Finding a home for Media’s ‘squeezed middle’
If you count yourself as a brand who buys media in single-digit millions, have you ever found yourself wondering: Am I getting the best rates? Am I getting access to the best people and senior leadership team? Am I being serviced attentively? Is my media plan bespoke to me and are my needs being put first? If so, you may be part of the so-called ‘squeezed middle’ which Omar Oakes penned an article on in Campaign.
In 2020, the ‘top 10’ media agencies had client billings that ranged from £300m or so, to over £1bn at the number one spot. This means that if you’re a client spending single-digit millions, you likely represent less than 1%, or even as low as 0.1% of the agency billings. Omar suggests that unfortunately, these clients may be at risk of receiving benefits and service levels proportionate to their contribution to the agency billings.
The point Omar raises is one that we are familiar with. Whilst there is more to being an effective media agency than sheer buying power, there is no denying that there is still a benefit that scale provides. The large networks are experts at what they do, therefore clients feel like they are making a safe choice when selecting them at the end of a pitch process. The issue however, is that at the large agencies the benefits of scale are often reserved for the biggest clients, as opposed to being shared equally across the entire client base.
Breaking it down
To win the biggest contracts in media, larger network agencies have to offer to work for extremely low fees and commit to buying media at market-leading rates. This situation mainly impacts two areas for the ‘squeezed middle’; media buying and servicing.
The pressure to achieve the lowest rates in the market has led to a race to the bottom where media is viewed as a commodity rather than a value creator. In order to achieve pricing guarantees, some agencies are needing to agree deals with media owners that offer added value based on spend commitments, which can be passed on to clients.
Whilst this is a win for the client in question, buying guarantees can be so stretching that it’s extremely hard for the agency to satisfy those terms without having to offset against other clients. The biggest clients take the bulk of the value that the agency can provide, meaning there’s none left to pass on to smaller clients – or in worst case scenarios, smaller clients may even need to pay more so that bigger clients can receive the lowest pricing.
This downward spiral then starts to impact media planning decisions. Network agencies may find themselves in positions where they will need to prioritise media owners that offer the greatest value or provide the lowest pricing to satisfy their agreements. This can lead to selecting suppliers that are the cheapest, but not necessarily the most effective in achieving client’s objectives.
The rise of the indie
It’s these kinds of issues that have led to a rise in independent media agencies over recent years. At many indies, clients spending single-digit millions would be classed as a ‘top 5 client’, thus receiving the level of care and attention that they deserve, just like what the biggest spending global brands achieve elsewhere.
As a smaller agency ourselves, we champion transparency, innovation and service. We ensure that our team is immersed in each client, fully understands the client’s business and provides media plans that are bespoke to each client’s brief and objectives, as we are not dictated by restrictive media owner deals that other agencies may have to work around.
What does the future look like?
Like many others, the media industry has been dealt a huge blow from Covid-19, which has only made these issues even more pronounced. With less money in circulation, the network agencies can’t hit buying agreements as easily, forcing them to focus on ways to drive additional revenue. In his Campaign article, Omar indicates this could lead to further transparency issues, especially as more media channels are becoming programmatically traded.
Let’s be honest though, client/agency relationships often end due to poor service rather than poor buying. Many agencies have had to make redundancies, reduce pay or put people on furlough during this past year, which further increases the strain on servicing. This once again will be felt most acutely amongst the ‘squeezed middle’ of the client base.
So, now that we’re on the road out of the pandemic and advertisers are starting to come back to market, it’s a good time for brands to consider if they want to stay part of the ‘squeezed middle’, or be a highly valued client for a smaller independent media agency.
We’re always up for a chat, so if you want to learn more about our media team, get in touch with us at firstname.lastname@example.org.
Written by:Ben Cunningham Media Director
Category:What we think
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