guarantee a certain level of savings. Then the winning media agency negotiates lower media rates with vendors. Lower agency fees may also be negotiated, but make no mistake about it – the big savings opportunity is derived from cost of media, not the agency fee. 

The problem with this cycle is that it simply passes the buck to the media sellers. At some point, publishers and vendors may resist being the catcher’s mitt for agencies promising large cost savings. Supply and demand will dictate that outcome, and publishers with clear differentiators can withstand the pressure. Itwill also mean fewer budgets for publishers who don’t have scale, unique ad products or an awesome sales team – not a bad industry outcome if publishers can’t bring their ‘A’ game.  

It’s equally possible that agencies won’t be able to win with a promise of costs savings from the media schedule and by adding workload to existing staff. There’s a real possibility that agency leaders and employees will say ‘enough is enough’ and media sellers reject the downward pressure from lowball CPMs.

 The Dawn of a New Model?

In this current environment – where daily headlines lament bots and fraud, viewability, rebates and more -- advertisers may want more than cost savings. Brands have concerns about transparency, they crave forward-looking agency partners and, most of all, they want media investments that deliver superior results for the business.

At the epicenter of this issue is performance. The industry is more sophisticated in measuring campaign performance and it goes far beyond simple metrics such as CPM, clicks or even viewability. This could spur demand for newer ways of defining KPIs to more closely reflect business drivers. The agency that puts forth a bold new approach for the ever-changing media landscape may have the best chance of winning. 

What might this new model look like? I would start with these key elements to form a more productive business relationship between advertisers and agencies:

• ·         Move away from the FTE staff model and reward agencies for results. The FTE method inhibits growth because it incentivizes inefficiency, where more hours logged means more revenue. Instead, explore ways to tailor compensation around the value of hitting the KPIs that are actually driving business results for the brand.
• ·         Use consumer-based search results to better plan media touch points and develop more effective ad messages in real-time. The syndicated research and focus group approach to guiding messages and ad campaigns needs a reboot. Search-based data from customers helps marketers better gauge what message should be, how to segment customers, and what media gets the best response.
• ·         Improve workflow by using technology to reduce manual hours and allow agency teams to focus on client strategy versus manual input on excel worksheets.
• ·         Automate basic reporting and data collection functions to reduce human error and meet client deadline expectations.
• ·         Offer advanced cross-media measurement analytics. Agencies need to provide attribution modeling that evaluates the ROI as a whole and not just channel-by-channel. It’s critical to integrate media channel data and messaging data to provide a holistic view of consumer segmentation business results.
• ·         Center the value of the AOR business to data collection and effectiveness in applying this to media decision-making.

The winners from this agency review process will emerge in the next four to six months. As the dust settles, we’ll learn if there is a new model to better manage media assignments, maintain agency business profitability, and deliver happiness for clients. Alternatively, we could learn that brands just want cheap media – which could cement the advertising industry’s position as one of the most antiquated businesses in the world. I hope our revelations will be the former.