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.

 

 

About Mike Lake

Mike is the Senior Vice President of Marketing for Evergreen Trading. When not playing jazz trombone he is probably obsessing about writing content that will capture the attention and interest of business people and fellow learning junkies everywhere.

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