Marketing Math Blog

Reduce Your Content Management Risks & Costs

By Content Management No Comments

Content Management SystemsContent curation and production continues to grow in importance as marketers expand their message distribution to multiple devices across a myriad of channels including mobile, web, social media, shopper marketing, public relations, etc. The result is an ever-growing quantity of brand specific content that needs to be managed and shared.

For most marketers this content is being accumulated, produced, and stored by multiple of their marketing service providers. This can create logistical challenges when it comes to managing and accessing these critical assets, invariably creating risks related to compliance, brand consistency and usage rights violations while driving up operational costs.

The solution can be straightforward… a centralized enterprise-wide content management system (CMS) that improves a marketer’s ability to manage and protect this disparate set of images, videos, logos, and text files across its marketing agency network. Further, creating a content management “center of excellence” makes it easier to search, access, transform and distribute these assets in their proper format for use by each marketing partner.

The centralization of this function, whether in-house, with a designated “lead agency” or with a specialized CMS provider can boost productivity and improve both time and cost efficiencies. How? Eliminating the redundancies in labor and costs related to accessing content curation, creation, formatting and cataloging from multiple agency providers. This allows brand management personnel, and their advertising agency partners to focus on their specialty… “origination” rather than “adaption” projects.

How Should Marketers View Digital Media in a Post-Cookie World?

By Advertisers, Digital Media, Media, Programmatic Buying No Comments

Third Party CookiesAs both government regulatory bodies and the advertising industry have become serious about data privacy, browsers such as Chrome, Safari, Firefox, and Explorer have announced safety measures that include restricting first-party cookies and blocking third-party cookies by default.

These moves will clearly have an impact on a range of outcomes, including user experience, data access, ad targeting and attribution. This will limit marketers ability to personalize content, target their advertising to individual users or assess which impressions had an impact on a consumer’s actions.

That being the case, how should marketers view the value of programmatic advertising in a post-cookie world?

For some, their focus has turned to first-party data for which consumers have given their consent. Yet, gathering this data and harnessing its value will take time. Further, this approach still requires an ad ID solution for which there is currently no standard or consensus among publishers, AdTech companies or device makers. That said, there is hope on the horizon as organizations such as the Advertising ID Consortium have emerged and are offering people-based identifiers that are compliant with “self-regulatory codes” and applicable privacy and security laws.

While the industry awaits a robust, unified ad ID solution, the loss of behavioral or deterministic targeting tools will clearly weigh on the efficacy of programmatic digital media.

According to Statista, global digital ad spend will reach $389 billion in 2021, with nearly 85% of that being place programmatically. In light of the challenges posed by the restrictions on third-party cookies, the question is, “Should marketers continue to allocate such a high percentage of their overall media spend in this area?”

In the words of 19th century author, Henry David Thoreau, “It’s not what you look at that matters, it’s what you see.”

Will Post-Pandemic Employee Compensation Impact Your Agency Fees?

By Advertisers, Advertising Agencies, Agency Compensation, Agency Fee & Time Management No Comments

Remote WorkersWith COVID-19 vaccination rates increasing, organizations across the globe are evaluating whether and or when their employees will be required to return to the office. As part of the consideration process, many are deliberating on whether to allow all or select employees to continue to work remotely.

The question being assessed by employers considering extending remote work privileges is, “How will this decision impact employee compensation?”

Many organizations are weighing different pay scales for remote workers. As an example, Google is planning to adjust employee compensation based upon the local market wages where an employee works from. Which certainly seems like a reasonable trade-off.

By way of example, in a recent article by Reuters, which had seen Google’s “salary calculator,” an employee living in Stamford, CT, which is an hour from New York, would earn 15% less if they opted to work from home, rather than commuting into New York City. Of note, Google is but one Silicon Valley company that has implemented location specific compensation models for employees living and working in less expensive areas.

As advertising agencies evaluate their post-pandemic approach to the use of flexible staffing and or remote workers, it stands to reason that while some will opt for location agnostic pay models, others may implement location specific remuneration programs for remote workers. In the case of the latter, the obvious question is, “How will cost-of-employment adjustments impact the fees charged to advertisers?”

Will those on commission-based fees adjust rates downward? Will those employing direct-labor-based compensation programs reduce bill rates?

It is certainly reasonable to assume that if an agency reduces its salary and overhead expenses, that the fees charged to advertisers should be reduced accordingly. That said, it is likely that any adjustment to agency bill rates will need to be the result of collaborative discussions, initiated by the advertiser, between themselves and their respective agency partners.

At a minimum, location-based employee compensation adds an interesting dimension to the ongoing quest for a fair and balanced agency remuneration system.

 

Do the Networks Owe You for Audience Delivery Shortfalls?

By Media No Comments

deliverables based compensationThis is an issue for advertisers. Audience deficiency shortfalls not made up in flight or earlier in the broadcast year create these types of problems. Advertisers really need to push their agency partners to be more diligent in tracking and securing compensatory media weight, rather than rolling these credit balances forward or accepting makegoods in streaming inventory as opposed to linear TV… where they were planned and purchased. Read Article…

 

Advertisers Renew Focus on Working Media

By Advertisers, Media No Comments

costLooking for reasons as to “why” advertisers should monitor working media spend in addition to the myriad of other analytics utilized to assess effectiveness? Beyond the fact that eliminating waste is part of a marketing organization’s fiduciary responsibility to their enterprise, there is now another consideration for monitoring this particular productivity metric. While many in the ad industry eschew the concept of “working media” it is interesting to see the importance CEOs, CFOs and financial analysts place on this important metric  Read More

What Do You Know About Your Ad Agency’s Use of Affiliates?

By Advertisers, Advertising Agencies, Related Parties No Comments

Line of SightDo your client-agency agreements require your agency partners to disclose their use of related parties? To secure your permission prior to engaging affiliates? To document how those affiliates are compensated?

If so, then you are in a better position than many. At a minimum, testing for agency compliance to such contractual requirements is an option that you can pursue. If not, the level of work being channeled to related parties by your agency may surprise you.

In our contract compliance and financial management audit practice, it is not uncommon to see 5 to 7 different related parties engaged by an advertiser’s agency. Examples of services provided by affiliates include items such as barter, programmatic buying, direct response TV, event marketing, principal-based buying and ad serving. Yet, oftentimes these affiliates and the manner in which they are compensated are not known to the advertiser.

Why should an advertiser care? For one, if work is assigned to an agency affiliate without undergoing a competitive bid process, what assurance can the advertiser have they are not being charged above-market rates? Secondly, the added profitability by recommending certain affiliates, such as those engaging in the procurement and resale of media inventory through principal-based buys or barter, could adversely influence an agency’s recommendations to the advertiser. And to compound matters, if said affiliates are also applying non-disclosed mark-ups to the media inventory procured or services provided, how can an advertiser fairly assess whether the total fees the agency is generating from its business are commensurate to the services being delivered?

Thus, it is important to revisit contract language to ensure that the following controls are in place:

  • Principal-Agent language that requires the agency’s fiduciary responsibility is to the advertiser and that all decisions and actions are undertaken in a manner that maximizes benefits to the advertiser.
  • Require the agency to disclose any and all related parties that it intends to deploy on the advertiser’s behalf and to secure the client’s prior written approval. Requiring quarterly updates to this list would provide an added layer of protection.
  • For instances where principal-based buys, barter or other non-disclosed transactions are being considered, require a double opt-in process:
    • The first step would be a formal letter of notification from the agency to be signed by the advertiser granting permission.
    • Secondly, any purchase authorization form presented by the agency to the client for approval should reiterate the agency’s intent in this area.

With these agreement guardrails in place, advertisers can further protect their interests by periodically auditing the agency to validate compliance and verify the accuracy of charges made by and or for related party activities.

Ultimately, this approach will allow an advertiser to leverage the full breadth of its agency partner’s resource offerings in a very transparent manner, providing comfort that its agency’s practices are aligned with its expectations.

Madison Avenue Moves Toward “Free Agency”

By Advertising Agencies, Agency Compensation No Comments

ad agencyInteresting findings from Horizon Media’s study on post-pandemic employment trends. As Madison Avenue rethinks the concept of “agency” and the potential use of independent workers versus employees, the industry will also have to come to grips with the impact on current remuneration models. With direct-labor based agreements dominating the current compensation landscape, the attendant formula of direct salary costs + benefits + overhead + profit does not readily extend to “free agency”… Read More

 

Agency Remuneration: Project-Based vs. Retainer

By Agency Compensation No Comments

CashIdentifying the right methodology and optimal rate at which to compensate advertising agencies has been an ongoing quest for advertisers. With the shift to project-based versus retained relationships this, driven in part by a desire for greater flexibility and responsiveness this challenge has intensified. As always, the question remains; “What rate can advertisers expect to pay under different agency remuneration models? Does a greater commitment lead to more efficient rates?” The following article from Leah Montebello of Producers & Procurers iQ presents an excellent framework for fairly evaluating this scenario. Read more…

 

The Insanity of Digital Media

By Digital Media No Comments

Oli Orchard, Founder of Fuel Media & Marketing a London based media consultancy and auditor recently published a LinkedIn post featuring this comic strip by Tom Fishburne. While funny, Mr. Fishburne’s take on digital media is sadly reflective of reality. In spite of the risks and questions around the “true” effectiveness of digital media, advertisers continue to increase both absolute dollars and share of spend on digital media in general and programmatic in particular… which is fraught with an even greater level of risk. Controls and rigid monitoring are cost of entry for advertisers in this area and in spite of the money being spent on adtech solutions, the scenario captured in this comic strip is as real today as it was when originally published years ago.

Digital Media

A Key to Rebuilding Client – Agency Relationships

By Advertisers, Advertising Agencies, Client Agency Relationship Management No Comments

Bias and ObjectivityThe state of client-agency relationships has been on the decline for several years. Whether measured in terms of longevity, the increase in project-based work versus retained relationship commitments or the waning level of advertiser trust in their agency partners, all of these important partnerships are under pressure.

Regardless of the reasons behind the current situation, this is not a healthy dynamic for either advertisers or agencies. The result has been shorter, more volatile relationships, higher levels of agency personnel turnover and some would argue less effective, less efficient advertising outputs. Reason enough for both sets of stakeholders to thoughtfully assess the current situation and seek corrective action.

There is, we believe, a clear starting point for improving client-agency relationships. It involves a return to the tried and true “principal-agent” business model that once formed the basis for relationships between advertisers and agencies. The woes currently besetting these partnerships and driving advertiser concerns over transparency and trust are direct outcomes of the industry’s deviation from this important principle and the resulting practices that are averse to this model.

A basic tenet of principal-agent relationships is that the agent is bound to make decisions and to take actions that are in the best interest of the principal…always. This, in turn, guides interactions between the parties in a manner that achieves the highest possible degree of accountability and ultimately trust.

It wasn’t long ago that all client-agency agreements contained language establishing the principal-agent relationship, the need for agencies to provide unbiased counsel and the resulting fiduciary obligations of both parties.

Sadly, agency compliance with and commitment to this framework began to wane within the agency community. Some may remember the controversial comments by Irwin Gotlieb, once CEO of WPP’s Group M who opined at the 2015 “Agency Financial Management” Conference hosted by the ANA: “Those relationships, rightly or wrongly, don’t exist anymore” he said, adding that “You cease to be an agent the moment someone puts a gun to your head and says these are the CPMs you need to deliver.” Blaming advertisers for the bad practices adopted by some agencies was inappropriate at best.

Even with contractual safeguards in place, problems occur when “agents” have hidden agendas or substitute their interests over those of the principal. This is why the topic of “media rebates” secured and retained by media agencies, without client knowledge or approval proved to be such a lightning rod topic when it initially surfaced.

Fast forward to the present and certain revenue-generating practices that are pursued by many agencies such as principal or inventory buys (media arbitrage), acceptance of incentives from third parties (i.e. rebates, value pots, EPI’s, etc.), agencies awarding work to their holding company affiliates without a competitive review or client authorization, and the application of non-disclosed, unauthorized mark-ups.

Whose interests are being served by such practices…certainly not the advertisers. To paraphrase Shep Gordon, Hollywood producer and talent manager:

“I think a problem for most people in a fiduciary capacity is to eliminate self and greed and all those things so that they can actually be in a fiduciary capacity where the client comes first, whoever the client happens to be.”

Advertisers must protect their legal and financial interests by crafting contract language and implementing the appropriate controls, including performing periodic audits. How else can they ensure that they have the transparency they seek in the context of their agency partners’ financial stewardship of their advertising investment and the confidence that their agencies are acting in their best interest?

On the topic of principal-based buying specifically, we have a contrarian perspective and don’t believe that it is ever appropriate for an agency to purchase media inventory in its name, mark it up by some undisclosed amount and re-sell that to its clients. Yet, these non-disclosed buys have proliferated as programmatic digital media buying has exploded. While the 4A’s issued guidelines to address this practice including documentation requiring client opt-in, explanation of an advertiser’s audit rights (if any) and access to the underlying costs, oftentimes agreement language is silent on these recommendations or they are simply not followed in actual practice.

Thus, if both parties want to establish trust and rebuild the client-agency relationship, begin by eliminating the risk of bias in an agency’s recommendations and or actions and reinforce the principal-agent framework in agreement language.