Best of the Week: The media agency numbers game; Remember the ABC's Project Jetstream?
Welcome to Unmade, kicked off on QF2088 from Burnie and wrapped up this morning at a hotel room desk in Sydney.
If it had occurred to me that I’d be transiting through Melbourne Airport on the lunchtime before a long weekend, I’d have allowed more than 40 minutes to make my connection for Sydney. By the time we belatedly left Tasmania, the transit time has shrunk to 15 minutes which meant a sprint to the furthest gate in the terminal. I’m still not sure how I made the flight, but I do know I need to improve my cardio fitness.
Happy National Rosé Day. For those currently heading for Cannes, that seems appropriate.
Before we get into a look back on the week, I’ve some news if you’ve been dithering about whether to become a paying member. Unmade is running its first EOFYS. Yep, we’re kicking off an end of financial year sale, so you can finally get off that fence.
Until midnight on June 30, we’re offering 55% off an annual subscription to Unmade. That reduces the $650 price down to $292.50 per year. It’ll never be as low again.
For the right side of your brain, joining our paid membership tier is a great way of supporting our independent journalism and analysis.
For the left brained, your membership gives you access to our paywalled content that will leave you better informed.
That includes full access to everything we release in our Tuesdata series. There hasn’t been a more thoughtful piece written about the insurance marketing battleground than my colleague Damian Francis’s authoritative analysis back in March.
And Damian did the same thing for the automotive sector last month.
You’ll also get a jump on your peers. Our paying members get posts like this one at least an hour earlier than everyone else.
And you get get a discount on our events. Our paying members who joined us for last month’s excellent Marketing in a Cost of Living Crisis panel, paid only ten bucks. And when we run out first event in Melbourne soon, Unmade’s paying members can come for free.
Even if the full price of being an Unmade member goes up in the future (which it undoubtedly will), for as long as you retain your subscription you’ll always be entitled to 55% off.
And of course, an Unmade membership is the sort of thing that may well be tax deductible for any business or individual working within the communications industry.
You’ll need to lock it in before June 30. You can use the button below to do it today.
A blurry roadmap
One of the stories of the last few days has been media agency rankings. Mumbrella got the ball rolling almost a fortnight ago, publishing what appeared to have been a leaked version of Recma’s chart.
Good on them for getting the scoop although it was tad annoying for us, as we already has Comvergence’s version of the ranking ready to go for our paying members in our Tuesdata slot, which we duly published this week.
AdNews joined in yesterday, also publishing a summary of the Comvergence data.
There is one thing I struggle with slightly. It was one of the big stories of the last few days according to all of our editorial agendas, but is it actually meaningful?
While there’s a certain ego boost involved in being the biggest agency (which was OMD as usual, according to both Recma and Comvergence) that may not be particularly important to clients. OMD got to be the biggest agency by being really good at what they do, and therefore attracting - and, even more importantly, retaining - clients. The clients don’t go there because just because it’s the biggest.
Yes, scale still matters when negotiating media prices. That’s half the reason why brands use media agencies rather than going direct. But all of the network agencies have access to a group price, and many independent media agencies also tap into one of the groups when it comes to buying deals.
So I suspect that very few chief marketing officers care whether they are with the biggest agency. They want to know (in a Maslow’s Hierarchy sort of way) that they’re not being ripped off, that the agency can get a good deal, that the agency can book the schedule competently, and that it can deliver a clever media strategy.
However, the rankings do offer a rough indicator on the state of the agencies as businesses. But only a rough one. The era of low interest rates has removed one of the major incentives for agencies to win business at cut throat rates in order to arbitrage the spend. Nonetheless, some accounts are less profitable than others. We can’t assume that just because an agency has twice as many billings it is twice as profitable.
Another issue is that almost nobody knows for sure how accurate the rankings are, including the people at Recma and Comvergence.
The two organisations, which both happen to be based in France, don’t get to see the agencies’ internal data. Instead they have to make educated guesses.
For a number of years, Nielsen positioned itself as a source of truth. Back when media was analogue, subscriptions to Nielsen’s ad expenditure monitoring was often the single biggest fixed cost for media agencies, after staff.
In a tedious manual task, the company logged every ad that ran in newspapers, magazines, TV and radio in every single market. Agencies relied on Nielsen to verify that the ads they had booked on behalf of clients had actually run.
That meant that Nielsen was able to publish rankings of the biggest clients and agencies. But it came with a big caveat. When it came to calculating the actual spend, all the organisation could do was make an educated guess based on the rate card price. Makegoods, freebies and distress inventory wouldn’t show up.
And then along came digital media. The Nielsen AdEx model doesn’t work when every online consumer is seeing a different ad. Which as much as anything else explains why Nielsen has faded as a presence in the market.
So how about today’s methodologies? One agency boss told me a few years ago of the game he used to play with Recma to do well in its chart.
At the times, Recma used to figure in things like staffing numbers. “Once a year someone would show up from France and come and sit in front of you. She’d ask how many staff you had. You’d know everybody else was lying, so you’d look her in the eye and tell her twice the number. She’d write it down. She’d ask how big your billings are. You’d say double the number. She’d write it down.”
Comvergence’s methodology is something of a black box. For traditional media, it uses the Nielsen data. For digital it uses “proprietary technology”, which are two words that could mean anything. Presumably it means bots crawling publisher sites disguised as various personas to see what types of ads are triggered. Incidentally, I wonder if brands end up paying for those ads to be shown to the bots?
After Comvergence comes to its educated guess, it tells the agency the number it’s come up with. If the chief financial officer will sign a letter, the agency can change the number. Whether in practice the agencies owned by listed holding companies are allowed to is a different matter.
Still, if you’re going to attempt an ocean crossing, it’s better to have a rough map than no map at all. These maps from Recma and Comvergence may be rough but at least they show trends, and relative positions in the market.
Let’s look at what they agree about…
As you’ll see from the table, although the two organisations mostly agree about the relative positions of the agencies there’s a discrepancy in the actual numbers.
Both agree that OMD is the biggest, and is the only one to bill more than $1bn, but Recma’s number is roughly 25% bigger. Indeed, Recma guesses higher for every single agency.
The individual agency bosses will know the truth about their own line on the chart, but it’s not in their interests to say.
There is perhaps just one person, sitting in North Sydney, who knows the whole truth. Unfortunately Standard Media Index’s local boss Jane Ractliffe can’t say. SMI has access to a firehose of data from all the major media agencies, and quite a few of the independents. It’s where SMI produces its subscription data from.
But in order to get access to that data, it must keep the individual agencies and brands’ spends confidential. Otherwise they wouldn’t share it.
Still, there are interesting things in the data.
One thing that immediately strikes me is how much WPP’s GroupM has faded over the last decade. Back when Danny Bass was chief investment officer there, I remember introducing him on stage as The $2 Billion Dollar Man.
According to AdNews yesterday, Comvergence’s estimate for the group buying power of WPP now is now just US$1.2bn. That’s behind Omnicom Media Group’s US$1.3bn, driven by the strength of OMD and growth of PHD. New boss Aimee Buchanan, who moved across to GroupM from OMG a few months ago, will have retaking that top spot as a priority, I’m sure.
I’m also struck by Dentsu Aegis’s lead agency Carat being down in a relatively lowly fourth. Back before the rebrand, when it was still run by Harold Mitchell, the group was a dominant force. Mind you, I do get the sense that the group has stabilised and is on the way back up again.
And I think I answered my own question. The numbers matter because they are a third party report card on an often opaque world.
The Unmade Index slide continues
The ASX is yet to find a bottom for the sliding valuations of media stocks.
Yesterday saw our index of ASX-listed media and marketing shares fall by a further 2.4% to a new low of 648.7 points. The Index is now 35% off its 1000-point opening at the start of the year.
The Unmade Index has now fallen for the last nine trading days in a row.
Among the big fallers yesterday were Southern Cross Austereo, which dropped 4.95%, taking it down to a market capitalisation of just $277m, and Ooh Media which dropped 4.55%, taking it below a $700m market cap.
From the archive
The Guardian created a stir this week, breaking the news that The ABC is to get rid of its 58 librarians and archivists. Admittedly, my first thought was to be surprised there were 58 of them. Nonetheless, the revelation caused alarm inside and outside of the ABC.
The idea that journalists will do their own archiving is kind of optimistic. The discipline of breaking news is a different one to preserving news. Recently I finally faced facts and threw out an old cardboard boss full of unfiled business cards from contacts which I’d carted around with me for the last 15 years.
Temperamentally, many of us are not natural archivists. I recall that during my time at Mumbrella it would be a never ending battle to get journos to tag their stories properly when they were racing to get them up and move on to the next thing.
Most of all though, the announcement was a real sliding doors moment.
The former ABC chairman Justin Milne, ousted in the 2018 aftermath of the messy sacking of ABC MD Michelle Guthrie, had been championing something he called project Jetstream. It would have digitised all of the output of the ABC, past and future. At the time he said:
“To build the ABC of the future we will essentially use a bunch of different technologies.
“There will be a big database into which we will pour audio video assets, complete shows, rushes, news footage, news segments and archival footage. Audio-visual pieces of content will live in that database.
“We have an overarching challenge that all media organisations have which is modernisation.
“Jetstream is a project that will be expensive, it will require support from the government of the day for it.
“The idea of Jetstream is for us to build a digital infrastructure which will allow this organisation to function more efficiently and more rapidly and provide audiences with what they want in the all digital environment which we are heading for.”
His ambitions were for it to become a kind of cultural archive for the nation.
Four years on, the ABC’s ambitions are rather more limited. Sliding doors.
Time for me to let you get on with your weekend. I’m headed back to the airport for a trip to the UK. Sad to report, the upgrade gods have not smiled upon me. It’s going to be a long 24 hours.
Enjoy the public holiday. Damo and I will be back on Tuesday with Start the Week.