Monday, October 20, 2008

Times up for the 20% rebate?

Lara Sinclair has written an article in todays Australian that finally documents what has been going on for years - some agencies are demanding 20% commission rebates from publishers.

http://www.theaustralian.news.com.au/business/story/0,28124,24520533-7582,00.html

"The warning comes as media agency Initiative has introduced a so-called "preferred partnership" scheme under which some internet publishers and online advertising networks are being asked to pay them a 20 per cent commission to become a favoured supplier.

But even as some media agencies -- including Emitch, the digital arm of the Mitchell Communications Group and Toyota's dedicated media agency the Media Store -- charge more than the standard 10 per cent commission, internet publishers are pushing back. "

The big question remains - are these higher that 10% rebate savings being pushed back to the client and/or being disclosed?

It's also interesting to see the publishers being so vocal about the issue - which was in the past an unspoken inconvenience - especially in regards to emitch and The Media Store. Wonder if they'll cop any blowback from these two.

6 comments:

Max Media said...

G'day Ben,

Dig your blog

Central to the point is whether 20% more or less is an acceptable rate to look after the clients interests and the services provided. There has to be somewhere in the cost to customer a service provision cost.

As we know the "squeeze", disintermediation or "cutting out the middlemen" is occurring across all supply chains - whether advertising or selling bricks.

Customers are generally happy to pay a fair price for good product or service ie those that differentiate and add measurable value along the supply chain.

Those that don't become commodities and margins will be squeezed with new paths (or least resistance or value models) created.

Regards
Scott Maxworthy
http://www.maxys.com.au

Wembley said...

Yes well 20% may be a fair price to pay.

It probably isnt but let's say it is.

The issue is that the fee is hidden from the advertiser and hence the planner is in no way independent nor expert.

Still if the advertiser refuses to audit their agency then they are negligent themselves.

Ben Shepherd said...

i think the key issue here is whether the 20% rebate is being passed on or not. Or, to Wembley's point ... whether it is hidden.

andrew pascoe said...

That's the thing Shepherd - it's not that this happens (why is 20% rebate any different to a lower rate, or any of the other results that agencies and clients want when they go into buying negotiations?), it's that it _used_ to be at least that the difference (ie 10%) wasn't being disclosed by the agency to the client, leaving the agency to get free revenue...

It the client's aware though that their agency is on 20% rebate for some/all publishers, whether or not it directly comes into their remuneration agreement with the agency or not, then the practice becomes just another trading tactic.

Ben Shepherd said...

the issue of 20% rebate as a trading tactic is the publisher will *generally* bump up the gross cpm to a higher level knowing s/he will take a hit on the nett after rebate. So effectively it doesn't make any difference.

If it's not being disclosed it gets interesting - an extra 10% rebate on a $600k campaign is $60k ... not a bad little bit on the side.

carlos matriano said...

Heya

from my point of view, the 20% commission isnt an issue as long as its addressed with the client.

Disclosure as many have pointed out is the only issue.

The truth is that its all about supply and demand.

Allegedly Fairfax said no to Emitch but i think they are probably hurting from that.

People misunderstand the fact that as planners we buy impressions. thats not the case. as planners we buy an audience. and as we all know, this audience visits more than one website.

as such we can afford to "shop" around.

where Initiative looked to have faltered is that they didnt talk about the strength of their positioning.

i have never advocated high added value over substance (i question why agencies dont put more conditions to agency deals such as media firsts and first to market offers) but trying to get the best deal for you client isnt a bad thing. you just have to be open about it.