Mike Yershon

Campaign 

October 2006

The recent repayment of media discounts by Interpublic to Tesco  (Campaign, 14 October) highlighted in a dramatic fashion the need for transparency in agency buying transactíonsacross all media.

This is a particularly pressing issue in TV buying, wbere tbe growth of channels, andience fragmentation and agency deals has made the situation most complex.

From a client perspectíve, tbe media owners are suppliers to their agent. Clients do not have the time nor tbe inclination to check tbe suppliers’ invoices. Nor do they have tbe time or expertise to check tbe agency media invoice. In my experience, the media owners are transparent in their dealings with agencies but tbe agencies are not similarly transparent in tbeir dealings with advertisers. The IPG stance is correct and tbe industry should follow its example.

For agencies, achieving transparency on TV by tbe end of the month following the month of transmission is difficult. Station prices are not released until the 21st day of the month and payment is expected by tbe 25th.Thousands of spots can be involved across different sales houses/stations/channels. That is why discrepancies are often not picked up. Checking press is comparatively easy, as three companies do the job of monitoring the appearance of an insertion. Radio is a nightmare to check. Outdoor made great strides during the 70s which have stood the test of time.

 In recent years I have worked as a consultant to three major advertisers with large budgets across all media. From the client perspective the process was opaque, which made finding how the money had been spent extremely difficult. It took a lot of time to get to the bottom of the issues and work out a realistic return on investment for the expenditure. 

This is an area of our industry that has not moved into tbe 21st century. Only by understanding the importance of monitoring the agency invoice at tbe time of delivery and before payment can we put an end to problems of the type that TPG and Tesco encountered.  

Mike Yershon Campaign October 2006

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Mike Yershon

FINANCIAL TIMES  

15 JUNE 2004

"Advertising spend is rising. But analyze the figures as a percentage of GDP and a less up beat story emerges!" 

When exactly are folk in Soho going to regain their confidence of a recovery in advertising spend? Will the latest rise in quarterly ad spend figures and a survey showing that sentiment among senior marketers has recovered, do the job?

Despite the rise in overall ad spend over the past two years, many marketers and agencies have remained cautious about trying to call a fully-fledged rebound. Data released today shows that ad spend for the first quarter of this year rose 3.5 per cent to £3.65bn, according to the Advertising Association (see table below). The Chartered Institute of Marketing’s survey of corporate marketers also reports rising confidence in April, compared with December.

But as figures in the Advertising Statistics Yearbook, published this month for the Advertising Association by The World Advertising Research Centre, reveal, the problem seems to be that the increase in advertising has not matched the growth rates of other sectors of the economy. In fact, seen as a percentage of GDP, ad spend is falling rather than rising. This may be one reason why, although the figures are going in the right direction, to many agencies this does not feel like an advertising recovery.

Between 1998 to 2003, when UK GDP rose by 28 per cent (at current prices), growth in advertising expenditure lagged behind at 19.5 per cent. Prior to this, the ad industry’s share of GDP had been rising steadily since the early 1990s. The ad industry’s share of GDP rose from 1.42 per cent in 1993 to an all-time peak of 1.79 per cent in 2000. It is clear that this was a painful turning point for the sector – by 2003 its share of GDP had fallen back to 1.57 per cent.

A closer look at the figures reveals that there were some fascinating, and surprising, winners and losers among the 11 media sectors. In order to analyze past performance and also to gain some indicators as to the future health of the individual sectors, let us look at both the five years 1998 to 2003 and also compare 2003 with 2002. The Compound Annual Growth Rate (CAGR) for total advertising expenditure during 1998-2003 (at current prices) was 3.6 per cent, 2003 grew by 2.5 per cent compared with the previous year.

The winners – those that grew faster than total expenditure during both the five-year period and also in 2003 compared with 2002 – were the internet, outdoor and transport, directories, radio and regional newspapers. The losers, which grew more slowly than the total spend in both periods, were consumer magazines, television, the national press and business and professional press.

Explaining the performance of the winners is relatively easy. The Internet was a new, exciting medium so it was bound to grow speedily, as advertisers became caught up in the dotcom boom and then experimented with ways to make ads on the net actually work. Now the medium has proved itself in terms of cost-effective responses and sales.

Outdoor benefited from heavy investment in product quality by the major companies and a growing audience, owing to the number of car journeys increasing by about 2 per cent a year.

Similarly, radio has gained from the growth in the number of commercial stations and also the evangelical work of the Radio Advertising Bureau in providing advertisers with good reasons for using the medium.

Directories may lack the glamour of higher profile media but are regarded as cost-effective, while the regional press has been boosted by very buoyant classified revenue in a period when Gordon Brown has used every technique he can to keep the employment figures up.

As for the losers, television and the national press have been hit by long-term structural change. The advent of pay channels has led to a steady fragmentation of television audiences, making what was previously the advertisers’ favorite medium seem less attractive.

Meanwhile the national press has suffered as TV and the internet have usurped its news-providing role.

The business and professional press has been hit by the squeeze on corporate profits. The recession has seen a constant drive by advertisers to cut costs engendered by intense competitiveness and the speed of change in most industries and markets. Consumer magazines have also felt this effect. They have held up better than their national newspaper cousins, perhaps because the magazine publishers have been better able to keep up with their audience’s needs and aspirations.

Cinema and direct mail, meanwhile, beat overall spend in 1998 to 2003, but experienced slower growth in 2003. Cinema, which enjoyed a mini-boom following the dynamic growth of smart multiplexes, and direct mail, which benefited from a move by advertisers towards more measurable media, may both have been victims of their own previous success, performing well until 2003.

As to future performance, the biggest imponderable is television, the medium where technological and regulatory pressures are likely to force profound changes in the next few years.

ITV is now able to concentrate on building the medium of commercial television rather than fight the inter company battles of recent years.

Assuming that a revitalized ITV can turn its post-merger cost savings into positive programming and successful marketing investment, it may claw back some share within the overall TV sector. This should help propel TV as a whole to grow ahead of total ad expenditure in 2005 and 2006. 

Mike Yershon

Financial Times 15 June 2004

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Dear Editor,

I found myself nodding In agrement with each view that was expressed by the top-level individuals below in regard to the question "Are full service agencies set to return?" 

Then I wondered if one particular solution was right for the industry going forward over the next decade?

 Bringing media planning (or ‘channel planning’ which seems to be the cnrrent terminology) back under one roof alongside creative has got to be good news for clients and media owners. The difficulty for a creative agency is "how to fund it?".

 This is linked to "how to bring the talent in and motívate them to do good work". The talent exists in the media agencies, so incentives must be found for them to move.

 Then tbe new recruits need to demonstrate the added value of their contribution.However this will not be done over the short term, but a start must be made by more than just one agency.

 Where they fit in is also an interesting discussion. My feeling is that they should sit with the account planners. In this way they will be involved at the development stage of the creative brief and the review of results once the campaign has run.

 Mike Yershon

January 2007