New Media Puts Increasing Pressure on Madison Ave

23Jun07

A quick, interesting look at the pending shakeups of agency structure on Madison Ave. Recently Richard Edelman commented on a need for change in the structure of traditional PR agencies as well. In the future, as we move more into the social media space, retainers will make more sense than traditional per-hour billing.Working in the space I have noticed how much research and time it takes to craft a campaign that respects the online communities we seek to engage and really working with the functionality of new sites to understand their utility for the client and the community using it. Per-hour billing, as Edelman stated, doesn’t leave room for PR practitioners and clients to enter the space in a meaningful, lasting way.

clipped from www.usatoday.com
New media, as well as audience fragmentation, have upset the old agency model of creating ads and taking a percentage of the mass media spending as compensation. Today, there is pressure on agencies by marketers for new measures of the effectiveness of the $600 billion a year they spend worldwide on advertising, and agencies are trying to come up with models for being paid for that analytical work.

New measures and pay plans:

•Flat fees. Simplest is a negotiated fee for service based on costs and profit margins to measure an ad’s effectiveness across media.

Dollars for consumer behavior.
Performance commission
Premium services. IPG’s Marketing Accountability Partnership bills clients an average daily rate akin to consulting fees.
Still, the industry hasn’t moved as quickly as media has changed, and agencies are reluctant to give up commissions as a business model. And they don’t want to be penalized if sales fall short for reasons other than the marketing.

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