Gustaf Wallström
20 February, 2020
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Trigger started as an alternative to the old agency models where an agency’s fees are linked to the customer's media budget. In some cases, there is still an hourly fee, but now it seems that this model is faltering. At ATS Stockholm's panel discussion this week, on”the future of the service layer", several CEOs from the larger agency networks said that they always try to avoid this model but customers are the ones who remain faithful to it.  Why?

The Model

In an earlier post, I wrote about how the trend of doing something ‘in-house’ is a reaction to the agency sitting on the campaign history and all of the data etc. To put it more simply, agency models are linked to the agency taking a percentage cut of the customer's annual media budget in order to manage strategy, planning and purchasing. The advertising purchases are made via the agencies' own platforms (Facebook, Google, DSPs, etc) or are negotiated with the media and the media invoices the agency, which then invoices the customer. 

What the ATS panel discussion also revealed was that all agencies seem to be working  in order to distance themselves from this model. With declining media budgets and higher customer demands, CEO’s tend to think that it’s difficult to achieve profitability with this model. The result is lower wages which means that they lose good people and that employees have to work overtime. It also seems to reveal a crack in the model when you look at the actual bidding process (pitching) where companies actively search for a new agency. This requires a lot of resources on the agency side, and it’s something that they don’t get paid for.

New actors

In recent years, new players from the management side of things have appeared wanting a piece of the action. Both Accenture and Deloitte have started agency-like businesses and are today seriously involved in chasing the big contracts, their model seemingly based on hourly rates or fixed fees. In other words, it seems that potential customers are able to think of a different approach. Accenture previously had a department dedicated to carrying out audits  where they checked the purchases made by media agencies. They no longer do that, favouring instead work in media consulting and direct media purchases.

More debate is needed

During my 10 years in the industry, I’ve only seen only a few attempts made to change the model. There’s been a few more since, but of course, it’s difficult to change large global companies such as the large agency networks.

Where there’s a vacuum however, there are also opportunities for new solutions such as more transparent business models where the customers' media budget is not the main focus, but one which values time and competency instead.

The debate has to be more about customer value and why a company should choose a particular media agency.

Do you think that transparency and clear compensation models are important? Get in touch with us at Trigger!

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