Globalisation And Lack Of Investment Causes Media Agencies To Regress
Media agencies have gone backwards instead of forwards due to a lack of investment following globalisation and commoditisation, according to Nick Manning, COO of Thomson-Intermedia, who was on the panel at this morning’s ‘Future of the Media Agency’ seminar held by MediaTel Group.
“The media agency scene has changed enormously,” said Manning, discussing why he was no longer part of the media agency scene.
“It went from being effectively an ideas driven business to a numbers driven business. The biggest thing that happened to media agencies in the last five years was the arrival of the ‘P’ word, ie, procurement.”
He continued: “Up until about five years or more ago we’d never heard of it, it hadn’t really impinged on our lives. When I talk about procurement it’s not necessarily in a negative sense, it is a necessary thing in a business which is increasingly consolidated and globalised. What procurement has helped to do is to ‘commodotise’ the whole industry on the buying side.”
Agencies are being squeezed by these factors, he believes, and squeezed by both shareholders and clients. In essence this has meant that agencies have become more reliant on media owners for some of their income. This commoditisation has also led to a decline in some standards, Manning believes.
According to clients, he stated, media agencies have become “much of a muchness”, with the only difference being price. However, Manning is confident there are many ways to get out of this particular bind, but “the business at the moment is at a relatively low ebb in the standard media planning and buying arena”.
Fellow panellist, Simon Mathews, founder of Rise Communications, said that part of his original frustration in being part of a large group was that there was an enormous amount of overlap in the strategic function, and “none of the agencies could really sort out between themselves who was responsible for what part of the strategy”.
Duplication is the “inherent weakness within the current model”, said Mathews, “They can’t quite sort out the difference between what the media planners are doing versus the account planners versus the brand experts versus the communications people and so on and so forth. The simple solution for this is to put it into one place,” he suggested, pointing out that he increasingly sees planning and buying as two very different businesses.
Andrew Walmsley, co-founder of i-level, agreed with Manning that the business had become numbers focused. “As margins have declined and overall fee levels have declined, everyone focuses on the cost component and not on the top line,” he explained. “I’m not sure whether there is a space for those companies who have got in to those positions to get out of it.”
He continued: “it’s hard to feel sorry for media agencies because the margins generally speaking are still incredibly high and most people would give their right arms for the kind of margins that are still being made. The trouble is though, it has always been like that, and so people get used to it. All the big media agencies are still making huge amounts of money and very good margins, but the trouble is that’s now taken for granted.”
Manning suggested that unless the structure of media agencies changes, they will not get to grips with the way the broadcasters and their media owners are trying to move their businesses.
“They won’t actually be evolving the way the media owners want them to,” he added.
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