Outdated models mean agencies 'unable to do their best work'
The former CEO of GroupM in North America and the current boss of AT&T's new advertising unit, Xandr, has said media agencies are unable to do their best work because the contracts that they have with advertisers rely too much on simply driving down costs.
Speaking at the Future TV Advertising Forum (6 Dec), Brian Lesser said the nature of agencies was changing, particularly after a turbulent few years in which opaque business practices have undermined client trust.
However, it was time to move on, Lesser said, as he gave a "bullish" assessment on the future of agencies.
"There’s huge distraction around transparency, and that’s a good thing, but we need to sort that out, turn the page and get the business models that make sense for agencies," he said during an on-stage interview with the journalist Lara O'Reilly.
"In many cases agencies are not allowed to do their best work because of the contracts they have with advertisers that say they must continue to see improvement in television rates – but that needs to be coupled with metrics around performance."
A 2016 report into media transparency from the US Association of National Advertisers changed the dynamics of how advertisers and agencies go about business together. The study found evidence that some agencies either fail to return accrued media benefits to their clients or in some cases they do not disclose them at all.
Meanwhile, some media owners are charging more for TV as fragmented audiences become more valuable, leaving agencies with increased rates of inflation.
Combining the two issues means agencies must look for new business models that cater for both new expectations from clients and changing market dynamics.
Experts have told Mediatel there is now a growing trend, particularly in the independent sector, back towards agencies being paid a fee only. Lesser's comments will therefore add to the argument that agencies should be paid enough to make a profit and invest in improving their work, with the extra money they make attached to quantifiable targets.
"The role of an agency in the media world is to join up the disparate market places to make them more efficient for advertisers," added Lesser, "but it’s never been more complicated than it is now.
"The nature of agencies is going to change – it’s going to become more data-centric; there are going to be more data scientists than account managers, perhaps, and frankly I think that’s a good thing because we need more science behind the media planning and buying process."