Digiday/Jessica Davies:Confessions of an ex-brand global media chief: ‘It’s all one massive arbitrage system’

Digiday

The Confessions

Confessions of an ex-brand global media chief: ‘It’s all one massive arbitrage system’

May 23, 2017 by Jessica Davies

Talent shortages are an ongoing problem in digital media, but for brands the issue is becoming more acute. Major scandals like the Association of National Advertisers’ media transparency findings in the U.S. and ongoing arbitrage in programmatic trading are spotlighting the uncomfortable fact that brands haven’t invested in the right media skills.

That’s the view of a former global media head of a multinational brand, who spoke as part of Digiday’s Confessions series, in which we grant anonymity in exchange for candor. This exec, who managed multibillion-dollar budgets during their career and spent time on the media owner and agency side, believes clients have shot themselves in the foot by not bothering to understand media.

Excerpts have been lightly edited for clarity.

What’s the biggest problem on the brand side?
The media structure. Clients are totally disconnected from media owners. Agencies have evolved into procurement businesses, which has been driven by clients prioritizing the road of cheap. Profitability fell out the window for agencies, so they found different ways to make profits with digital, which led to hiding costs. And there’s been zero skills at the client end to deal with it.

Zero, why?
There’s no career path for media people client-side. They’re tied against marketing salaries, which are lower than media’s. Because the salaries aren’t good, you don’t get the best. It’s only at the top that people pay money to get the skill sets. So you have agencies getting more smart and acute, and clients are left behind.

Left behind on digital?
Everything. They rely on agencies. They think all they need to do is beat up their agencies a bit as that’s what they’re paid to do. And the agency just goes, “OK, I’ll take a beating because I’m actually ripping you off.” Clients don’t even recognize media as a function. It’s either bolted on to procurement or marketing.

Hence being procurement-driven.
Yes. And that’s a punch-up between the agencies trying to make a living and nicking bits around the edges, and making sure the promises of savings are delivered. There’s no real comms planning. It’s just: If you paid £10 ($13), have you delivered £10? If not, I’ll kill your fee. I’ve sat in pitches where the comms-planning document is put in the corner to hold the door open, and the conversation is driven around what and who is cheapest.

That was shown up with the YouTube boycott.
That was a big problem. Agencies claim they have control of quality and content, but the average guy who buys impressions doesn’t. And where does it leave the client? If you have agencies on this full time, a few guys at the client supposedly running media, there’s no chance. And if the margins are so massive from the agencies, what’s the incentive for them to stop it? None.

Some agencies claim clients don’t want to pay extra for content-verification software.
It depends what margin you want to put on it. The biggest issue in programmatic is still arbitrage. A major agency gives you three or four buying options: Totally transparent, which shows the price it was bought from the DSP and what the client paid, is the same. They’ll take a 25-30 percent fee for that full transparency. You then go to non-transparent, which brings it to 14-15 percent. But it’s all bullshit; there’s no difference. They’re just covering off the loss from the arbitrage by charging the extra fee for the transparency.


You said media owners are disconnected from clients?
I know major media owners who are under massive pressure from the multinational agencies for free volume, volume trading, extra discounts — then you have one massive arbitrage system. Media owners need to understand how clients work and how client-agency contracts work.

How so?
Most media owner presentations are naive. They don’t understand who is pulling the strings; they don’t understand the marketing structure or who the budget holders are. They also fail to understand the marketer and flog in a media way. I call agency pitches the dance of prostitutes. The pimps at the back dictating the pitch are the agency-buying houses, and their individual agencies are the girls in the shop window. Because clients are driving the pricing process, the agency guarantees the client a fixed price based on using certain media partners. They’ll win the pitch, so that’s then locked in. So if a major broadcaster starts running a new show and a client wants to be involved in it, the agency won’t necessarily go for it because of how their bonus is set up. Unless clients really grow up and understand they need skilled media people and pay them outside the marketing payment structures, they’ll continue to struggle.

Will that happen?
No. What annoys me is clients piss and moan about this. They act shocked and appalled about the ANA report findings, but what’s actually happening? Nothing. They understand the awesomeness of the cool, shiny new things, and what film stars have signed. But they’re not looking under the water. There is a beautiful swan on top but dirt and corruption underneath.

Like what?
There are cases in the U.S. where some will say, for example, they only buy visible impressions. That’s very honorable. But what about the other 126 countries? Oh look, you’ve just shifted your profit base to Asia, where they don’t guarantee anything.

They make back margins overseas?
Absolutely. Because digital is exploding in Asia. So the situation is: The game is up in America — let’s try this process in Asia, in China. There is a real naivete in clients. They need to start employing senior media people in a standalone media function and respect the role — not as an afterthought chucked in to the back of procurement or marketing.

Have you tried to force change?
I have. It’s all in the contracts. There is a lot of good work being done by the advertising trade bodies about contracts, but unless you understand the contracts, it can be ignored. You can have the best contracts in the world, but unless you have people who know how to manage it, it’s irrelevant because the agency can turn it upside down.

   
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