The Final Existential Threat To Adland: Remuneration

The Final Existential Threat To Adland: Remuneration
SHARE
THIS



B&T’s favourite opinionated columnist Robert Strohfeldt from Strohfeldt Consulting has penned his final piece in a four-part series on the existential threats to adland, starting with Identity, then progressing to cover Credibility and Competition. Today, he explores the issue of remuneration.

The vast majority of people working in the industry love what they do – something never to be taken for granted.  Every research study conducted into the primary reason for people changing jobs is surprisingly not for money. It is for job satisfaction.

Another of the changes I have seen over 30 years is the drop in salaries across the board for every role in agencies. This is not unique to advertising; wage growth has been stagnant for some time. But compare 2016 to 1983 and all agency jobs pay far less in real terms than the wages stagnation we have witnessed since the GFC.

The simple reason is that advertising agencies are nowhere near as profitable as they once were. But agency remuneration structure, though highly rewarding at the time, had an inherent weakness that the digital world has glaringly exposed.

There used to be a saying ‘Media Means Money’ – an agency was paid 10 per cent commission on the media expenditure, which was limited to mainstream, and a 7.5 per cent service fee on top of that plus production (print and electronic) charges – in some cases head hours for jobs outside of creating and producing ads.

Head hours was seen as a mug’s game, not particularly profitable and as a colleague once said “Only prostitutes and lawyers charge by the hour”.

Though the revenue stream was fabulous, we were in fact “giving away” the thinking and making money on commissions and the production.

Advertising agencies were originally “advertising agents” – as mentioned in the article on ‘Credibility‘; advertising agents bought press space for as little as possible and sold it to clients for as much as possible.

Essentially, they were retailers of press space, as opposed to providers of advice i.e. what is most beneficial for you (the client), as opposed to me (the vendor) was not how the system worked. Walk into any retailer today and ask, “Is this product any good?” I seriously doubt you will get the response, “It is a piece of shit”.

If a better option is recommended, even if it is the same price or cheaper than the original product enquired about, it will be because the margin is greater i.e. the benefit is always going to favour the retailer.

When creative was added to the service, the revenue came from the production and printing. But the really valuable stuff, the thinking, was literally given away for free.

In many ways, our industry still operates in a similar manner, that is, we give away the most valuable component of the overall service we provide and charge for superficial crap. Rather than solve problems, our industry became trapped into a system where revenue was only generated if media was bought and ads were produced.

Yes, there has been a shift to fee-based remuneration, but it is still biased towards making or booking something. For all the jokes made about lawyers, the bastards know how to bill – they bill in six minute increments. Yes, 10 to the hour and how they keep track of that is anyone guess. They have prostitutes covered there (both male and female). Even they wouldn’t have the gall to bill you for the time it takes to get undressed.

Lawyers also have the advantage of hundreds of bright young things all prepared to pretty much sell their souls to make equity partner. And to make equity partner, you firstly need a record of producing loads of billable hours. Very profitable having hundreds of minions, who you pay $2.50 an hour and charge out at $300 an hour. (Not quite $2.50, but the variance between what the bulk of associates are paid and the amount they are billed out for makes the three times head hours cost formula look like chump change.)

This approach is not only taken by lawyers. Accounting/advisory/management consulting firms all use a similar formula.

Apart from being a very profitable business model, their fee approach ensures they are seen as providers of advice and clients know (or should I say believe) they are paying for objective advice – they are paying for an intangible, which is quite a coup.

History always comes back to bite you on the bum in some way. We want to be seen as providers of advice and yet historically we have used commissions and “making something” as our primary form of billing. As an industry, we have never said “this is the idea and it will cost you $x”.

Of course to ensure the integrity of the idea from concept to finished product, we really need to produce it and that will be $y. But x should always be far greater than y.

In a digital world, with so many different forms or disciplines of communications/persuasion we have the opportunity to shift the billing model and charge for thinking. Ironic that an industry renowned for creativity doesn’t charge for it. Imagine artists giving away their paintings, only making money on marking up canvas, frames and paints, crayons etc.?

In essence, that is what the advertising industry has been doing for over 150 years. All of the fabulous ideas (both creative and media), essentially have been given away for free. And when something is free, you place very little value on it.

 

Please login with linkedin to comment

Robert Strohfeldt

Latest News

Verizon Media Academy Ends For 2021 With Youth Charity Pitch-Off
  • Advertising
  • Media

Verizon Media Academy Ends For 2021 With Youth Charity Pitch-Off

Verizon Media’s talent program has come to an end for the third year, closing with a hybrid pitch-off event for Musicians Making A Difference (MMAD). The Verizon Media Academy class of 2021, made up of 44 emerging leaders from across Australia and New Zealand media, advertising and marketing industry, were given just one hour to […]

Industry’s Gamers Unite For UnLtd’s Virtual Rocket League Comp
  • Advertising
  • Marketing
  • Media

Industry’s Gamers Unite For UnLtd’s Virtual Rocket League Comp

Social purpose organisation UnLtd’s Big Games competition has raised a combined $85,000 for children and young people at risk. Running over five weeks, the competition involved 32 teams from across the advertising, marketing and media industries battling it out virtually for a chance to qualify for the Rocket League final. The tournament culminated in a […]

Sam Worthington And Phoebe Tonkin To Star In New Stan Original Film ‘Transfusion’
  • Media

Sam Worthington And Phoebe Tonkin To Star In New Stan Original Film ‘Transfusion’

Stan has announced that the Stan Original Film Transfusion commenced filming in Sydney earlier this week and will premiere on Stan in 2022. Transfusion is a taut, muscular thriller starring Sam Worthington (Avatar) as Ryan Logan, a former Special Forces operative, who is battling to cope with life after the loss of his wife and is thrust […]

COVID-19 Saw Stock Imagery Return To Harmful Gender Stereotypes
  • Advertising
  • Marketing

COVID-19 Saw Stock Imagery Return To Harmful Gender Stereotypes

According to a decade of data collected by iStock, Australian brands turned to imagery depicting outdated gender stereotypes during the pandemic. Tracking the keyword ‘women’, iStock by Getty Images found that in 2020, ANZ brands and businesses reverted to gender stereotypes. Images of mothers home-schooling were used at almost twice the rate of images of […]

by B&T Magazine

B&T Magazine
Maddison Connaughton Ends Time As Editor Of The Saturday Paper
  • Media

Maddison Connaughton Ends Time As Editor Of The Saturday Paper

Schwartz Media is congratulating Maddison Connaughton on her three years as editor of The Saturday Paper. Connaughton has decided to finish up her editorship this month. “It’s been an honour to edit the paper,” Connaughton said. “The Saturday Paper is one of the brightest voices in Australian media and I have been happy to see […]

Teenage boy wearing headphones works at desk in his bedroom
  • Media

New Research Names Olivia Rodrigo And BTS The Most Popular Study Music

Research from EdBbirdie using Spotify data has identified the most popular songs to study to. After analysing thousands of studying and homework playlists on Spotify, American singer Olivia Rodrigo’s ‘drivers license’ came out as top song to study to. It featured on 48 study playlists, while other top songs included ‘Ophelia’ by The Lumineers, ‘Falling’ […]

Happy woman drinking tea and waving to someone while having video call over desktop PC in the evening at home.
  • Marketing
  • Opinion

Building A Successful Remote Marketing Team

Dayna Stewart is the Business Director – Digital Marketing, Media & Creative Services at The Nudge Group. Here, she discusses the challenges that come with building a successful marketing team when working remotely. Before COVID-19 changed the way businesses work, most marketing teams spent their days together in a meeting room collaborating on the next […]

Opinion

by B&T Magazine

B&T Magazine
Australia’s The Kid LAROI Joins Billie Eilish, Dua Lipa, Olivia Rodrigo And More In iHeartRadio Festival Line-Up
  • Media

Australia’s The Kid LAROI Joins Billie Eilish, Dua Lipa, Olivia Rodrigo And More In iHeartRadio Festival Line-Up

The line-up for the 2021 iHeartRadio Music Festival has been announced as the legendary event returns live in Las Vegas in September. This year, the epic two-day lineup for the iHeartRadio Music Festival main stage will feature performances by Billie Eilish, Cheap Trick, Coldplay, Dua Lipa, Florida Georgia Line, Journey, Khalid, Lil Baby, Maroon 5, Nelly, […]

Shop! ANZ Calls On Industry To Participate In ANZ Shopper And Retail Marketing Industry Survey
  • Marketing

Shop! ANZ Calls On Industry To Participate In ANZ Shopper And Retail Marketing Industry Survey

Shop! ANZ is calling on shopper and retail marketing professionals from all retail related disciplines to participate in the first ANZ Shopper and Retail Marketing Industry Survey in four years. This important research provides a guide of where the retail marketing industry in Australia and New Zealand has come from and what is anticipated to […]