A couple of weeks ago the Association of National Advertisers issued a press release to announce this little pearl: "Two-Thirds of Global Marketers to Change Agency Compensation." According to a survey of ANA members, performance based compensation schemes for agencies are all the rage. 49% of marketers now have some form of performance-comp written into their deals with agencies, but - according to a study by the 4As on the same topic - performance incentives accounted for only 3% of holding company revenue. Irresistible force, meet immovable object.
As I've talked about this issue with individuals and groups over the last two weeks, I've gotten a mix of three kinds of reaction. Disbelief: "They've been trying this for years but agencies are never going to go for it." Bewilderment: "I don't see what that has to do with me as an online advertising seller." Despair: "Cost per click pricing, here we come."
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To the disbelievers I say "This time I think it's really going to happen." In my opinion, the big holding companies have never held a weaker hand. Thanks to companies like Poptent, creative can now be crowd-sourced, and the availability of inventory on open exchanges (today web impressions, tomorrow scatter market TV spots?) is democratizing the media aggregation process: if you want to quickly assemble an audience for your message, there are now hundreds (if not thousands) of players who can do it for you. Are the big shops in danger of going under? Of course not. But who can argue that today's client/agency bond isn't badly frayed, or that competition for clients isn't savage?
To the bewildered and despairing, let me frame this whole discussion around its impact on the digital seller's world. Very soon, either because they take a proactive approach or because their hands are forced, agencies are going to be compensated based on a variety of performance metrics - product sales, lifts in key brand metrics, customer engagement, planning efficiency, and so on - while the fee and commission models will wither away to nothing. If we continue to tacitly support and accept click- and post-click measurement, then they will become codified into the fabric of web advertising, and our already-commoditized display marketplace will become one vast flea-market. Cash-strapped and people-starved agencies will count what is quickest and easiest to count. Click-based deals get shoved down the throats of frightened sales organizations; today for remnant display space, tomorrow for prime, next week for video and so on.
Unless we get out ahead of the problem and turn it into an opportunity.
As I said a few weeks ago in this space, now is the time to move aggressively and proactively on developing, documenting and training our teams to talk about alternative "performance value" models; to put the same creativity into ROI theory that we do into design and user experience. When agencies begin casting about for their answer to the "performance compensation" question, we will be more than ready. Instead of our reps lamely calling out "branding" value, we'll help digital media take the lead in redefining "performance" and making it a dominant strength.
Running a national sales team and searching for answers? There are a handful of seats remaining for The Upstream Seller Forum on June 19th in New York. If you'd benefit from frank discussion with your peers around the most vexing sales issues, drop me a note and we'll save you a seat.