Get out and sell something

Michael Hedges June 12, 2009 Follow on Twitter

Advertising remains medias primary revenue source. Moving that money from advertiser to media means selling. It shouldn’t be that complicated. But it is. And maybe that’s one problem.

Ad spending is a tricky number to follow. Trade press headlines exhort falling spending, sending media people into shock. Projections from media buyer ZenithOptimedia (ZO), released in April, expect advertisers to spend 6.9% less this year than 2008 in Western Europe and 13.9% less in Central and Eastern Europe. What’s left for European media is a paltry €100.5 billion, which, according to ZO, will increase by €2 billion in 2010.

Economists generally consider ad spending to lag consumer spending, which lags consumer confidence. Many factors interact with these models and projections but the dismal scientists seem to agree that ‘normal’ won’t return until 2011. Between now and then media dependent on advertising is undergoing considerable restructuring, which, itself, will affect current projections. In other words, finding ad revenue means looking for a moving target.

The flow of money from advertiser to a final destination is the source of constant concern all along the effluence.  Swiss-based advertising ‘intermediary’ PubliGroupe, for example, is moving on with restructuring its services after posting a 2008 loss of €28 million (CHF 42.1 million). PubliGroupe, through its Publicitas subsidiary, represents media outlets in 12 European countries and has a significant presence in Asia. Gross revenues for 2008 were €1.4 billion (CHF 2.12 billion), 81% of which came from media sales. Publicitas has been selling ads for newspapers since 1916.

Shortly after releasing the 2008 financial PubliGroupe Chairman Hans-Peter Rohner announced a change in business model, essentially offering more ala-carte services. But he took a hard line. “Those who do not want to cooperate with us will no longer publish ads through us,” he told Comin (May/June 2009). Major Swiss publisher Edipresse dropped its deal with Publicitas effective in 2010 as it seeks to merge assets with another major Swiss publisher TAMedia.

Intermediaries like PubliGroup sell with the leverage of exclusive representation of media outlets. Exclusivity in the age of Google Ads is an all but forgotten concept. And consolidation in the media sector affects the money flow up and down the stream.

From advertiser to broadcaster or publisher the revenue flow looks less like an arrow shot and more like the annual journey of a salmon, many rocks to jump and its all upstream. Most advertising is bought and sold nationally, advantage going to national or quasi-national media. The reason is entirely structural; big advertisers are organized nationally. Big national advertisers account for between 60% and 70% of ad spending. Pan-European ad spending is a small segment, perhaps 5%, but appears to be growing. The rest is locally based advertising, which tends to take the more direct route from advertiser to media.

For most ad spending, the first stop is the advertising agency, where campaigns are created and organized. The decision points are less directed at specific media than specific targets. Advertisers have a result in mind, usually, and the path is merely a detail.

Ad agencies do, however, shape how the money will flow to the broadcaster, publisher or other media supplier. Those decisions are based on keeping the advertiser client happy and happiness comes in many forms. During the not so recently past ‘fat days’ ad agencies looked out for client happiness with photo and spot shoots, clients in attendance, in nice locations often hiring attractive and expensive talent. Anecdotal evidence suggests a generational shift, inventing video games for the internet more interesting than a week in Tahiti. But the bottom line for ad agencies has always been to get the maximum ‘bang for the buck’ for the client. More and more that means a direct relationship with sales or, in the case of political advertising, votes.

Once the creative step is passed the next stop on the money trip is the media buyer. This is where science meets reality. The portion of the clients’ money left over from ad agency efforts and fees, the largest part usually, goes to choosing media in its various forms for the message.

Media buyers pour over audience figures, circulation figures and more. They make projections. They make budgets based on different mixes, time lines, opportunities and targets. Media buyers sweat the details; every part of the ‘buy’ must be justified. Very often ad agencies and media buyers are owned by the same monolithic giant, like WPP.

Being the ‘left brain’ part of the advertising process, media buyers have attached themselves to all things analytical with emphasis on tons of data. Media content is irrelevant; delivery or presumed delivery is everything. That data collection from Website cookies and internet robots yields minute details of consumer traits justifies, they hold, a bias toward media that can provide that data. For media buyers, more and more, an IP address is existential.

Once media placement is decided, the money flow, typically, enters the whirlpool of the intermediaries, media wholesalers, the régie publicitaires in French. These institutions negotiate rates with media buyers. Blood is always in the water.

Wholesalers negotiate large, often long-term agreements with media providers. They match media buyers’ needs with available spots and space. They sell bulk delivery within the framework of their contracted suppliers.

This long journey is facing protracted challenges as the landscape changes. Being structural, comfortable and traditional the flow reacts badly to change. But the river is overflowing the banks. New media offers ad agencies a new canvas and new opportunities for fees. Media buyers salivate at the data collected. Wholesalers find themselves cut out of a world where Google rules.

And, too, media providers – particularly those of scale – occasionally try to upset tradition. ProSiebenSat.1 Media changed its sale model, meaning it stepped outside of the built-in relationships between media buyers and spot wholesalers and was punished. Others, like CME in the Czech Republic, have found financial advantage to rule changing. Media buyers have great comfort with ‘intermediaries’ that understand the concept of lowest possible price. And they are highly resistant to media outlets selling directly to advertisers.

Selling it – the ad space – is the challenge. While American broadcasting legend Mel Karmizan often and loudly pronounced “I just love to sell advertising,” there’s little of that in Europe where big, traditional broadcasters and publishers out-source ad sales to intermediaries who sell ad space as a commodity. And best not to get hands dirty with – AARRGGHH – selling.

The obsession with bottom line management brings joy to investors, stock traders and the rest of that tradition. As all have noted, cost-control and consolidation in the media sector generally has accelerated the flow of ‘eyeballs’ to new media. Fire the DJs. Fire the reporters. Nobody cares about wimpy, hard to access content.

Top line management, granted more challenging, turns that equation – and the money flow. A very old yet still illuminating study conducted by the American Radio Advertising Bureau in the 1980’s showed that the single most determinant factor in producing higher ad sales across US markets was the number of people actually selling advertising. A few more salespeople on the street just might be a solution to flagging ad revenue.

As a personal aside, my first exposure to this negative attitude toward selling was at a new Berlin radio station in the early 1990’s. The owners – newspaper people – spent a fortune on state-of-the-art studios and marquee offices…except for the sales team. They –  all 12 – were locked away in a different building, in the basement, a considerable distance from the fun at the radio station. I met them one morning in their sparsely outfitted tomb. There was one big desk with a dozen telephones. Stacks of very attractive presentation folders decorated the room.

The sales team were busy throwing pencils at each other as they “waited for the phone to ring.” It never did. When I suggested we gather up those lovely presentation folders and walk them to every advertiser in the heart of the city six of the 12 quit. Only one showed up for work the next morning. So it goes. The station disappeared.

Do you have a dismal sales story? How about a good one? Send them to me, OK? Or Twitter a headline.

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