Maloney-3P Track
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Maloney-3P Track Maloney-3P Track Presentation Transcript

  • 3P Track
    October 9
    2011
  • “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.”
    2
  • Client Perspective
    May not understand requirements to deliver digital marketing programs
    Simplify and standardize processes for managing agencies:
    Same compensation framework
    Same metrics (effective commission rate, blended hourly rate, etc).
    3
  • Digital Reality
    More labor-intensive
    Different set of skills
    Demand > Supply for certain talent
    Historical relationship between cost of “creative” “production” and “media” no longer relevant
    4
  • Digital Reality
    The right agency model to deliver value
    Getting compensated
    Maximizing profitability
    5
  • Agency Model
    6
  • Digital Agency Service Model
    Production
    Media Strategy and Planning
    Media Buying
    Brand Strategy
    Creative
    Multiple Channels:
    Website, SEM, SEO, Video, Social, Email, Mobile, etc.
    Build/Partner/Outsource?
    Specialist/Integrated?
    7
  • Digital Agency Service Model
    Production
    Media Strategy and Planning
    Media Buying
    Brand Strategy
    Creative
    “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.”
    President, Leading Digital Agency
    8
  • Digital Agency Service Model
    Production
    Media Strategy and Planning
    Media Buying
    Brand Strategy
    Creative
    Quality Control
    Understand Client’s Technical Infrastructure
    Commoditization
    Investment required given expanding range of options
    9
  • Digital Agency Service Model
    Production
    Media Buying
    Media Strategy and Planning
    Brand Strategy
    Creative
    10
  • Digital Agency Service Model
    Production
    Media Strategy and Planning
    Media Buying
    Brand Strategy
    Creative
    Operating Margins
    In-house: 19.2%
    Outsource: 16.5%
    11
  • Digital Agency Service Model
    Media Buying
    Production
    Media Strategy and Planning
    Brand Strategy
    Creative
    Operating Margins
    In-house: 18.5%
    Outsource: 18.0%
    12
  • “The Newest Ad Agencies: Major Media Companies. Marketers Increasingly Bypass Traditional Business Model”
    “Google, Omnicom Partnership Redefines Digital Advertising”
    “Hearst Buys iCrossing For $325 Million”
    13
  • Clients
    Media Planning and Buying
    Strategy and Creative
    Production
    "If I were an agency, I would be really worried about being disintermediated. More and more, agencies are almost in the way sometimes.“
    Ad Exchanges
    Ad Networks
    Media Companies
    Search Engines
    Becky Saeger, CMO Charles Schwab
    14
  • Clients
    Media Planning and Buying
    Strategy and Creative
    Production
    Ad Exchanges
    Ad Networks
    Media Companies
    Search Engines
    15
  • So, What’s the Right Agency Model?
    Client Requirements
    Media Consolidation
    Production Volume
    Agency
    CoreCompetencies
    Culture
    Ability to Differentiate
    Quality
    Price
    $$$
    Growth vs. Margin Erosion
    16
  • Compensation
    17
  • of Marketers utilize retainer/project fee combination
    Increasing use of performance incentives
    18
  • Compensation
    Educate/Define SOW
    Budget Presentation
    Utilize Performance Metrics to Demonstrate Value
    19
  • Output-Based SOW
    Traditional
    Digital
    Create development and production of one :30 TV Spot
    One full-page, four-color print ad
    Website Enhancements: Strategy, Architecture, Wireframes
    20 Landing Page Designs & Code Executions
    20
  • Scope of Work
    21
  • Scope of Work
    22
  • Scope of Work
    Develop 4 Landing Pages
    23
  • Scope of Work
    24
  • Scope of Work
    25
  • Scope of Work
    26
  • Budget/Proposal
    “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.”
    Digital Campaign
    $250,000
    $0
    $1,000,000
    $1,250,000
    25%
    David Beals
    27
  • Budget/Proposal
    28
  • Managing Profitability
    29
  • Attendee Survey
    30
  • Profitability Model
    Full-time / Freelance Staff:
    Recurring / Project Revenue
    Client / Agency Labor Mix
    70% / 30%
    Profitability by client/service
    Adjust for owner’s distribution
    Employee utilization > 80%
    31
  • Profitability Model
    Rent: 8% Revenue
    RSF Per Employee $175
    32
  • Agency Example
    Subpar profitability on key digital services
    Client/Agency Labor Mix: 54%/46%
    Billing rates do not cover overhead
    33
  • Agency Example
    34
  • Educate/Define SOW
    Budget Presentation
    Utilize Performance Metrics to Demonstrate Value
    35