The latest edition of the Association of National Advertisers’ “Trends In Agency Compensation” report shows a rebound for the media commissions model, jumping to 12% this year from a low of 3% of respondents in 2010.
I predict by the time the ANA conducts its next study, it will be orders of magnitude higher.
Why? Because in the near future, a big independent agency, which spends big dollars in digital, will propose that one of its clients go back to the future… and pay a 12% commission on consumer-facing digital media buys.
In return, the agency will pay all intermediary costs except:
Creating the ads.
Serving ads to sites verified to be human.
Affixing measurement and verification tags like comScore and Moat.
In the days when agencies were paid by commission on media, they picked up all costs — except ad creation and ad distribution.They even paid for measurement, such as Nielsen ratings.
Why didn't this happen with the Internet?
In the late 1990s, when Internet ad spending was small, agencies told advertisers they couldn't break even if paid via commissions.
By the late 1990s, advertisers were already moving toward fee-based agency compensation models.
Flash forward to 2017.
There now are many digital budgets big enough to support commission-based payment and require agencies to pay for only those intermediaries that add value — not those that only add costs.
In this way, agencies would be charged with cleaning up the crappy, redundant supply chain, which adds a lot more costs than it adds value.
Implementing this new "12% solution" will be a win, win, win.
Win No. 1: Marketers would see 85% of the money they allocate to digital reach screens with ads that humans can see.
Win No. 2: Quality publishers that deliver content humans choose to see, will see much more of the marketers digital spend hit their screens.Win No. 3: Agencies will, over time, regain the trust of marketers. That's because the agencies are acting only on the marketers behalf, maximizing working media, eliminating crappy supply chain intermediaries who add costs but no value.