- Ad agencies have had a trust problem since a 2016 study by the Association of National Advertisers revealed illegal agency rebates and other misuse of clients’ money.
- A new global survey from consulting firm ID Comms that involved all major holding companies found that trust in them continues to drop.
- Trust among brands, agencies, and publishers is also dropping.
- The only group that has a more favorable view of advertising is marketers’ procurement departments.
- The decline in trust could mean agencies’ services lose value over time.
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Ad agencies face growing pressure from clients and publishers alike as Facebook, Google, and emerging platforms gobble up an increasing share of digital ad spend. And according to a new survey, trust in agencies has never been lower.
Trust is also declining among agencies, brands, and publishers, but for the agencies, the decline threatens to undermine their main revenue source. It also comes at a time when their model is under threat from new competitors like consulting companies.
Management consultancy ID Comms, which has recently overseen global agency reviews and audits for brands like Mars, GlaxoSmithKline, and Puma, spoke to 177 clients responsible for more than $20 billion in annual spending.
Business Insider reported earlier this week that nearly 70% of marketers have updated their media buying contracts since a bombshell 2016 Association of National Advertisers report confirmed the widespread use of illegal rebates and other dubious financial practices among agencies. Yet most respondents to the ID Comms survey still see paid advertising as a “complex headache” rather than a key investment.
Read more: ‘An apocalyptical onslaught to their models and profit margins’: Why media agencies are on their death bed
ID Comms consultant and survey author Paul Stringer said, “At a time when the challenge of media has never been greater, it is disappointing to see that so many marketing and media professionals are struggling to implement media strategies or forge relationships that deliver long-term growth.”
The only group whose opinion of advertising improved is marketers’ procurement departments. They were historically tasked with acquiring commodities like phones, laptops, and building materials but are increasingly overseeing marketing contracts as well, and many industry insiders see them as the primary factor behind the value of such services dwindling over time.
Media companies don’t trust agencies, agencies don’t trust marketers, and marketers don’t trust themselves
“Overall, procurement is making marketing feel like the new IT,” Omnicom Media Group CEO Scott Hagedorn, who leads the world’s second-largest ad buying network, told Business Insider. “It’s about cost containment versus strategic growth.”
Brands gave agencies an average score of 2.4 out of 5 for providing “neutral and objective” recommendations regarding ad strategy. As one anonymous marketing executive put it, “Media agencies are factories for account management and provide no innovative or added value thinking or strategy and implementation.”
Publishing executives were even less forgiving, scoring agencies 2.45 and 2.12, respectively, on their ability to share data-based insights and integrate owned, earned, and paid media.
“We are trying to solve new challenges with old processes, and the results are underwhelming,” said Joy Robins, chief revenue officer at The Washington Post. She said publishers sometimes see agencies as “RFP dispensers” while agencies view media partners as “commodified idea factories.”
Robins added, “Figuring out what is best left automated is an important step, but there has to be a recognition of the value exchanged when advertisers, agencies and publishers share a collaborative relationship.”
The survey wasn’t just an exercise in finger-pointing. Clients also rated their own media management abilities poorly, with an average score of 2.56. And all numbers in the ID Comms Global Media Thinking Report 2019 are down from the firm’s previous report of two years ago.
The trend shows no sign of stopping as cost drives everything
These results reflect a tension in the advertising model as big brands try to do more with less by treating marketing like any other commodity and judge it by its ability to meet budget goals.
Hagedorn suggested the main reason procurement sees advertising agencies positively is that desperate agencies are increasingly willing to work for less — even if it makes their own long-term profitability more tenuous. Clients simultaneously write contracts that pay agencies every 120, 150, or 180 days instead of monthly or bi-monthly. These sorts of agreements make it harder for media buyers to properly compensate their publishing partners, and many media executives simply refuse to play ball.
Hagedorn said distrust will persist as long as key players keep fighting over smaller and smaller pieces of the industry pie.
“I hope that marketers snap out of it and get back to thinking about value creation,” Hagedorn said. “Otherwise, why are we doing this?”
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