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Media agencies revamp themselves
Two weeks ago, when Western Initiative Media announced it was dropping the Western name, chairman and CEO Lou Schultz presented the agency’s new mission statement to employees via videoconference. He talked about teamwork and how Initiative would be dedicated to providing clients with “strategic vision and highly effective strategies and custom solutions.”
But the man who runs the world’s oldest media buying service said nothing about media buying. Not a word.
“If you walked into our offices 10 years ago, you’d see seven buyers and three planners,” says Jim Surmanek, evp of CIA Medianetwork. “Today, you’ll see a 50-50 split. And tomorrow, seven planners and three buyers.”
Surmanek is being figurative, not literal, and Schultz was using language designed to rally his troops, not define job functions. But each example vividly symbolizes the driving force in the media agency business today. Shops’ remarkable metamorphoses in the ’90s from buying services that brokered and bought commodities into loci of ad industry power have created a new challenge for media agencies now.
In short, the fact that media finally gets respect is yesterday’s news. Now, Job One is to institutionalize the gains of the past decade by creating an agency infrastructure, developing the skill sets and putting in place a compensation system appropriate for the new media world order.
“We’re re-examining the process and how everything interacts,” says Mark Stewart, evp, regional director North America for Universal McCann. “I don’t think it’s a revolution; it’s an intelligent evolution.”
Independent or unbundled, large or small, media agencies are building new models for their business and themselves. While there is infinite variety in the ways they reinvent their organizations, job titles and business practices, everyone works from the same script. There exists a striking consensus among media executives–and increasingly, among clients–a shared marketplace reality that acts as both foundation and fuel for their new mission.
The consensus rests on the assumption that media has become the most critical element in communications. It’s also:
The most costly: 80 percent or more of any marketing budget is used to buy media;
The most complex due to fragmentation;
The most difficult to understand: a pseudoscience impacted by new technologies like optimizers and theories like recency;
The most promising: the seducing power of the Internet to deliver measurability, targetability and interaction. (Internet advertisers often turn to media agencies first for branding and messaging counsel. Kal Liebowitz, chairman and CEO of KSL Media, says he’s asked so often by dot.com clients to find creative shops he’s become a search consultant.)
Clearly, media’s role has expanded beyond its planning/buying origins. The 21st-century media executive is now a strategic consultant. National and global clients, in fact, demand it.
“What intelligent clients want today is knowledgeable strategic vision,” says Herb Zeltner, media adviser and consultant for Initiative Media. Adds Arthur Anderson, managing principal of Morgan Anderson Consulting, “Clients have different issues and needs than they had in the past. They’re looking to outside service providers to solve those problems.”
For example, when Saatchi & Saatchi brought Zenith Media Worldwide to the U.S. in 1995, Zenith only did buying for clients it shared with Saatchi. Zenith, for whom strategic counsel is a source of pride, oversees planning and buying for its direct clients in the U.S.
Many media executives believe their new mission complements their creative cousins. Today’s media agencies are profit centers, not service centers. “We’re going to give our clients anything they want, and we’re going to probe what they want,” says Michael Moore, CEO, MediaVest Worldwide. “If the management of the holding company is open-minded, and they should be, they should allow us to compete any way we can.”
“There is a [strategic] trend, but if you plotted all the players on some sort of
quadrant, you’d find we cover the lot,” says Gene DeWitt, chairman of independent DeWitt Media, which is moving into account planning, business analysis, positioning and other nontraditional media agency roles.
“If [media agencies were] a fleet and you were looking down, everybody would be moving in the same direction but some would be more nearly there and others would be pretty far away,” DeWitt says.
In general, the goal is to create groups, often client-specific teams, in which media “generalists,” as Mike Lotito, president of Initiative Media, calls them, direct the entire media operations for a client. This theory is a bedrock of the new media consensus. One sees it in some form or another at virtually every media shop and it is designed to replace the old planning department/buying department service structure.
“Media management companies are ahead of the rest of the advertising community; they understand who they are and what they can do,” explains Jane Twyon, partner/media services at search consultant AAR/Bob Wolf Partners. For Twyon, changes in the media as well as client expectations are feeding the change. “With cross-media platforms [increasingly] being sold, it’s an important change to happen, and it requires a whole new training and perspective.”
The switch is really a change in emphasis from execution to consultation, says Moore. “You’ll see more and more resources placed against what some people might call a media account executive,” he predicts, “somebody who is responsible for the total media capability of that client.
“Before, [media agency structure was] a functional thing. Now media companies try to ensure that the media service is holistic, not functional,” Moore adds.
At Initiative (formerly Western), for example, the client-services department has been merged with media planning across the country. The goal is to focus on strategy and less on implementation. And at KSL, one of the early adapters to the trend when it formed a business- development division in the late ’90s, the agency is moving to a client-service team structure in which buying becomes a support function. “Like production” is in the creative process, says Hank Cohen, president of KSL’s West Coast operations.
At SFM Media/MPG, Steve Farella, chief operating officer, says, “The difference in the structure and operations of a modern media agency … is reflected in SFM’s [creating] a new department called the research and insight center.”
The research department, in fact, is undergoing a thorough reinvention at almost every media agency. To execute their new mission, media agencies are turning to people with skill sets that heretofore would never have been seen inside a media shop.
When your mandate is not just to crunch numbers but to develop a three-dimensional portrait of your clients’ customers–in effect to do for media services what account planners do for the creative product–you don’t need a media maven. You need a market researcher.
“We have 25 people in our research department and many of them don’t do media research in the pure traditional sense,” says Bob Igiel, president, broadcast division for The Media Edge. “It’s now about modeling, interpretation, effectiveness, analysis and response modeling.”
One thing hasn’t changed, and never will: The bottom line is money. Getting more for their clients’ money was why agencies gave their media business to Dennis Holt when he invented independent media buying and created Western International Media 30 years ago. The opportunity to create a new profit center was one of the motivating factors that led to the unbundling of media at all the major ad agencies.
Making the bottom line black demands that yet another new skill set be built into the modern media agency: the ability to manage an enterprise profitably. More and more, media agencies are being run not by service-oriented media professionals but by expatriate full-service agency managers, businessmen like David Verklin at Carat, Farella at SFM and Schultz at Initiative.
The key change in the economic model of media agencies, though, is a continuing move away from commission-based
relationships to a fee-based approach, a trend that is being directly driven by the client. Surmanek says fees were the compensation method of choice in the last dozen new-business pitches his shop participated in, mostly for larger pieces of business.
Dot.com accounts are often fee-based, which makes agencies less nervous about whether the client can actually spend what it says it will. The dot.coms, unencumbered by a commission tradition, don’t care as long as the fee is reasonable.
Given the Internet’s ability to provide accountability, it’s considered just a matter of time before the compensation model includes a pay-for-performance element. Anderson foresees a scenario in which agencies are paid “a base fee less than their cost and have to earn incremental profit on the upside.”
That might be a little hard to swallow, but in general, media agencies don’t oppose the idea of pay-for-performance, especially if it’s packaged as a bonus in addition to a fee that sustains a fair profit on the account. Still, they won’t accept plans based entirely on sales performance.
Igiel tells a joke about the ad agency guy who is wrapping up a presentation before a prospect. He looks at his watch and says, “OK, we got five minutes left. You want to talk about media or you wanna go to lunch?”
Today, that material doesn’t fly. Media has become serious business. K