Darren Woolley, founder and global CEO of TrinityP3 has warned the industry of the growing problem of arbitrage in the creator marketing space.
As much as two-thirds of brand investment in creator and influencer marketing is potentially being absorbed by hidden agency margins, according to a new Industry Bulletin issued by TrinityP3.
B&T sat down with Woolley to discuss the Bulletin.
“I’m not saying this is right or wrong. But the continuation of lack of transparency is what is doing a disservice to the industry,” he told us.
The new report warns that agency holding companies are deploying a familiar playbook — previously seen in digital production and programmatic media buying — to position themselves as non-transparent middlemen between marketers and creators.
As creator marketing matures into a multi-million-dollar core media channel, TrintityP3 has said major holding companies are increasingly aggregating briefs and routing them into internal creator divisions rather than exposing them to open-market competition.
The holding companies are bundling talent fees, technology gateways, compliance, and management costs into a single, non-itemised “Creator Cost” line item. This, according to Woolley and TrinityP3 is helping the holding companies extract massive backend margin.
For what it’s worth, B&T has contacted all the major holding companies for comment on the research.
But the problem is not necessarily of agencies’ making. Instead, Woolley the loophole has emerged as agencies are being asked to “do more with less”.
“For a lot of the traditional services they [media agencies] offer, they’ve often ended up discounting under pressure from both procurement and marketers. You’ve got to remember there’s very few marketers that have more than enough budget, so they’re trying to do more with less, and in most cases they’re engaging with procurement, which is incentivised to reduce costs,” he said.
According to TrinityP3’s commercial benchmarking data, a $100,000 campaign managed under an aggregated, non-transparent agency model yields as little as $35,000 (35 per cent) in direct working spend paid to creators. Conversely, a fully itemised, transparent commercial model ensures that up to $60,000 (60 per cent) is directly allocated to creator output and mandatory superannuation, effectively doubling the working budget without increasing overall brand expenditure.
Woolley also discussed that a lot of brands are willing to pay higher fees so they don’t have to manage content creator relationships.
Clients are making this decision on the basis of convenience. The more and more they go into content creator as a strategy, the more and more complex it becomes, and so I can see why they’re very happy to jump in with the agency to manage it on their behalf. What we’re saying is ask the right questions before you do,” he added.
Demand transparency
For brands to not get stung by these hidden costs Woolley gave some advice.
“The first thing is just from a brand’s point of view. Make sure that the agencies are very clear with unbundling and itemizing actual costs. Demand transparency and support that by asking for independent verification,” he said.
“And then make sure that you’re also making the agencies be very clear about any pass-through costs or or platform incentives, because you know that’s the other thing: the bigger the agency, the more likely they are to have a an arrangement with the platforms to give them incentives based on volume.”
In a release Lydia Feely, general manager at TrinityP3, emphasized that commercial transparency and agency performance guarantees are not mutually exclusive.
“Agencies frequently argue that bundled pricing allows them to offer performance guarantees, but a guarantee should never be used as a shield to deny commercial visibility. Brands have every right to know exactly where their money is going,” she said in a statement.
“We aren’t suggesting that agencies shouldn’t be fairly compensated for strategy, compliance, and technology management. They absolutely should. But those fees must be visible, itemized, and negotiated out in the open. Our objective with this bulletin is to equip CMOs and procurement teams with the exact framework and questions required to unbundle their creator spend and get maximum value from their investments.”
The research came about after Woolley and Feeley noticed a growing demand from clients for specialist social media and content creator expertise. Through a number of tenders and projects, TrinityP3 identified a broader issue around the increasing complexity of creator marketing, with brands managing dozens or even hundreds of creators while agencies increasingly offer to take that complexity off their hands, but without always providing clarity around the true cost of those services.
And unless marketers are willing to ask the questions that need to be asked, Woolley has predicted that the hidden costs in the creator marketing space will continue.
