The problem with performance …


So it’s day 2 of Advertising Week and a lot of discussion so far today has been around remuneration models – mainly around agencies – but also as a general topic.

Performance based remuneration is the concept that is relatively popular –  moving from FTE to outcome. CEOs from the likes of JWT, BBH, Mediabrands, Publicis spoke today at Times Centre and the topic was discussed yesterday as well.

Most discussion was the agencies would like to work towards this sort of model, however they had to be careful to work out what the model actually was. A variable, results based model is often in conflict with the resources they need and the investment required by their client base. In short, some clients want to pay for performance but want high quality, in demand individuals almost on tap.

It got me thinking about the idea of ‘performance’ media. As a concept I’ve never really understood it.

I get the concept of skin in the game – but that is a lot different to performance based media remuneration models. Models that are increasingly popular within digital and models that put a lot of stress on publishers.

It felt, hearing these CEOs speak, that they were uncomfortably open to the idea of performance based remuneration as they realised the agency market was in flux and heavy on supply so it was something that needed to be discussed in order to gain some advantage.

The media vendor landscape is the same – in flux and heavy on supply – so given the abundance of supply and dynamic nature of the landscape performance based media trading doesn’t seem that ludicrous.

One panelist pointed out that since procurement departments got involved in pitches things have never been the same for agencies as they were effectively placed alongside the metal supplier and paper suppler and look at as a pure expense based engagement as opposed to investment.

Effectively, media vendors are a supplier to a brand – albeit through an agency. Imagine, if you will, during the procurement stage, an auto company asking a architect whether they were happy to be paid only on how many cars the dealership they were designing sold. But they were still required to invest the same amount of money and time into the project?

The architect would never do it. There are simply too many other variables involved for the architect to take all that risk.

Maybe some architects might consider it. But you can bet your house that they wouldn’t be the architects you really wanted involved. You would have to compromise. Bigtime. Which sort of defeats the purpose really.

The same premise exists for performance based advertising. The media vendor has no control over the message, creative, refresh, landing page, speed of load, strength of offer, fulfillment, legacy issues of the brand etc … but is paid ONLY on the performance.

Most places people want to advertise don’t accept this – TV, radio, outdoor, premium web, print – but other places do. Generally these are web channels. Generally, if you had your choice most of these sites you wouldn’t appear on. It’s a compromise. A big compromise.

How have we gotten to a situation where this is considered normal?

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