IPG Mediabrands announced that, according to Media Post’s Media Daily News on Monday, January 16, it “will move to a pay-for-performance model that links the agency’s performance and compensation to the clients’ business outcome, according to global CEO Matt Seiler. Other ways create a ‘horrible disservice’ to clients, he said. ‘It’s simple, if our clients don’t achieve their business plan, we don’t get paid.’”
The Media Daily News story went on to indicate that:
Last year, IPG Mediabrands hired McKinsey & Company to start shifting the business mode. “Frankly, we are happy to move the whole industry in that direction, too,” Seiler said.
The move means tying IPG Mediabrands’ pay-for-performance business contracts directly to the emerging technology focus spearheaded by IPG Media Lab, which continues to rise in applications, about 600 in its database total. The physical IGP Media Lab in New York highlights 50 applications, helping brand execs better understand emerging technologies by touching and feeling the apps.
Nine days later, on January 24, this headline appeared in Media Daily News: “Carat To Steer $3B GM Media, Digital: Global Savvy Was Key To Win.”
General Motors has awarded its estimated $3.5 billion global media planning and buying account to Aegis Group’s Carat, after a formal review that began in August, the carmaker confirmed Tuesday.
Other contenders included the U.S. incumbent Starcom, Omnicom Media Group and Interpublic’s [Mediabrands.] Commenting on the award, GM’s Global CMO Joel Ewanick said: “We wanted a media agency partner with the sophistication to leverage global marketing opportunities.” He called Carat’s approach “innovative” and able to “drive significant marketing value” that would align with the company’s global and regional brands.
And further in the Media Daily News Story:
Reps for IPG’s Mediabrands and Omnicom Media Group did not immediately respond to queries for comment.
So, let me make sure I get this straight: IPG’s Mediabrands’ CEO Matt Seiler makes a wild claim that Mediabrands’ new pay-for-performance compensation model is going to be a game changer because of some gobbledogook about technology, and then a little over a week later GM, one of the world’s largest advertisers, pulls a portion of its media buying business from Mediabrands and gives it to Carat. Could the two be linked? You make the call.
At the time, Seiler’s announcement seemed like he was waving a white flag in order to scrape up any crumbs of business he could find by essentially agreeing to work on spec, a move that has been tried many times over the years by desperate agencies that are on a precipitous decline. The GM announcement that Carat had won its business meant that Mediabrands had lost its piece of the GM business, which put a spotlight on the hypocrisy of Seiler’s previous week’s announcement.
If pay-for-performance were the most effective and efficient agency compensation model, the Big Three conglomerates, WPP, Omnicom, and Publicis, would be using it and it would have become the preferred way to compensate agencies. These conglomerates are as profit minded and as confident of the efficacy of their work as Seiler’s Mediabrands is, but they and their clients have not adopted the pay-for-performance model. Why? Because “performance” is too hard to measure, as it involves creative execution, competitive activity, pricing, weather, luck, and distribution channel effectiveness, among hundreds of factors.
Therefore, when pay-me-if-it-works is touted as the best new system and all other systems are called a “horrible disservice” by a media agency that has just lost one of the world’s biggest spending advertisers, presumably because GM didn’t think Mediabrands did a good job, Matt Seiler makes about as much sense as a Republican candidates’ debate does.
And, similar to the debates, the perception that is created is not one of effectiveness, but one of desperation – not a good way to win new clients.