Principal media buying practices are set to “blow up” in agencies’ faces, causing potentially irrevocable damage to the trust that clients place in their agencies, according to Mutinex co-founder Henry Innis.
It was a statement that drew audible gasps from the crowd at Hemingway’s Brewery at Cairns Crocodiles, presented by Pinterest.
Speaking to B&T after his talk with Cairns Crocodiles content director Pippa Chambers, Innis expanded on his position.
“They should try to maintain that role in strategy and execution. The critical risk for agencies is that if they’re seeing corroding trust, what does that do to us as a whole across the industry? I’m concerned about a world where we start to erode trust further in the industry.”
Principal media is the practice that many of the large holding groups, most notably Publicis and WPP, have taken up of late.
Under the practice, media is bought in bulk from publishers at lower rates before being re-sold to clients. It allows agencies to lift their margins, something notoriously hard to do.
Currently, there is some conjecture about whether the practice exists in Australia and which of the large holding groups operate principal media buying locally. There is also conjecture around whether clients are being informed of their agencies’ actions and if the savings are being passed on. There is no conjecture, however, over the fact that it reshapes the client-agency dynamic.
“It could [change the client-agency relationship]. But the transition period to get there might do a lot of damage. If we’re going to do that, let’s be explicit about it and explicit about changing that model very openly and the implications. There are clear implications if that’s the case,” said Innis.
“If we are looking to reshape it like that, should agencies being doing measurement? That’s a critical question. What we need to see is a lot more action and a more intentional strategy that rather than diversify revenue, we pick a revenue stream and make sure we maintain trust in the industry because trust is the single currency we’ve had eroded.”
That said, Innis believes that if media agencies do continue down the principal media route, it could have benefits for everyone—but only if trust is maintained with clients through transparency and, potentially, “giving up measurement”.
“Agencies are great revenue businesses, they’re just not great margin businesses at the moment. We’ve been lucky enough to create a great margin business, it can be done through technology,” he continued.
“I’d love to see agencies productise more. I’d love to see agencies empower people to innovate at the bottom levels and push that tempo. The strategy won’t come top-down, it will come from empowering people to execute across these businesses.
“What we can’t have is principal media turning into principal conflict. That’s how we destroy trust in our industry.”
Innis’ session at Hemingway’s Brewery saw a packed room, where he and Chambers, discussed the goings on at Mutinex and the wider industry. Everything was on the table from former CEO Mat Baxter’s short stay at and abrupt departure from Mutinex to building a lasting business.
“It was never a shouting match,” Innis said of Baxter’s departure and that “he was able to teach me more about building a strong business culture than anyone in my career”.
On building a lasting business and culture, Innis believes that Mutinex’s staff having equity in the business keeps the team “incentivised” and aligned” to help grow the business long-term.
He added that the size of the US market made it his key target for Mutinex’s further expansion. The upside of working in the US is that most of the staff they’re selling to are data scientists, unlike in Australia. But the downside is that “in Australia, you get feedback that you’re not doing a great job. In the US, you get fired.”
In terms of client prospects, Innis believes that Mutinex doesn’t work well with governments.
“We don’t work well with government because we are very focused on driving optimisation and commercial outcomes. I don’t believe that government optimises to those outcomes at all. So despite those being some of the largest clients, for example the South Australian Tourism Commission came out with an MMM pitch, we declined because I don’t believe MMM is best fit for organisations that aren’t interested in growth and optimisation.”
Safe to say, it was a rollercoaster and attendees had plenty to ruminate on over a couple of Hemingway’s Brewery Canecutter lagers afterwards.
