Rethinking The Ad Agency Model: Partners In Business, Rather Than Service Providers
Alok Kejriwal is a digital entrepreneur based in Mumbai. He is the CEO and co-founder of games2win.com.
Whenever I see the success of Vodafone
Alok Kejriwal is a digital entrepreneur based in Mumbai. He is the CEO and co-founder of games2win.com.
Whenever I see the success of Vodafone
Interesting thoughts. Infact this is not the first time I'm hearing that. Although first time I assume re-modelling of business models might happen since now big agencies are loosing on the same turf they were playing to smaller fishes because of this new medium called Digital.
Anyways, my point is even if agency-client share the profitability together, I'm fine with it. But don't you think there's more to lose for agencies when client makes a loss (for many unforeseen reasons in present marketplace). The all the cash burnt during the whole process of giving the failing brand a new life goes into drain. So what's the solution to that? How agencies can sustain themselves keeping in purview that at least now the ~15% commission model is helping them put oil in the cog?
What I feel is that even though your idea is great since it makes agencies more chargeable & accountable (from clients' perspective) but from agency point of view, I think they have more to lose than to gain keeping your VC approach to agency-client biz model for obvious reasons.
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Cheers
@Sampad
Alok, I agree wholeheartedly. I've been involved in the digital media/advertising business for many years and have seen the gradual transition of ad agencies from brand 'custodians' as you say, to commodity creative designers, production houses, and media buyers. David Ogilvy would turn in his grave if he knew what had become of the ad agency business today.
Equity-based performance may be a tad risky for agencies as the previous commenter mentions, but even if an agency were to stake it's fee on the net revenue or profit growth in the business, that would be something. I've held some direct and indirect responsibility for managing agency relationships for businesses I've been involved in in North America, and have often unsettled my agency representatives by demanding this type of approach to fee structure. I don't think I've been unfair.
I believe that performance metrics should be specified and agreed to at the onset, and at all times should be directly actionable by the agency's work.
Why doesn't this fly? The conclusion I've arrived at is that the agency business, or at least the traditional agency business, is still in denial of the changing rules of business. They refuse to embrace accountability, and transparency as vital components of the way they do business. Perhaps this is because they believe that 'being gray' is what will ultimately preserve the retainer model and other antiquated fee structures. To your point this is extremely short sighted. Eventually, young hungry agencies who understand the new rules will take these risks, underwriting them with their firm belief in the abilities they possess. These new agencies will disrupt the oligopolies that exist today.
Great article. I'm the CEO of a company called Jigsee (www.jigsee.com), and I invite any of those young, hungry agencies out there to give me a call.
Best,
Ray
Nice post. The issue of agency compensation and deliverables is not debated often enough in marketing & advertising circles. For a combination of reasons, agencies are underselling their wares. You are absolutely write about ZooZoos. There never is an upside for the agency that create such ideas in the traditional commission or retainer fee model. Mostly, agency remuneration is linked to delivery of project and the increase in annual retainer fee doesn't factor in the success generated.
When it comes to accountability – there are so many factors outside the influence/control of the agency that decide the fate of an idea.