A new WFA report identifies the latest trends in global media agency models and remuneration
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At the end of 2018, we surveyed our members on the subject of media agency management and remuneration. Based on input from 51 global media experts representing companies with a global media spend in excess of $40bn, the report Media Agency Models & Remuneration identifies a clear appetite for reviewing what service is ‘rented’ versus ‘bought’. Here are some of the findings.
- Two media agency models represent the prevailing approach to agency management across the membership, with the single network media agency model being most widely adopted (42%) versus mixed network of agencies from different groups (36%).
- There’s some evidence to suggest that clients will begin to switch allegiance to the mixed network model in the near-future. Net predicted growth of the mixed network model is double that of the single agency model (45% vs 22%).
- But the real appetite for change is concentrated around in-house or hybrid models, for which 68% say they are likely to do more of over the next 3 to5 years. This is supported by the fact that half of respondents agree that ‘Biddable media buying is a commodity that can be done as well as an agency’.
- Despite the confidence, in-housing is a divisive issue, considered a ‘false economy’ by almost two fifths of respondents. It’s increasingly recognised that even the most established in-house teams depend on agency support to some extent.
- Global Master Services Agreement (MSA) and local agency contract is used by 62% of respondents. This is becoming the de facto means of contracting with media agencies.
- Commission-based fees (in their various forms) emerge as the most common model for remunerating media agencies across all services analysed in this survey (with exception to media strategy and planning). But this is in decline across the board, with labour and performance-based fees on the rise.
- Performance and value-based fees work best with full agency support and it’s encouraging that 54% of respondents agree that ‘media agencies are increasingly prepared to offer progressive remuneration models with skin in the game'.
There has probably never been as much flux as now, in terms of what we need from agencies and how we work with them, and this is reflected in this research.
But while in-housing is on the rise, considering the highly complex global media ecosystem we find ourselves in, we still need agencies.
And clients have a role to play in the maintenance of a healthy agency ecosystem. We can’t ignore the fact that rock bottom fees prompt agencies to seek out alternative revenue streams, which in turn fuels the transparency fall-out we’ve witnessed over the past few years. But the impasse can be broken.
As we state in the WFA Media Charter, while we require ‘complete transparency throughout the supply chain’, advertisers do commit to ‘relevant and fair levels of remuneration’.
And in this research we find that clients are increasingly looking at new ways to value and pay for agency services, with a focus on strategy and planning. Meanwhile it’s encouraging that network agencies are increasingly prepared to offer progressive remuneration models.
As we hear regularly from clients in our Forums, “we cannot cut our way to growth”. True partnership, under-pinned by a fee model which remunerates appropriately and incentivises the right outcomes, has got to be the right way forward.
We hope that this research can help arm members with some benchmarks and insights to pursue such a partnership.