For ad agencies, it’s never been harder to get paid. They forced to do more with less, even as margins and fees are getting squeezed.
We asked attendees at the Digiday Agency Summit in Phoenix, Arizona, some of the new ways they are coming up with to combat the crunch. From embracing value-based compensation agreements to adding newer capabilities, here’s how agencies are getting paid.
Answers have been lightly edited for clarity.
Nichola Perrigo, vp, associate director, digital marketing at RPA
We’ve addressed this by becoming more open and more flexible with our compensation models, to fit the client business structure. Sometimes this means a baseline agreement for what’s in scope and then a better framework for out-of-scope work. Sometimes it’s baseline agreement and a performance bonus. And sometimes we’ll take an investment position on a project with the understanding that it will become equitable later — that kind of trust helps sustain relationships.
Michael Duda, managing partner, Bullish
As consumers, we seek cheaper options and look for more value where we can. And when that happens, corporations have to figure out how to protect margins and become more efficient. The agency compensation issue is a part of that. It’s not personal. The issue lies with the lack of an honest, straightforward discussion. Speaking about fees feels like talking about sex at the dinner table. And it shouldn’t. Agencies cannot be afraid to stand up for what they need, because if we don’t, why should the client? We need to focus on compensation models that focus on the desired business outcomes and real KPIs, not just the cost to make ads.
John Osborn, president and CEO, BBDO New York
If agencies are providing ideas and campaigns that are an economic driver of a client’s business, the agencies should be fairly compensated. There should be a proportional upside in terms of incentive that the agencies should attempt to achieve. In our own relationships with clients, no contract is exactly like another. We structure these relationships uniquely based on the client. The types of services that agencies are providing are much more diverse than ever before, not only in terms of content, but also the data and the context piece. That does lend itself to looking at more diverse compensation structures.
Marcus Collins, svp, social engagement, Doner
Not only are scopes either flat or decreasing, but clients want more with less. And that’s because the industry is being disrupted. A lot of people can now generate ideas and do our jobs, and do it more efficiently than we can. So as an agency, we’re looking at what other ways do we service the client outside of creating creative products. We’re rethinking the role Doner plays for our clients: We’re not just outsourced hands, we’re partners. We’ve developed a production house that not only provides social and digital content, but also does TV production in-house, which was typically outsourced earlier. We’ve also reimagined our hiring strategy, we look for much more hybrid talent today than we did before. We need people who can don multiple hats.
Digiday+ Research: Instagram wins over Facebook for role in brands’ holiday marketing
Brands differ on how they use each marketing channel during the holidays -- even when it comes to sibling social media platforms Facebook and Instagram, Digiday+ Research found.
How — and why — Candy Crush is in the midst of a 10th anniversary brand refresh
In the years since Activision Blizzard acquired the Swedish game studio King in 2016, employees at the gaming giant have started to internally refer to their company as “ABK” — that is, Activision Blizzard King. But the corporation’s recent financial reports indicate that “KAB” might be a more accurate abbreviation.
Independent agency Goat invests in influencer strategy for clients as it expands in the U.S.
Everyone is after influencers to up their marketing game. But the secret to success, Goat contends, is in viewing influencers as performance media and using data to deliver clients guaranteed outcomes.
SponsoredHow brands are measuring incremental performance on CTV
Connected TV is unique among other advertising channels because it combines linear television’s storytelling capabilities with digital marketing’s targeting and measurement. As more marketers leverage CTV advertisements to reach relevant and engaged audiences, they also want to understand the real value they are generating with their investment. Incrementality reporting and measurement allow advertisers to measure […]
Marketers bring Web3 to the FIFA World Cup with augmented reality, NFTs and virtual worlds
The month-long tournament, which begins this weekend, will be the first World Cup since it took place in Russia in 2018 long before “Web3” entered the global lexicon. Now, official and non-official sponsors are hoping to harness the hype with a range of NFTs, virtual worlds, augmented reality tools and other trendy tech.
U-Haul diversifies its social strategy to tell people it’s more than moving trucks
In recent years, U-Haul's in-house agency has been working to "better leverage social media for brand loyalty."