www.trinityp3.com TrinityP3 © Copyright 2013 Global versus Local Media Agency Remuneration Agreements Total Media Spend - There are economies of scale in media, but not always as much as you may think and not always in the places people look.Therefore many of the principles here can be used no matter what your media investment. From $10 million in media spend to $1 billion in media spend Media Spend vs. Agency Fee - For large global advertisers, the agency fee as a proportion of the media spend has reduced over time, with traditional media fee half the digital media fee. The difference isdue to the higher resource requirement to spend for digital. Media Owners Sales Incentives - For the media owners, the proportion of their revenue available to incentivize sales (discounts, rebates, added value, etc.) is more than double for digital over traditional as digital has low fixed cost, making the digital media market more dynamic. Comparing Agency Fee to Media Incentives - The average agency fee paid by advertisers is very much smaller to the size of the sales incentives the media owners offer to secure a sale. Advertisers should ensure their agency is negotiating more than their fair share of these incentives on their behalf. Global Economies vs. Local Opportunities - Even with the global media owners selling their media on a market by market basis, there is a very small economy of scale in buying media through a single global media buying agency. However, if you are willing to overlook the inconsistencies in the media planning and buying across markets of various agency networks, then there is a much larger economy of scale in media agency fees. Global Media Agency or Local? With a global network you can negotiate agency fees as low as 3% and 6% or lower due to economies of scale. But this could come at the expense of the 97% and 94% buying effectiveness as you could end up accepting convenience over consistency. Are You Still Paying Media Commissions? - While some markets continue to protect commissions (India, Brazil & Canada), most have moved away from commissions with the ANA recently reporting that the media commissions have fallen to just 7% of all media agency contract arrangement. Most are using a Cost Based Resource Model - The most popular model is a resource cost based model in retainers and fees.Yet this focuses on a cost that only contributes 3% - 6% of the total cost of media. No wonder it leads to questions about resource levels, overhead costs, profits.In fact everything except the media value actually delivered. Bonuses & Value Based Payment - With so much at stake outside of the media agency fee, compared to the fee itself, why has there been such a focus on reducing the agency cost? Isn’t it smarter to give the agency incentives to raise performance and increase media value delivered?

1. marketing management consultants
Global versus Local
Media Agency Remuneration Agreements
TrinityP3
© Copyright 2013

2. marketing management consultants
Total Media Spend
There are economies of scale
in media, but not always as
much as you may think and
not always in the places
people look.
Therefore many of the
principles here can be used
no matter what your media
investment.
$1 billion in
media spend
$10 million in
media spend

3. marketing management consultants
Media Spend vs. Agency Fee
WFA 2012
Traditional Media Digital Media
3%
6%
For large global advertisers, the agency fee as a proportion of the media spend has
reduced over time, with traditional media fee half the digital media fee. The difference is
due to the higher resource requirement to spend for digital.

4. marketing management consultants
Media Owners Sales Incentives
Traditional Media Digital Media
20% - 30% 60% - 80%
For the media owners, the proportion of their revenue available to incentivize sales
(discounts, rebates, added value, etc.) is more than double for digital over traditional as
digital has low fixed cost, making the digital media market more dynamic.

5. marketing management consultants
Comparing Agency Fee to Media Incentive
Traditional Media Digital Media
20% - 30% 60% - 80%
The average agency fee paid by advertisers is very much smaller to the size of the sales
incentives the media owners offer to secure a sale. Advertisers should ensure their
agency is negotiating more than their fair share of these incentives on their behalf.

6. marketing management consultants
Global Economies vs. Local Opportunities
Even with the
global media
owners selling
their media on
a market by
market basis,
there is a very
small economy
of scale in
buying media
through a
single global
media buying
agency.
However, if you
are willing to
overlook the
inconsistencies
in the media
planning and
buying across
markets of
various agency
networks, then
there is a much
larger economy
of scale in media
agency fees.

7. marketing management consultants
Global Media Agency or Local?
WFA 2012
Traditional Media Digital Media
3%
6%
With a global network you can negotiate agency fees as low as 3% and 6% or lower
due to economies of scale. But this could come at the expense of the 97% and 94%
buying effectiveness as you could end up accepting convenience over consistency.
97% 94%

8. marketing management consultants
Are You Still Paying Media Commissions?
7%ANA 2013
While some markets continue to protect commissions (India, Brazil Canada), most
have moved away from commissions with the ANA recently reporting that the media
commissions have fallen to just 7% of all media agency contract arrangement.

9. marketing management consultants
Most are using a Cost Based Resource Model
CO$T
FTEs
VALUE
FTEsFTEs
VALUE VALUE
CO$T
CO$T
CO$T
?
?
?
?
??
OVER
HEAD
OVER
HEAD
OVER
HEAD
The most popular model is a resource cost based model in retainers and fees.
Yet this focuses on a cost that only contributes 3% - 6% of the total cost of media.
No wonder it leads to questions about resource levels, overhead costs, profits.
In fact everything except the media value actually delivered.

10. marketing management consultants
Performance Bonuses Value Based Payment
$?With so much at stake outside of the media agency fee, compared to the fee itself,
why has there been such a focus on reducing the agency cost? Isn’t it smarter to give
the agency incentives to raise performance and increase media value delivered?

11. marketing management consultants
Value Remuneration vs. Performance Bonus
FINANCIALLY
MEASURABLE
SUBJECTIVE
HIGH AGENCY
INFLUENCE
(100%)
LOW AGENCY
INFLUENCE
(0%)
DIRECT
RESPONSEAGENCY
SCORE CARD
SALES /
REVENUE
MODEL
MEDIA BUYING
PERFORMANCE
MARKETING
AND BRAND
METRICS
There are many ways to measure value
and performance in media and marketing.
But you must consider the subjectivity of
these measures and the level of influence
the agency has over them.
This will determine the level of risk and
reward in developing the model.

12. marketing management consultants
Implementing a Value Performance Model
Example: Financial Services*
Media Investment
= $100 million
Media Agency Fee = $2.4 million (incl. 15% profit margin)
30% Direct
Response =
$30 million
50% Network Television =
$50 million
The advertiser had a traditional retainer model based on resource required.
Yet we discovered that 30% of their media spend was effectively direct response and
that they measured their TV buying – both of these are ideal for performance and
value based remuneration. * Actual numbers changed for confidentiality

13. marketing management consultants
A Composite of Fee, Value Performance
Example: Financial Services*
Media Agency Fee =
$1.36 million
Performance Bonus –
10% of fee or
$240,000 at risk with
30% upside for
decreasing CPM on
Network TV.
Value Based
Remuneration – made
$800,000 of agency fee
paid per sale. Plus an
additional bonus for
reduced CPA.
While the agency base fee dropped 40% this was more than compensated by the
opportunity to earn bonuses based on the TV buying performance and share in the
value created by optimizing direct response sales and reducing CPA.
Media Investment
= $100 million
30% Direct
Response =
$30 million
50% Network Television =
$50 million

14. marketing management consultants
Considerations on Media Agency Remuneration
• Commissions are out.
• Cost based models most popular.
• Performance bonuses increasingly popular.
• But measures increasingly subjective.
• Global and regional deals deliver fee savings.
• But media value more valuable than fee reduction.
• Consider remuneration based on business media
value delivered.

15. marketing management consultants
For more information please contact…
TrinityP3 Pty Ltd
Sydney
+612 8399 0922
Melbourne
+613 9682 6800
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+852 3589 3095
Singapore
+65 6884 9149
people@trinityp3.com
www.trinityp3.com
@trinityp3
www.trinityp3.com/blog/
TrinityP3
Darren Woolley