Home Analysis Advertising The agency model may not be broken, but bad agencies are

The agency model may not be broken, but bad agencies are

Future of Brands Sydney, as discussions turn to whether the agency model is broken
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Is the agency model broken? This question provoked a frank debate at Future of Brands Sydney recently, with Mike Wilson, CEO at Havas Media ANZ, declaring that while there is a shred of truth in the idea, overall it has become a cliché. “To talk about the agency model as a fixed entity, as being fundamentally broken, is lazy thinking,” he declared. “There are good agencies and bad ones. The bad agencies are broken – that does not mean the model is.”

The reality is that there is no single agency model, he argued, with Havas Media ANZ using around 15 depending on the client, which creative partners are used, and the role of management consultants or other ecosystem partners. “It [the agency model] is an evolving relationship.”

Railing against what he calls the hype around this subject, he said: “There are good and bad clients. There are good and bad pitch consultants – and woeful ones! Bad agencies need to take a hard look at themselves or they will go by the wayside.”

Christophe Eymery, Head of Digital Marketing at recruitment specialist SEEK, inferred that there has been enough bad practice in the past to suggest the model is broken. He is responsible for search, display, social and CRM at SEEK and previously worked agency-side and also client-side with L’Oréal and Renault. Good intentions focused on equitable partnerships and transparency are not always delivered in reality, he suggested.

Recalling his client-side days (which included six years with L’Oréal in Australia) he said: “I was frustrated because I found that agencies were not necessarily focusing on the right thing, and that drove clients to look at how they engaged with agencies, and occasionally take their media buying in-house.”

What he considers unfair monetisation of programmatic was one of the concerns when he was on the buy-side, though he acknowledged that “clients have squeezed margins and that is a curse we can create for ourselves, pushing an agency to find another form of income.” He does not think transparency issues have been fully resolved.

Gil Snir, Chief Commercial Officer at Bench, which provides a programmatic marketing platform, agreed there is still a challenge around transparency and agency models that needs to be addressed. He wants agencies to be more upfront and specific about what people are being charged for.

He suggested there are still conflicts of interest that prevent alignment of agency and client interests. Snir did agree with Wilson, however, that the agency model is changing, rather than broken.

Anneliese Douglass, Head of Media and PR at Unilever ANZ has no personal concerns about transparency but thinks clients must take responsibility for understanding the P&L model at an agency partner, and know how they make money. “Are they responsible to their shareholders or the clients?” She knows the bad players but was not about to reveal them publicly!

“We have all been burnt, whether innocent or not, by the practices of others,” Havas Media’s Wilson opined. He admitted that the agency model has not always worked properly. In 2004 he co-founded the Australian office of the multi-disciplinary agency Naked Communications and won awards for a more client-centric approach.

“Digital was just happening and media agencies used to do deals on behalf of clients and spend all their money before they had even worked out what the campaign objectives were for the year. We thought that was bad. We did not make our money on deals.”

Fast-forwarding to the present, he thinks there is an easy resolution to any remaining bad practice. “Just get rid of your agency.”

Four years ago, Wilson helped launch Havas Media in Australia. The agency was set up to be totally transparent, but bad players have left a legacy of distrust in the industry. “The most depressing thing in my job is that in pitch situations, when you meet clients for the first time, there is almost an assumption that there are transparency and trust issues. That is before we have even had a conversation.”

Doubling down on the good agency narrative, Simon Williams, National Managing Director at Carat ANZ, told the Future of Brands Sydney audience: “We should be acting independently, making decisions on behalf of our clients that we are entitled to make, acting in their interests.

“Ultimately, it is incumbent on both the client and agency to have a mutually equitable partnership that drives trust and transparency, and bottom line value to the client P&L.”

He said Carat can provide as much transparency as a client needs – opening up ‘process paths’ and unlocking data. There are practical limits of course – you reach a point at which the client has to talk to Nielsen rather than the agency, for example.

Williams hailed a client engagement this year that took onboard standard AANA (Australian Association of National Advertisers) recommendations so transparency issues could be put to one side, after which Carat was benchmarked on strategy.

“That is the Holy Grail because we are then reviewed on the work we do. We have some amazing people in agencies and do not want to be known as shady or non-transparent.”

Williams added: “We are striving towards being wholly open, honest and transparent but we want people to pay for the value and the service we deliver, because it is exceptional and outstanding.”

Mike Wilson complained that when it comes to fees, “The challenge is that in the Australian market, clients don’t value strategy and won’t pay for it. Agencies have people who are highly skilled and can make a huge difference. They can do great thinking in partnership with clients but that is not valued enough here.”

Speaking earlier at the conference, John Broome, Chief Executive Officer at AANA, gave his view on the question of whether the agency model is broken. He believes it is broken in the sense that the way they are paid, based on hours of expertise, makes it easy for procurement to attack them as a cost and so nibble away at agency margins.

Yet there is nothing obvious to replace this remuneration model, Broome said, so it is incumbent on the agency world to come up with an alternative that better reflects the value they add, and tell the industry what it is. “Make us an offer. AANA stands ready to give feedback,” he said.

Douglass at Unilever agreed that the agency model needs to change. “They need to move to a place with lots of different models to suit client needs because there is no one solution anymore.”

Her company has just launched the Digital Hub, which is a combination of an in-house digital creative agency and a DMP. This model leaves room for an agency to work within the Hub, getting a better feel for the Unilever business, including its e-commerce and how it trades with bricks-and-mortar retailers. “That is delivering great dividends,” Douglass revealed.

Carat’s Williams alluded to just how far agency models could change, telling the Sydney audience that he can offer an integrated approach to solving business challenges – and they may not even involve media. “Brief us on your business problem and let us come back with a solution,” he asked.

“We are moving away from saying ‘Here is some media, here are some TARPs’ [the Australian measure for target audience reach points]. We are an integrated set of solution architects. Brief us on the business problem; don’t always jump straight to the media challenge.”

Williams can also see opportunities from in-housing, where clients perform some media services themselves that were previously provided by agencies. “This is a massive opportunity, in fact.”

Some clients want their ‘marketing cloud’ better integrated into the wider tech stack so they can make better real-time decisions and own more of the strategy. Carat can hold their hands during the implementation. The agency is helping one client work out what it wants to achieve and then making it happen.

“We have great experience hand-holding, guiding people through processes. Sometimes these things come back to us; some things do not work in-house.”

Mike Wilson at Havas also sees opportunities from in-housing. “A client said we are going to in-house services. We put someone in to work with them for two years. That throws up other opportunities.”

Wilson reckons the challenges facing agencies today are actually little changed from five years ago, or 20 years ago. “If you were starting an agency tomorrow it would take ten seconds to write them down. It is in-housing, pressure on margins from intermediaries like pitch consultants. It is transparency and trust. It is complexity.”

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