Should you prefer the trading division related to your advertising agency?

Should you prefer the trading division related to your advertising agency?

Several years ago, a major shift took place in the media trading industry. Advertising agencies who had long been recommending against trade to clients suddenly owned or acquired trading divisions. The viability of media trading was more than they could ignore, so rather than watch trading companies place a portion of their client’s media, they took matters into their own hands. Most of the holding companies started trading divisions.

Now that so many advertising agencies have sister relationships with trading divisions, a common assumption is that using those internal trading divisions is superior to bringing in outside trading companies. Let’s take a moment to consider that assumption.

The advertising agency plays an important role within a trade transaction. They provide insight, direction, and of course, the media specifications/terms to which a trading company must adhere and execute while overlaying the trade model. Making sure that media values are upheld is critical to the financial success of trade.

The independence of the trading company from the agency provides the greatest assurance that scrutiny will be applied by the agency to the rates and media delivery by the trading company. That scrutiny will ensure that both parties will work toward maximizing efficiencies for the client.

While the concept of “one-stop shopping” may be operationally appealing, from a procurement/sourcing best-practices perspective, this may not always be in a client’s best interest.  Holding company trading firms and agencies experience immense pressure to work closely with each other to maintain 100% of revenues under the same corporate umbrella.  This neighboring structure can lead to compromises being made (e.g. escalating pricing benchmarks), ultimately diluting the financial benefit of the overall corporate trade transaction.

Our process of purchasing media on a net rate basis does not disrupt the agency fee structure. Inherent in a seamless partnership with our client’s media buying and brand teams is an understanding that all parties involved in the corporate trade process have a joint fiduciary responsibility to the client. This important guiding principle is what ultimately allows for the creation of optimized operational and financial efficiencies for the client and also leads to the creation of trusting relationships.

Our independence and lack of any financial relationship with any other media entity associated with the agency assures the client that the full and proper scrutiny will be applied to all of our media buying. We enjoy very productive relationships with our agency partners who provide similar scrutiny to the media buying their clients receive through us.

In the end, is it in the client’s best interest that trade be run through their agency’s trade division? Not if the client wishes for certainty that trade values are as high as possible resulting in the greatest possible return for their excess inventory, surplus real estate or other undervalued asset.

 

 

How is a media trading company different from your advertising agency?

How is a media trading company different from your advertising agency?

Fish apples and orangesYour advertising agency places your planned media on your behalf. So does a media trading company. You pay your agency for the cost of that media. You pay the trading company for the media they place. So, is there a fundamental difference between your advertising agency and a media trading company?

The answer is relevant to you for three reasons:

  1. You’ll know how to appropriately compare your agency to a trading company
  2. You can better evaluate the capability of a trading company
  3. You’ll find it easier and more effective to properly evaluate the work of a trading company

The main difference between the two entities is: advertising agencies spend their client’s money and trading companies invest their own.

As a trading company, Evergreen Trading risks our own capital by making investments with the media vendors. In consideration for these investments, we receive payment in the form of media futures at a greater value than our initial investment. This investment activity allows us to maintain a cost basis that is lower than the largest non-trade media buying companies.

Agencies, on the other hand, perform a valuable function that is different from a trading company. They pay the media vendors with their client’s money, buying media at negotiated retail cash rates.

Why should you care?

Your agency is in a fundamentally different business, so don’t expect them to buy your media at a cost comparable to the trading company and receive your excess inventory or surplus real estate as partial payment to cover some of that cost. The trading company is no more competing with your agency than a title company is with your broker.

The trading company needs to have pricing benchmarks in order to charge you the same rate at which your agency buys your media. To properly evaluate a prospective trade transaction, the trading company will charge you the same $5 CPM that your agency pays (as an example). Through trade, you’re able to pay part of that CMP with inventory, real estate or some other asset.

Your agency plays an important role in your evaluation and implementation of trade by providing the trading company with those benchmarks. Sharing that media information is not a breach of your confidential rates. Rather it is an assurance that the financial benefit of the trade will conform to your expectations. Without knowing your media rates, the trading company cannot properly structure a transaction that pays you the price you desire for your excess inventory or other asset.

Your agency and trading company are distinctly different businesses. The clearer you are about those differences, the more effective you’ll be in evaluating and managing the trading process so that you gain the greatest possible value from your trade.

Will you get better trade value from your agency’s barter division?

Will you get better trade value from your agency’s barter division?

HiResIt’s a common question and one that we were asked again today. It makes complete sense to ask, and to many, the answer seems counterintuitive.

The question is: won’t I get a better value if I engage in trade with my agency’s barter company?

The short answer is, “No”.

The slightly longer answer is:

Keep in mind that the value you receive in a trade comes from the media placement being at a par with your normal media buys. A dollar of trade credit must buy a cash dollar worth of media. To put it another way, $800,000 of cash and $200,000 of a trade credit must buy $1MM of media as benchmarked by the cash CPM your agency normally negotiates. If that $800,000 of cash and $200,000 of trade credit actually gets you $900,000 in media value, the trade isn’t keeping the financial value you expect to receive.

The assurance you get that the media values through trade are on par with your cash buys comes from the policing that your advertising agency does over the trade firm. Their job is to hold the trade firm to the CPM or other rate benchmarks they establish. It’s easy for them to do that “policing” because there’s a natural and perfectly legitimate conflict between your advertising agency and a third-party trade firm. If your advertising agency is overseeing their own trading firm and the media buys that are being done on trade, how objective will they be? What if their trading arm needs to increase the CPM a bit in order to make their buy work better? Will the agency cry foul to the client? Probably not. But they sure would if a third part trading company nudged the rates a bit in order to make a little more money.

It’s a bit like using your tax accounting firm to do your audits. How objective/rigorous will they be? In fact there are provisions in SOX to prevent exactly that.

So, before assuming that your best trade value comes from your agency’s trading division, consider at least talking to a third party trading firm.

For further explanation of this topic, read this post.

Why Growth Is Killing Digital Agencies

Why Growth Is Killing Digital Agencies

Ad Age recently published in insightful article on the growing problem of agency management layers increasingly getting in the way of the important work their clients want.

Here are three steps agencies can take to survive the operations crisis by Jack Skeels, CEO of Agency Agile.

Seven tips on ad agency client retention

Seven tips on ad agency client retention

Face it. There is probably no more pressing matter for your advertising agency than your client retention. Studies are showing the average retention for agency clients is now less than three years. That’s a lot of onboarding time and treasure invested for less than three years.

Being a media trading firm, we are in a unique position. We interact daily with advertising agencies all over the country while servicing our own clients in a related role. So, naturally we have some thoughts on best practices for retaining clients well beyond that current three year average. Below are some tips we’ve compiled from some of our senior media people that may remind you of some basic practices as well as some ideas you may not have considered.

Michael Tripodi, Vice President, Digital Director
Silloette head shot

Treat every client like they are brand new business. Always.

With every new client, there is a honeymoon period. Communication is rapid and complete, relationships are building and fun, social opportunities are made, and life is good. What happens after a few years? Responsiveness may drop off a bit, enthusiasm is replaced with a bit of complacency, and they’re just not as fun as they used to be. Losing the initial spark in a client relationship is certainly understandable, but it is a leading cause of the client looking elsewhere.

One way to maintain enthusiasm is to constantly be looking for ways to provide your client with something fresh. Not every new idea you present will be greeted with enthusiasm by the client, but they will see you stretching the boundaries. They will see that you care about their success and that in itself will go a long way to keeping the relationship healthy. Not only will your client see you trying, but if one of your brilliant ideas gets implemented and produces an ROI, you’ve added greatly to your client retention bank account.
And, yes, if all this sounds like tips for personal relationships, they are. People are people and we all want to feel appreciated and know that we are viewed as important. Always.


Vicki Fabricant, VP, Group Director
Vicki Fabricant photo

Implement the habit of consistently responsive communication

This one may seem obvious, but are you consistently practicing it? In other words, have you trained your clients that regardless of the reason for them contacting you through email or voice mail, they receive a response within 24 hours?

That response can be the answer they are looking for or it can be, “Great request/question, let me get back to you tomorrow on that.” They key is to not wait for your answer to materialize in order to get back to the client, but to respond now so they feel that they are getting attention.

Related to this is something I like to do which is to send a very short email response as soon as I receive something from a client. This response could be “Got it” or “Let me think about that. Get back to you tomorrow.” or something that simply acknowledges my receipt of a request or question. Again these may seem very basic, but it’s often the basics that we forget after a while. Oh, and do all these things with your internal team partners as well!


Larry Finnegan, VP, Director of National Broadcast

Larry Finnegan

Prove client success by good reporting

In my experience, client expansion has been based on agency executions and the best way to show progress on an account is to prove it with hard numbers and facts. It’s absolutely standard to supply some sort of post reporting as traditional client service, however most agencies miss the goal with their reports.

How I define ‘Buy Maintenance’ is the actual stewardship of the buys we have executed. Clients can easily look at a post analysis of their buy and see poor delivery of goals, downgraded buys, airing in inappropriate programming etc.. These all lead to agency business being up for review and the client potentially moving to another agency as opposed to them renewing and expanding on their existing business.

Examples of Buy Maintenance are:

  • Best in class stewardship
  • Delivering 100% of the buys guarantee within flight
  • Upgrading existing programming into Premium content/Special’s etc.
  • Securing ‘A’ commercial positions when possible
  • Increasing added value when faced with liability

When agencies deliver on the items listed here, clients will notice and be more likely to renew with their agency!


Concetta Lombardi, VP, Director Local Broadcast
Female headshot silouette

Treat your clients as people rather than a dollar-generating objects

Even though our motivation to keep clients happy is to continue the flow of the dollars they control, the irony is that the more we view these people we serve as a path to more dollars, the less we truly listen and respond to their very real needs.

How willing are we to do something they client needs that may actually in the short-term reduce our financial return? If your knee-jerk reaction to such a request is to convince them that they are wrong or that they should modify their decision, think twice. Yes, sometimes, client requests are not in their best interest, but sometimes they are.  If you are truly empathetic to your client’s best interests, you’ll be clear on your course of action: 1. do what they request, or 2.  convince them otherwise.

Human beings have an incredible capacity to know whether or not someone truly cares about their best interests. Listen to your client as they talk about their needs, propose unsolicited ideas, and surprise them with your forward thinking about their business and individual needs.


Jennifer Moore, SVP, Media Director
Jennifer Moore

Clearly communicate results on a regular basis

Clear frequent communications can go a long way toward fostering satisfied clients. Regular reporting of results that demonstrate an ROI make it much more difficult for clients to look elsewhere.

Doing this effectively goes beyond picking up the phone whenever something goes well. Set up a system of scheduled reporting of activities and their results. Even if the results are less than hoped for or not yet available, the fact that you communicated when promised/expected teaches the client that you are focused on them.

Regular reporting requires that you establish metrics that matter to the client. Determine what those metrics are such as cost of lead acquisition, cost per social follower, marketing content engagement, agency ROI, etc. You may find that by regularly communicating the state of your marketing and media efforts your client might start sharing a bit more of their results. Wouldn’t it be nice to get feedback on sales numbers after your most recent national TV campaign or digital buy? Train your client that regularly sharing data on results works really well both ways. Now you’ve got a healthy client partnership.

We already have an advertising agency!

We already have an advertising agency!

Woman saying noThis is something we often hear from people we approach about media trading with Evergreen Trading. The statement makes sense because after all, we are proposing to place a portion of their budgeted advertising. That sounds exactly like what their agency is paid to do, right? Sounds like a conflict.

These same people are then surprised to hear that we structure the transaction to fully compensate their agency. We buy the media at net, and instead of retaining the balance, the client keeps those funds to pay the agency’s normal commission or fee on the media that we place.

The reason we allow for agency compensation is that we are not an agency and we are not taking the place of the agency, nor do we wish to. The business models are very different. An advertising agency spends its client’s money on the media they plan and place, and for that role, they are compensated.

Evergreen Trading is in a different business. We invest our own money in the media our clients need or that which we project they will need. Our capital is at risk unlike the advertising agency who is, as mentioned above, spending their client’s capital. So we make our profit from our placement of the media – the difference between our investment cost and the client’s planned media cost. Most of that profit goes to the client as either an overpayment for a distressed asset or as a source of funds for an unbudgeted need.

Regardless, the client’s advertising agency continues to play an important role throughout our placement of their media. Since we benchmark the media costs to that which the client would normally pay, the agency provides us with those planned costs. Communication continues between us and the agency as the media is placed, and after the media has run, the agency is charged with reviewing the post and reporting back to the client and us their approval with the media that ran.

So, no, we are not taking the place of the advertising agency. They continue to have their job and we have ours. Even though there may be some initial trepidation about Evergreen Trading becoming involved in the placement of a portion of their agency’s client’s media, we have a successful track record of working effectively with our client’s agencies and even providing some unexpected value add to those agencies.

Agency holding company mapping – part 1

Agency holding company mapping – part 1

We were recently looking for a good graphic mapping of the agency holding companies and found only one, and that was several years old. The big 5 holding companies own much of the agency world and it is sometimes helpful to untangle who owns whom. Now that the merger of Publicis and Omnicom is dead, gaining a clear understanding of the complicated agency terrain seems timely.

So we’ve set out to create a current map in the form of an infographic. It’s a project that will take some time to complete, so we thought we would roll it out in segments. Here is the first holding company we’ve completed: Omnicom.

Omnicom Holding Company