3P Track<br />October 9<br />2011<br />
“Advertisers and their agencies are facing an increasing challenge, which…often creates friction, inefficiency and waste i...
Client Perspective<br />May not understand requirements to deliver digital marketing programs<br />Simplify and standardiz...
Digital Reality<br />More labor-intensive<br />Different set of skills<br />Demand > Supply for certain talent<br />Histor...
Digital Reality<br />The right agency model to deliver value<br />Getting compensated<br />Maximizing profitability<br />5...
Agency Model<br />6<br />
Digital Agency Service Model<br />Production<br />Media Strategy and Planning<br />Media Buying<br />Brand Strategy<br />C...
Digital Agency Service Model<br />Production<br />Media Strategy and Planning<br />Media Buying<br />Brand Strategy<br />C...
Digital Agency Service Model<br />Production<br />Media Strategy and Planning<br />Media Buying<br />Brand Strategy<br />C...
Digital Agency Service Model<br />Production<br />Media Buying<br />Media Strategy and Planning<br />Brand Strategy<br />C...
Digital Agency Service Model<br />Production<br />Media Strategy and Planning<br />Media Buying<br />Brand Strategy<br />C...
Digital Agency Service Model<br />Media Buying<br />Production<br />Media Strategy and Planning<br />Brand Strategy<br />C...
“The Newest Ad Agencies: Major Media Companies. Marketers Increasingly Bypass Traditional Business Model”<br />“Google, Om...
Clients<br />Media Planning and Buying<br />Strategy and Creative<br />Production<br />"If I were an agency, I would be re...
Clients<br />Media Planning and Buying<br />Strategy and Creative<br />Production<br />Ad Exchanges<br />Ad Networks<br />...
So, What’s the Right Agency Model?<br />Client Requirements<br />Media Consolidation<br />Production Volume<br />Agency <b...
Compensation<br />17<br />
of Marketers utilize retainer/project fee combination <br />Increasing use of performance incentives<br />18<br />
Compensation<br />Educate/Define SOW<br />Budget Presentation<br />Utilize Performance Metrics to Demonstrate Value<br />1...
Output-Based SOW<br />Traditional<br />Digital<br />Create development and production of one :30 TV Spot<br />One full-pag...
Scope of Work<br />21<br />
Scope of Work<br />22<br />
Scope of Work<br />Develop 4 Landing Pages<br />23<br />
Scope of Work<br />24<br />
Scope of Work<br />25<br />
Scope of Work<br />26<br />
Budget/Proposal<br />“Marketer perceptions are that digital agencies are more expensive, when in fact, the expense is simp...
Budget/Proposal<br />28<br />
Managing Profitability<br />29<br />
Attendee Survey<br />30<br />
Profitability Model<br />Full-time / Freelance Staff:<br />Recurring / Project Revenue<br />Client / Agency Labor Mix<br /...
Profitability Model<br />Rent: 8% Revenue<br />RSF Per Employee $175<br />32<br />
Agency Example<br />Subpar profitability on key digital services<br />Client/Agency Labor Mix: 54%/46%<br />Billing rates ...
Agency Example<br />34<br />
Educate/Define SOW<br />Budget Presentation<br />Utilize Performance Metrics to Demonstrate Value<br />35<br />
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Maloney-3P Track

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Maloney-3P Track

  1. 1. 3P Track<br />October 9<br />2011<br />
  2. 2. “Advertisers and their agencies are facing an increasing challenge, which…often creates friction, inefficiency and waste in client/agency relationships as traditional players on either side, or both, apply traditional practices (or expect traditional outcomes) without an understanding of very different Digital norms and economics.” <br />2<br />
  3. 3. Client Perspective<br />May not understand requirements to deliver digital marketing programs<br />Simplify and standardize processes for managing agencies:<br />Same compensation framework<br />Same metrics (effective commission rate, blended hourly rate, etc).<br />3<br />
  4. 4. Digital Reality<br />More labor-intensive<br />Different set of skills<br />Demand > Supply for certain talent<br />Historical relationship between cost of “creative” “production” and “media” no longer relevant<br />4<br />
  5. 5. Digital Reality<br />The right agency model to deliver value<br />Getting compensated<br />Maximizing profitability<br />5<br />
  6. 6. Agency Model<br />6<br />
  7. 7. Digital Agency Service Model<br />Production<br />Media Strategy and Planning<br />Media Buying<br />Brand Strategy<br />Creative<br />Multiple Channels:<br />Website, SEM, SEO, Video, Social, Email, Mobile, etc.<br />Build/Partner/Outsource?<br />Specialist/Integrated?<br />7<br />
  8. 8. Digital Agency Service Model<br />Production<br />Media Strategy and Planning<br />Media Buying<br />Brand Strategy<br />Creative<br />“One of the smartest things we did was build an in-house production capability. Having said that, I don’t know if we would do it today.”<br />President, Leading Digital Agency<br />8<br />
  9. 9. Digital Agency Service Model<br />Production<br />Media Strategy and Planning<br />Media Buying<br />Brand Strategy<br />Creative<br />Quality Control<br />Understand Client’s Technical Infrastructure<br />Commoditization<br />Investment required given expanding range of options<br />9<br />
  10. 10. Digital Agency Service Model<br />Production<br />Media Buying<br />Media Strategy and Planning<br />Brand Strategy<br />Creative<br />10<br />
  11. 11. Digital Agency Service Model<br />Production<br />Media Strategy and Planning<br />Media Buying<br />Brand Strategy<br />Creative<br />Operating Margins<br />In-house: 19.2%<br />Outsource: 16.5%<br />11<br />
  12. 12. Digital Agency Service Model<br />Media Buying<br />Production<br />Media Strategy and Planning<br />Brand Strategy<br />Creative<br />Operating Margins<br />In-house: 18.5%<br />Outsource: 18.0%<br />12<br />
  13. 13. “The Newest Ad Agencies: Major Media Companies. Marketers Increasingly Bypass Traditional Business Model”<br />“Google, Omnicom Partnership Redefines Digital Advertising”<br />“Hearst Buys iCrossing For $325 Million” <br />13<br />
  14. 14. Clients<br />Media Planning and Buying<br />Strategy and Creative<br />Production<br />"If I were an agency, I would be really worried about being disintermediated. More and more, agencies are almost in the way sometimes.“ <br />Ad Exchanges<br />Ad Networks<br />Media Companies<br />Search Engines<br />Becky Saeger, CMO Charles Schwab<br />14<br />
  15. 15. Clients<br />Media Planning and Buying<br />Strategy and Creative<br />Production<br />Ad Exchanges<br />Ad Networks<br />Media Companies<br />Search Engines<br />15<br />
  16. 16. So, What’s the Right Agency Model?<br />Client Requirements<br />Media Consolidation<br />Production Volume<br />Agency <br />CoreCompetencies<br />Culture<br />Ability to Differentiate<br />Quality<br />Price<br />$$$<br />Growth vs. Margin Erosion<br />16<br />
  17. 17. Compensation<br />17<br />
  18. 18. of Marketers utilize retainer/project fee combination <br />Increasing use of performance incentives<br />18<br />
  19. 19. Compensation<br />Educate/Define SOW<br />Budget Presentation<br />Utilize Performance Metrics to Demonstrate Value<br />19<br />
  20. 20. Output-Based SOW<br />Traditional<br />Digital<br />Create development and production of one :30 TV Spot<br />One full-page, four-color print ad <br />Website Enhancements: Strategy, Architecture, Wireframes<br />20 Landing Page Designs & Code Executions <br />20<br />
  21. 21. Scope of Work<br />21<br />
  22. 22. Scope of Work<br />22<br />
  23. 23. Scope of Work<br />Develop 4 Landing Pages<br />23<br />
  24. 24. Scope of Work<br />24<br />
  25. 25. Scope of Work<br />25<br />
  26. 26. Scope of Work<br />26<br />
  27. 27. Budget/Proposal<br />“Marketer perceptions are that digital agencies are more expensive, when in fact, the expense is simply related to outdated perceptions about agency fees as a percent of media and/or production spend.”<br />Digital Campaign<br />$250,000<br />$0<br />$1,000,000<br />$1,250,000<br />25%<br />David Beals<br />27<br />
  28. 28. Budget/Proposal<br />28<br />
  29. 29. Managing Profitability<br />29<br />
  30. 30. Attendee Survey<br />30<br />
  31. 31. Profitability Model<br />Full-time / Freelance Staff:<br />Recurring / Project Revenue<br />Client / Agency Labor Mix<br />70% / 30%<br />Profitability by client/service<br />Adjust for owner’s distribution <br />Employee utilization > 80%<br />31<br />
  32. 32. Profitability Model<br />Rent: 8% Revenue<br />RSF Per Employee $175<br />32<br />
  33. 33. Agency Example<br />Subpar profitability on key digital services<br />Client/Agency Labor Mix: 54%/46%<br />Billing rates do not cover overhead<br />33<br />
  34. 34. Agency Example<br />34<br />
  35. 35. Educate/Define SOW<br />Budget Presentation<br />Utilize Performance Metrics to Demonstrate Value<br />35<br />
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