What is the rationale for employing a large media agency?
That your brand will get more bang for its budget, making your advertising more effective?
What is the truth of this proposition?
The only parties that benefit from large network media agencies are global clients, and shareholders of those network agencies.
Big agency networks dominate the advertising billings table.
The 2015 billings table reveals the top 10 agencies listed represented 50% of all recorded advertising expenditure.
If you break this down further by agency network, WPP agencies represented 23% of expenditure, OMD agencies 10%, Carat Dentsu agencies 10% and Publicis network agencies 9%.
Multi-national clients and the largest spending advertisers dominate the billings of these agency groups.
There is a myth that to get the best deals, advertisers need to ally themselves with these big agencies because they get the best deals in the market by default of their scale.
The reality is, if you are not a big budget client, you gain no advantage from your agency’s big billing inventory, and should not be using a large agency
Only the biggest spending clients benefit from utilising big agencies and their network connections. They wield the power to ensure the benefits of scale go their way.
The smaller spending clients end up subsidising the big clients in three ways
They not recovering rebates from agency share deals relative to committed budgets
They do not benefiting from quality attention from the best staff
They allow the agencies to allocate media funds to inappropriate media for brand plans.
Large agencies negotiate share deals from media owners to supplement their incomes. Big clients wield their power to ensure they also benefit from these share deals. This can take two forms. First, direct cash remittance, or second, incremental media value against committed budgets. All client expenditure contributes to the share deal figures. Not all clients benefit.
Bigger spending clients demand and get the lion’s share of best thinking and attention from within the large agency talent pool. Implementing a big budget is a very simple way to dominate the market and maintain above average share of eyeballs. By definition lower budget clients need better attention to allow their budgets to compete beyond the sledgehammer approach. Stretched staff within agencies, dominated by junior overworked employees, are tied up processing budgets for large clients, and do not have the time to dedicate to smaller budgets to ensure quality of thought.
With no objective reference to validate agency thinking, unless you resort the additional expense of external audits, your campaigns may be planned against agency deal imperatives, not brand imperatives. Brands therefore lose out via the double whammy of not benefiting from the very deals their expenditure is contributing to, and reduced value through inefficient media allocation.
Ask yourself the following three questions;
Are your budgets supplementing other clients’ deals?
Are other clients enjoying better media value as a consequence of your media budgets?
Are your brand’s budget allocations being dictated by your agency’s deals?
If you cannot answer all of the above questions with a clear and precise no, then your precious advertising budget could be mere “deal fodder” for your agency’s bigger spending clients.