Thursday, February 28, 2008

The agency deal: poor value for advertisers

A version of this piece was published in Marketing in 2008

See also this later post from 2010 - nothing changes!.

Media folk are hitting the slopes or heading south for the sun right now – the year’s work is done, and it’s time to hand over the reigns to the enforcers, those beleaguered media buyers who will spend the rest of the year chasing media owners and winkling the delivery out of the deals their masters struck in December and January.

The Agency Deal has been a feature of media trading right back to the mid-eighties, when Media Independents wrested control of the budget from full-service agencies.

The theory is, an agency’s advertisers all gain. By lumping their budgets together and trading as one, the argument goes, greater leverage is exercised over media owners – and that translates into better value.

But balancing the books becomes a constant challenge for the agency – particularly as the year-end approaches. If trading has been mismanaged, the agency may have to play catchup – and it could be you that’s funding that shortfall, finding your ads in less appropriate environments.

It’s a prix-fixe menu for media. You know you don’t get the best dishes and the portions are going to be smaller, but you do know what it’s going to cost.

Except of course, you don’t. Because once a deal has been struck over an agency’s entire trading book it becomes very hard to tell who’s getting what, and the agency is often taking a rake off the top as undeclared ‘volume’ discounts.

But all of this relates to traditional media right? Wrong.

The two staples of the agency deal, the ‘volume discount’ and the limited menu are alive and well in digital advertising too.

You might ask why in a world of super-diverse media options, with thousands of websites to choose from and tools that allow management of advertising across hundreds of sites, do agencies use the agency deal model?

Surely, you’d think, it’s a model best applied to media where supply is limited, and share is one of the few levers you’ve got to play with? Surely when a media market is changing constantly, it’s disadvantageous to tie yourself into year-long deals?

You’d be forgetting one important factor.

Aside from the extra income it can generate, an agency deal is cheap for the agency to run. A month or two’s running around, and you can tie up the whole agency’s trading for the year, fixing prices, quality and delivery parameters for the enforcers to work to until next Christmas. Buyers don’t need to buy, and planners don’t need to plan – the menu’s there for them, and the decisions have been made.

Put 80% of your trading into just a few sites, and you’ve got a dealbase that’s easy to administer, and you’ve maximised your leverage against those sites by offering them the bulk of your trading. Using the diversity of the medium to reflect the nuance of a brand’s requirements is subjugated to the prime aim of getting away the media at the lowest administrative cost.

This model has been letting advertisers down for years in traditional media, and it has been enthusiastically imported wholesale into the online advertising business.

The problem as ever, is one of money. All this non-standardisation costs. If you ever asked yourself; how come no matter what my brief says, I always get the same three sites on the media plan, then this is probably the answer.

Digital media gives us accountability. It’s amazingly adaptable and enables us to react quickly – pumping investment into stuff that works, diverting funds away from areas that underperform. Stick an agency deal on the front of that, and you’ve just limited your options. Growth is slower, performance weaker, flexibility hampered.

It’s time for the agency deal to die. And the best way to kill it is to evaluate agencies on the value they bring, rather than how cheap the media is, or how low their fees are.

Thursday, February 21, 2008

Record companies and their Canute moment

A version of this piece was published in Marketing in 2008

The story famously associated with King Canute is most commonly interpreted as an example of hubris. But Canute was in reality smarter than this, attempting to demonstrate to his fawning courtiers that even he as King could not stop the incoming tide.

It seems though that the music industry has no such self-awareness. Like a bunch of people who’ve never heard of King Canute, its struggle continues to hold back the tide of illegal downloading that continues to rise.

Threatening to take single mums to court for their kids’ downloads, suing file-sharing site Napster, pursuing site after site, the business has fought tooth and nail to halt the growth of piracy and the file-sharing sites that feed it.

Despite all this effort, consumers have been voting with their mice – over ten million people sharing files on Pirate Bay (closed by Swedish police earlier this month), 26 million on Napster before it’s shutdown in 2001. Over a third of web traffic is said to be in the form of torrents (typically video files being shared between users), and the appetite for illegal downloads is seemingly insatiable.

And now they’ve dragged the Department of Culture, Media and Sport into building dykes for them to stick their finger into. A draft copy of the forthcoming Green Paper on the creative industries, quoted in the Times, set out the Government’s intention to force Internet Service Providers to “take action on illegal file-sharing”.

In other words, the idea is that ISPs will have to start to monitor not just what types of files are being shared by users, but the actual content (and presumably copyright status) of those files. Many ISPs already discriminate between file types, usually to ensure quality of service for users – data for a phone call has to be prioritised to avoid the sound breaking up, whilst an email arriving half a second later rarely makes any difference to anyone.

But this is quite different, because it will require ISPs firstly to spy on users, and then to punish them for infringing the law, withdrawing service from them and providing evidence to record companies.

The BPI has been lobbying for ages for this. Chief exec Geoff Taylor is quoted on their website calling for ISPs to partner with the music industry to help grow the creative economy, and accusing them of having “built a business on other people’s music”. Ignoring the fact that ISPs (and the internet) have been built on a fair bit more than just music, his proposed partnership is in reality a bit one-sided. ISPs will act as his police force, and he doesn’t propose to pay them for the job.

ISPs argue that like the Post Office and the phone companies, they’re ‘common carriers’ – having no responsibility for what they convey. That responsibility should remain with the user they say. This seems self-evident, but perhaps Mr. Taylor would contend that Tarmac should be held accountable for the development of the getaway car in robberies.

Whilst it’s disappointing that the Government seem to have been suckered into supporting this dummy, it’s perhaps not surprising of the music industry.

Digital represents a huge threat to their existing business model. It’s a threat that’s not going to go away, and a threat that’s only going to grow. But digital also represents an exciting set of opportunities for content owners.

New businesses will be built, new industries created and new fortunes made, and record companies are in a prime position to capitalise on the potential. Perhaps if the music business spent half the time thinking about how to build, create and make these that it devotes to trying to turn back the tide, it might have a chance of succeeding.

To achieve this, it needs to face forwards not backwards. And having an industry body called the British Phonographic Industry isn’t really much of a sign that they’re ready for that.

Thursday, February 14, 2008

Ger your free content here!

A version of this piece was published in Marketing in 2008

In November Rupert Murdoch announced that following News Corp’s acquisition of the Wall Street Journal he “…expected to make it free”. I wasn’t at the announcement but I doubt there were many gasps of surprise from the audience.

More interesting though was the recent u-turn on this decision, Murdoch instead opting for a hybrid model. Content that is relatively easy to find elsewhere will be made free but the specialist content, in other words, what most people buy the subscription for, will still be subscription-based.

So what does this mean for marketers? Is the hybrid model the way forward? No doubt Murdoch’s bean counters created innumerable financial models and decided the best way to maximise profits was to drive more traffic by offering content for free, and hence increasing advertising revenue, but at the same time keeping the crown jewels under lock and key for subscribers only. Perhaps not so surprising given subscription revenues are estimated at around fifty million dollars a year.

But before we all run around implementing hybrid models lets stop and have a think about what’s really driving the digital market - customers. What does the internet offer customers? Well many things, but the overriding driver, and what’s changing market economics the most, is one simple word – choice.

Consider Pirate Bay, a peer to peer file sharing ‘solution’. Or in other words a method for people to download paid for content for nothing. Before the authorities got their way Pirate Bay had 10 million customers. The choice these customers made was not to pay for content.

Take the US hit show, “Lost” as an example. The show could be downloaded in the UK shortly after it had aired on the East coast of the USA and before the West coast had even seen it. It was coming to terrestrial TV in the UK, and therefore was going to be free anyway, so the downloaders didn’t really feel like they were doing anything wrong.

This is of course questionable logic, and I’m not advocating illegal downloads. The lesson though is clear. The internet has given consumers much more choice and what people want is what they don’t have to pay for.

So what does the future hold for the subscription model? It isn’t dead, but the prognosis isn’t healthy.

Consider another huge subscriber model business – online dating. Take a look at your teenager daughter’s FaceBook page and you’ll probably see a profile that states she is single and interested in, “meeting men”. Putting aside the obvious alarm bells this rings as a parent it’s also likely ringing bells at and all the other subscription dating sites.

A more direct attack has been mounted by, the owner of which proudly announces on his site that he is the sole employee, runs the site from his Vancouver apartment and that it is 100% free. A real life cupid? Reports of $10 million a year in advertising revenue suggest not.

So maybe Murdoch will need to re-think his hybrid strategy for the Wall Street Journal. But what he’s probably sweating about more is how the pesky internet might interfere with subscription TV.

Take a look at Kangaroo for example, the joint venture between BBC Worldwide, ITV and Channel 4 purporting to offer over 10,000 hours of programming from kick off. Not all of it is planned to be free, but it seems pretty clear that the Kangaroo concept isn’t built around a revenue model that takes much from the consumer’s pocket.

So will consumers continue to stomach paying £40 a month for 100 channels when you can pay nothing for the ever expanding wealth of free shows available online? For now, probably yes, because the choice isn’t there yet. But choice is something the internet offers in ever increasing levels. And while consumers are of course unique, they share one attribute – everyone buys free.

Thursday, February 7, 2008

Hacktivism, hierarchies and hubris

A version of this piece was published in Marketing in 2008

Incoherent, messianic, slightly bonkers. Even the control-freakiest of Hollywood stars can let their carefully-crafted image slip from time to time. And so it was with Tom Cruise, whose video for the scientologists has been doing the rounds on YouTube for the last few weeks.

Repeated efforts by ‘Church’ lawyers from this famously litigious charity to have it taken down have been met with failure as, like a game of whack-a-mole, every time they hit it, the video pops up again elsewhere.

Whilst ridiculing both Scientology and the rather self-righteous Cruise have been the principal drivers of the YouTube outbreak, a more serious group have emerged to challenge Scientology’s well-funded and highly-resourced operation.

Using techniques developed amongst cyber-terrorists and the hacktivist community, a group called Anonymous has been associated with Denial of Service attacks (overloading a web server with millions of requests for pages) to bring down their website, and using facebook groups and Google maps to share information and organise protest events.

Anonymous publish extensive toolkits for hacktivists and cyber-protesters, allowing them to conceal their identity and cause damage to their targets, together with resources to enable communication between ‘Anons’.

Whereas before, political, social and commercial protesters have operated in small groups, Anonymous adopts a decentralised structure, making use of wikis (websites that can be edited by all their users) to allow the organisation to be collectively driven by all its members, rather than hierarchically driven from the top.

In doing so they have changed the model for internet protest and taken it to another level.

And it’s this combination of the collective (web 2.0) approach with more established hacktivist tools that is likely to set the toolkit for future protests.

Activists have long used the internet to support protests against commercial enterprises as well as political and social ones. claims “McDonald's spends over $2 billion a year broadcasting their glossy image to the world. This is a small space for alternatives to be heard”. The website is primarily an information resource with news on campaigns, issues and links to other protest organizations. provides a vast information repository on the Union Carbide disaster at Bhopal and the company’s twenty-year history of avoiding its responsibilities in the aftermath. It makes grim reading, and is the work of the UK Campaign for Justice in Bhopal, providing a resource for the media to counter the company’s PR.

These sites, and hundreds like them, are an effective way of reaching the media and a useful way of coordinating campaigns. But they require dedicated people and substantial work to keep them relevant, up-to-date and useful.

What makes Anonymous significant is that it has taken to user-generated ‘ground-up’ nature of Web2.0 and applied it in the activist space – in doing so, making it many times more powerful.

The campaign can now be a collective effort between people who may be geographically distant – operating across borders and time zones to create and maintain content and organise the campaign.

This is significant because in the past, companies had a innate advantage – better resourced and funded, they could coordinate media coverage more effectively. That advantage has now perhaps been lost.

But this decentralised approach has given them something else. Hierarchical organisations are vulnerable to the key people being targeted, either politically or personally. An organisation without identifiable leaders is very hard to sue.

So the web is now the key battleground for activism from political to commercial. Consumers have been empowered by these technologies, using them to connect to the mainstream media to expose everything from poor customer service to corporate manslaughter.

But now they’re using web2.0 techniques to connect with each other, allowing them more effectively to leverage their scale – and with this, we can only expect to see online activism grow as a force for change, whether for serious purposes or just the sheer pleasure of pricking the hubris of a celebrity.