The Final Existential Threat To Adland: Remuneration
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 StrohfeldtLatest News
Sydney Comedy Festival: Taking The City & Social Media By Storm
Sydney Comedy Festival 2024 is live and ready to rumble, showing the best of international and homegrown talent at a host of venues around town. As usual, it’s hot on the heels of its big sister, the giant that is the Melbourne International Comedy Festival, picking up some acts as they continue on their own […]
Global Marketers Descend For AANA’s RESET For Growth
The Australian Association of National Advertisers (AANA) has announced the final epic lineup of local and global marketing powerhouses for RESET for Growth 2024. Lead image: Josh Faulks, chief executive officer, AANA Back in 2000, a woman with no business experience opened her first juice bar in Adelaide. The idea was brilliantly simple: make healthy […]
Is Meta’s New AI Chatbot Too Left-Wing?
Meta's chatbot accused of being left-wing after being caught wearing a Che Guevara T-shirt & listening to Billy Bragg.
TV Ratings (23/04/2024): Why Did No One Tell Angela That Farmer Wants A Wife Is Set On A Farm?
As wonderful as this headline is, let's face it, we all know an 'Angela', don't we?
PubMatic Unveils New AI Partnership To Turn Social Posts Into Ads For Any Digital Channel
Here's some nifty tech for turning social posts into ads. Assuming said posts aren't one-star character assassinations.
Intuit Mailchimp Makes A Splash With Its First Australian Brand Campaign
Ever laugh along at a gag you didn't get so as not to appear dumb? Get ready for more feigning with this new work.
GumGum’s Rob Hall: Advertisers Can No Longer “Rely On Binary Descriptions” Of Consumers
If anyone's got their finger on adtech's pulse, it's Rob Hall. He also avoids using the good paper in the office printer
Mastercard Nabs Florencia Aimo From Marriott International
Marriott International's Florencia Aimo jumps from the hotel business to the exploitative credit card one.
Bastion Agency Appoints Cheuk Chiang As New ANZ CEO
Cheuk Chiang takes the reins over at Bastion Agency. But not the rains down in Africa.
Spotlight On Sponsors: Major Sponsorship Wins After A Disappointing Week In Sport
B&T continuing our deep dive into local sport sponsorships & that's despite not a single offer of a free ticket as yet.
Macca’s Marketing Director, Samantha McLeod On Big Mac Chant: “What Was Once Old Is Now Cool Again”
Macca's using the power of nostalgia in latest Big Mac campaign. Well, only for those who've ever eaten one sober.
World Premiere Of Midnight Oil: The Hardest Line To Open Sydney Film Festival 2024
Oil's biopic to open Sydney Film Festival. Here's hoping Molly Meldrum will take his pants down at the premiere.
Entries Are Now Open For The 2024 Brandies, IntelligenceBank’s Annual Brand Marketing Awards
The Brandies are, of course, a prestigious marketing gong and not the mystery tipple favoured by nannas everywhere.
The Fred Hollows Foundation Appoints Ardent For PR
Yes, we all like to have a joke at PR's expense. But sometimes it does important work, like this.
AI, eCommerce & Marketing Specialists Are In Increased Demand By Businesses, New Data From Fiverr Shows
Has your philosophy & anthropology degree left you with nothing but a huge HECS debt? Here's what you should've studied.
Perth’s First 3D Anamorphic Billboard Arrives Courtesy Of oOh!media
Do you love a buzzword? Now you can add anamorphic to the list as it relates to billboards, not a colleague's ears.
MasterChef Australia & Crown Resorts Launch Unique Dining Experience With ALUMNI
A pop-up restaurant staffed by MasterChef contestants! That's fine dining prices for first-year apprentice chef cuisine!
Amanda Laing Announces Resignation From Foxtel Group
Foxtel's chief commercial & content officer heads for the exits. Read nice things the bosses said about her right here.
The Lost Letters From Our Diggers: News Corp Unveils ANZAC Day Special
It's nice when brands respectfully acknowledge ANZAC Day.
Howatson+Company Acquires Akkomplice
Large indie acquires a slightly smaller indie. Much like a shark eating a tuna, just with less thrashing and blood.
Google Delays Third-Party Cookie Deprecation Again
In good news for the sale of picture library biscuit photos, Google continues to tease over the end of cookies.
Education A Low Priority For Aussies More Concerned With Cost Of Living Forethought Study Reveals
Study finds Aussies cutting back on education due to cost of living. Booze & Uber Eats sales remain largely unaffected.
“I’m Still The Same Person That I Was”: Rikki Stern Says “Fucc It” To Cancer Stereotypes
B&T always happy to promote the anti-cancer cause. Even brands that massively overdo it with the hot pink.
The Unapproved Climate Certification Allegedly Causing Mass Greenwashing
Are you left flummoxed in the canned tuna & free range eggs aisle? Just wait till this green certification gets up.
TV Ratings (22/04/2024): Fans Mock “Over The Top” Reaction To New MasterChef Judges
MasterChef returns for its 2024 season. B&T stands by putting peppercorns in Gravox & no one will be any the wiser.
Dentsu Restructure: Muddle, Harvey & Johnston Take Leadership Baton As Bass & Yurisich Exit
A large broom has swept through Dentsu's local ops this morning, taking with it some big names & the air con's cobwebs.
Industry Shares Trends Shaping The Industry This International Creators Day
B&T's asking adland creators to reveal their top trends. And it's not good news for your Jenny Kee cardigan collection.
Mable Extends HOYTS Sensory Screenings Partnership
Mable has extended its HOYTS sensory screening partnership. Vigorously defends its two-star Oppenheimer review.
Orphan Launches ‘They Need Our Help. We Need Yours’ For Children’s Cancer Institute
Anything to do with childhood cancers has B&T's 110% support. That said, we do ignore the red meat & alcohol warnings.
Smile Team Orthodontics & Keep Left Collaborate On Smile-Inducing Campaign
As parents would attest, given the cost of orthodontics you'd expect this campaign to be a lavish production indeed.
Opinion: How Video Calls Neglect Learning Diversity
Need an excuse to duck out of a video call this arvo? Show this to your boss.
DoubleVerify Achieves First-Of-Its-Kind Responsible AI Certification From TrustArc
DoubleVerify receives responsible AI certification. However, not its robotic vacuum that's been seen menacing the cat.
Smile For A Good Cause: The Social Media Campaign Giving Back To The Community
Are you known as the office Austin Powers? More for you teeth than shagability? Get snappy new fangs with this news.
Elon Musk Mocks Albo After ESafety Wins Court Injunction Against X
Albo's 2024 from hell continues - Rabbitohs in crisis, down in the polls and now feuding with world's richest man.
Real Estate Developer In Hot Water Over “Sexually Exploitative” OOH Campaign
Real estate agents again tops in the 'least trusted profession' polls, nudging used car salesmen & ad creatives.
Epsilon’s Shane Hanby: Post-Cookie Era Relies On “Teamwork” Between Brands, Marketers & Tech
This pro predicts more "teamwork" in a post-cookie era. Which spells bad news for the uncooperative or plain stubborn.