Global brands pushing for a shift in media agency models: Report

Increased complexity, better-equipped clients, and the speed of automation and AI are pushing agency remuneration models away from the traditional ‘time and materials’ approach. 

It is not just an Indian phenomenon. Three-quarters of global brands want to change their agency remuneration model, suggests a new study from the World Federation of Advertisers (WFA) and global media advisors MediaSense. The study titled “The Future of Media Remuneration report” is based on a survey of more than 70 multinational brands representing over $50 billion in ad spend. 

Measurement and transparency remain significant challenges in advertiser-agency relationships. A striking 84% of clients identified the lack of data and tools to effectively measure outcomes as a key barrier. Furthermore, 87% believe agencies resist adopting models that demand greater financial transparency. While 75% of advertisers express concern about how their agencies earn revenue, only 28% feel they have sufficient insight into these processes, noted the report. 

Interestingly, the desire for change is not grounded in cost reduction, as only 15% pointed to this as a reason. In fact, 60% of brands expect agency fees to increase over the next three years as they pay more for strategic and technical talent. However, for more commoditised or tech-enabled tasks, fees are expected to drop: where AI is deployed, 58% of brands expect to pay less.

“Clients are looking for a more ‘networked’ model, where global agency capabilities can be leveraged to unlock speed, agility and talent. Yet this new research reveals that the gap between expectation and reality is found to be largest for these very attributes. So, as an industry, we have to come up with the models and approaches that unleash greater effectiveness”, says Catherine Lautier, VP, Global Head of Media & Integrated Brand Communication, Danone and People & Partners Co-Brand Champion within WFA’s Media Charter, in the report. 

Notably, the WFA in April 2023 had released a “Media Charter 3.0” highlighting the unmet need to improve and grow the media ecosystem. The five-point charter included a) fair access to data and interoperability, b) measurement and accountability c) Responsibility towards society d) Sustainability e) partners must be appropriately compensated. 

Soon after, the Indian Society of Advertisers also came up with its own “media charter” which also talked about similar points. Besides, Indian advertisers also sought their “fair share” in media rebates, a “right to audit” which does not only cover the agency vendors but the whole of agency turnover to arrive at ‘fair share’ of rebates, and monthly updates on unbilled media among other things. 

“The way agency models are optimized by clients in India has undergone a significant transformation over the last couple of years. Contracts are now more well-defined and comprehensive, ensuring greater transparency. We have also begun claiming full media rebates, which agencies previously retained. This shift is especially critical in the current economic climate, where mounting pressures from CEOs demand that every dollar is maximized for impact,” says a marketer from a leading FMCG firm. 

Agency networks still crucial

The report shows that the traditional holding groups will still have their role to play. “The established Holding Company model (i.e. Dentsu, Havas, IPG, OMG, Publicis and WPP) is well aligned to this ambition through the vast breadth and depth they can offer,” the report noted, adding that 2/3 of respondents operate within this model, with most operating a combination of a localised and centralised servicing model.

But looking to the near future, more change among agency models is anticipated as just 11% of respondents believe that their current model aligns well to their future requirements and 24% believe it is unfit for future purposes, the report noted. 

There is also a growing theme towards integration, with a recognition that the complexity, which exists within the agency ecosystem is inhibiting brands from being able to deliver more integrated experiences to their consumers – powered by data and technology. 

Most respondents believe that speed and agility are important, but just 31% are satisfied with how their agency delivers in this area. 

The report finds that modern media organizations are calling out for more streamlined offerings, capable of ‘joining the dots’ between an increasingly broad set of marketing touchpoints. This requires investment in data and strategic capabilities, alongside a more diverse talent pool capable of going deep and wide. The future is focused less on individual channel execution but more agile, integrated consumer experiences.