Response issue by Ebiquity

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INTERNATIONAL

MARCOMMS INSIGHTS FROM EBIQUITY

Get control of accountability and transparency in online advertising

Inside: Google plays fairer with news

Transparency in Latin America

The case for data pooling

Transparency and trust: the time for media industry action

UK General Election communications review

Can an app in your pocket challenge live television?

Brand crisis management

Subscription Video On Demand â&#x20AC;&#x201C; Down Under

Issue No.20: Q3 2015

ONLINE ADVERTISING

COVER STORY

The key to accountability and transparency in online advertising: control Ebiquity’s Chief Strategy Officer, Nick Manning, recently issued a call to arms on how to achieve accountability and transparency in online advertising with an increasingly influential and powerful audience: procurement. Here he shares the best practice guidelines that captured the attention of Europe’s leading marketing procurement professionals at the third international ProcureCon Marketing conference in London. And at the heart of his advice to brand custodians, Nick urges advertisers to take control.

nline advertising can be spectacularly successful or incredibly ineffective; the difference between success and failure depends on many variables, far beyond those of offline media. The online market is a complex one which requires careful management of multiple components to get it right. One example of success was our recent ROI analysis of a UK gaming client spending more than £4m in online channels. The company had been using network buys with little effect but, when the client switched to Facebook, their

Nick Manning is Chief Strategy Officer at Ebiquity

cost-per-click was dramatically higher but their click-through rates increased by 550 percent. This enabled digital display to outperform all other channels in terms of ROI, more than three times the rate of both TV and generic pay-per-click (PPC). Conversely, we analyzed the ROI for a UK finance client spending in excess of £3m online annually on network buys. The topline results suggested a positive ROI, but our deep-dive showed that online display was returning only 15 percent of investment. So we ran a test and control exercise to determine the true effect of online, and found that the client’s online advertising was no more effective than charity ads run at the same time. In this instance the client had been put under pressure by its agency to put more money into online via its Agency Trading Desk on the promise of better performance. The ugly and inconvenient truth for advertisers, agencies, and the many links in the

online advertising chain is that this category of advertising is hugely sensitive and requires far more control than any other channel. Yet we routinely find that advertisers have less understanding of where their money is going in online and of how it is performing than in any other channel. What’s more, the fastest-growing elements of online advertising – programmatic, mobile, and video – are producing the worst results and are the least well understood by clients. And while many clients understandably feel underinformed and underserved by their agencies, we would argue that they need to learn and know more about the sector because of its complexity. It’s time they wrested back control and demanded increased accountability and transparency around online advertising. Data from the World Federation of Advertisers (WFA) has shown that as much as 60 percent of online ad value is lost before any revenue

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reaches online publishers. Beyond the WFA data, there is typically additional wastage in non-human traffic ‘viewing’ ads placed online, and as much as half of all advertising placed online may well never be viewed at all (even at a very low threshold of viewability). Allowing for these factors, the actual exposure of online advertising is often no more than 15–20 percent of a client’s budget. So it is no surprise that much of it is ineffective, but the agents involved in placing the ads get paid handsomely anyway. Compounding the factors underlying significant value erosion from undisclosed agency fees, mark-ups, and technology costs is the issue of brand safety. In a recent audit of online advertising for a US drinks brand, dozens of placements were found on wholly inappropriate sites (such as Alcoholism.about.com, Childfun.com, and Teenmachine.us). Hardly a ringing endorsement for an automated system, and yet revenue continues to pour into digital display. Consumers increasingly live online, and advertisers naturally want to follow and engage with them. But they need to do so appropriately and in a way that delivers genuine and demonstrable value and ROI. The way to do this is by taking control: systems and data control to improve accountability, and contractual control to provide financial transparency. Control requires clients to take responsibility for their online ad spend and not expect their agency to do everything for them with little scrutiny. It demands setting media objectives and KPIs across all channels, setting new targets for continuous improvement, and interrogating data, tech, and buying infrastructure and strategies. While online is complex and requires handson management by clients, the good news is that the tools exist to do this job. The two key areas where control needs to be exercised are in performance management and financial management, and clients need a rigorous program for both, armed with the right advice, data, and reporting tools. To ensure accountability of advertising effectiveness, clients need to have clear sight of what is being bought on their behalf, how it is being bought, what the audience size and shape is, and what the relevant success metrics are; the ad verification elements of viewability, non-human traffic and brand

View more insights at blog.ebiquity.com

safety must be reported on at a granular level to ensure continuous improvement is built into the media trading process. Clients should expect a higher level of reporting in online than in any other channel – not less – including site-level analysis. After all, in a world of programmatic trading, this data is vital for future performance. And yet it is often not reported at all. Marketing procurement in particular has a critical role to play in ensuring client media teams actively manage agency relationships, and this begins with putting in place rigorous and fair contracts to ensure financial transparency. Having the right contract is essential, and there are six key areas where advertisers should focus: 1. Ensure that the definition of ‘agency group’ in the contract includes all links in the chain. 2. Ensure that discounts, rebates, early payments, and unbilled media are all defined unambiguously. 3. Ensure that the ‘balancing services’ which exist between media vendors and the agency are clearly defined. 4. Insist on strict, water-tight definitions of media services and KPI deliverables. 5. To ensure transparency, be certain to align performance incentivization to KPIs. 6. Secure full data ownership, access, and audit rights. Asking the right questions and taking control of the contract and agency relationship is demanding, as PJ Leary points out in his article in this issue of Response. But when advertisers do assert control; when the right strategy, insight, data, systems, and performance improvement measures are put in place; when the right incentivization program is established to reward better accountability and transparency; then – and only then – can advertisers be certain that they are getting the levels of control and ROI they deserve from a medium that has been allowed, for too long, to get away with underperformance because of its apparent complexity.

“To ensure accountability of advertising effectiveness, clients need to have clear sight of what is being bought on their behalf, how it is being bought, what the audience size and shape is, and what the relevant success metrics are.”

ONLINE ADVERTISING

The right contract – 6 key points 01

Ensure that the definition of ‘agency group’ in the contract includes all links in the chain.

Ensure that discounts, rebates, early payments, and unbilled media are all defined unambiguously.

Ensure that the ‘balancing services’ which exist between media vendors and the agency are clearly defined.

Insist on strict, water-tight definitions of media services and KPI deliverables.

To ensure transparency, be certain to align performance incentivization to KPIs.

Secure full data ownership, access, and audit rights.

The industry view Before ProcureCon, we spoke to leading figures and authorities in the international marketing community. Here’s what they had to say about the issues of accountability and transparency in online advertising.

“It’s time advertisers wrested back control and demanded increased accountability and transparency around online advertising.”

Mark Butterfield, Head of Global Media for pharma giant Boehringer Ingelheim, observed: “We have little or no clear understanding of what percentage of digital spend is being delivered to the media owner and what is being taken in fees from either the agency or middle men. There needs to be clarity in the value chain, otherwise clients will continue to question the validity of the digital buy.” David Wheldon, CMO at RBS and WFA President, said: “I am very concerned about what’s happening with click fraud and the lack of measurement and accountability. This crosses borders in a way that nothing has been able to cross borders before. We, as an industry, need to focus on how we can do something to make sure that the internet serves all of our customers as well as our businesses correctly.” Mike Hughes, Director General of ISBA, UK, commented: “The major media issues that we’re confronting as a community center very much on the digital space. We’re talking about brands finding themselves on totally inappropriate sites at the end of the day. It’s all to do with lack of tracking and lack of care.” And Martin Riley, former CMO of Pernod Ricard and WFA President, added: “One of the problems we have in programmatic media is that we don’t fully understand it and we

don’t see full transparency, and until we fully understand it I think there will always be a question mark over how it really works.”

“Procurement has a critical role to play in ensuring client media teams actively manage agency relationships, and this begins with putting in place rigorous and fair contracts to ensure financial transparency.”

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TECHNOLOGY

SPOTLIGHT ON...

Google plays fairer with news In an unexpected move, Google is investing significantly in helping some of the major players in the European media industry to do better out of modern news production and distribution. Sabine Pevy, Account Director at Ebiquity Reputation, explores its motives.

t the end of April 2015, Google and several major European news organizations launched a joint Digital News Initiative, described by the search giant as a drive to support high quality journalism in Europe through technology and innovation. Its declared aim is to work with news media companies to increase revenue, traffic, and audience engagement, with Google committed to helping publishers boost income from ads, apps, and analytics. It is also funding research into how people use and access media, and digital skills training for traditional media journalists. Under this new deal, Google will provide €150 million to European news publishers over the next three years to help them monetize online content and coverage. Founding media partners in the scheme include the Guardian and FT (UK), Les Echos (France), El País (Spain), Die Ziet and FAZ (Germany), and La Stampa (Italy). News Corp (UK and global) and Axel Springer (Germany) – major players in European news, whose content sits behind paywalls – are notable absentees. Both groups are believed to object to Google’s ‘First Click Free’ policy, which means titles need to provide free access to five articles each day if Google is to index their content. They also oppose Google’s spidering software scraping and copying their content without payment within seconds of publication. The relationship between Google and traditional, longer-established news media has not always been a happy one in Europe. The latest deal follows a pilot two years ago with French media outlets, who threatened to View more insights at blog.ebiquity.com

deny Google access to their content unless the company paid licensing fees. That Google was prepared to dig so deep to ensure continued access to branded, trusted, original content which consumers clearly find so desirable reflects the realities of search. With a different outcome, in 2014 some German publishers demanded a financial share from Google for access to their content, which led Google to stop returning news from those publishers in its search results.

“The relationship between Google and traditional, longerestablished news media has not always been a happy one in Europe.” As a consequence, the German publishers observed a significant decline in traffic, leading to the realization that Google’s news business does not just serve its own interest but benefits publishers too. The publishers withdrew their demands. More recent calls in Spain for a ‘snippet’ tax from Google may well have similar consequences. This new Initiative also follows last year’s benchmark ‘right to be forgotten’ legislation in Europe, which caught Google unawares – an outcome that led CEO Larry Page to commit the company to becoming more European in its thinking and behavior.

Some suspect that Google’s Initiative is driven more out of self-interest than active support for the European media industry. Critics claim it is designed to make the European Commission back off the search giant, for the Commission has recently accused Google of abusing its monopoly in search and is currently investigating whether the company unfairly bundles its apps with Android products. Those yet to be convinced by the deal – including those media groups who have so far refused to sign up to it – will be watching keenly to see how the media groups who are involved report Google’s dealings with regulatory authorities at the national and EU level. To refute charges of conflicts of interest, media partners of the Digital News Initiative will be expected to report fairly on the company’s anti-competitive and anti-trust battles. If Google was hoping to recapture some of its founding ‘Don’t Be Evil’ allure with this Initiative, that was probably hoping for too much. But its act of enlightened self-interest in ensuring continued supply of desirable, soughtafter content should be applauded if it helps to secure the medium-term future of some of the world’s best content creators, namely some of Europe’s finest news organizations, and it should therefore be in their best interests too.

Sabine Pevy is Account Director at Ebiquity Reputation

GLOBAL MEDIA

FEATURE

The case for data pooling To pool or not to pool – that is the question, particularly in the wake of changes to market dynamics and media trading processes. Martin Sambrook, Ebiquity’s International Practice Leader for Media Audit and Effectiveness, argues that data pooling has never mattered more.

n argument has been developing in recent years that the well-evolved technique of media data pooling is an increasingly outdated and unreliable method of competitive industry benchmarking for advertisers. As a practitioner and evangelist of data pooling and media auditing for more than 25 years, I am of course tempted to say to those companies lacking a pool and a significant number of clients: “Well they would say that, wouldn’t they?” Businesses ranging from one-man bands to the consulting giants claim you don’t need pools and that they’re meaningless because media trading is so complex today. “Give us your data,” they say, “and we’ll give you our expert opinions based on year-on-year targets. Don’t waste your money on this media pool nonsense.” With respect, I beg to differ.

Why data pooling matters 1. Because media is increasingly complex Media trading, planning, and buying is ever more complex today. This is precisely why advertisers need to understand the real competitive price of the available media options. Indeed, it was complexity that drove Ebiquity to widen our frame of reference for understanding agency pricing and value, to include agency trading group deals that go beyond individual client deals. In acquiring FirmDecisions, the leading global financial auditor, we recognized the need to step beyond immediate media transactions to identify the hidden value in agency rebates.

Our joint client work with FirmDecisions has led to an inescapable conclusion that understanding the nature of trading dynamics is all about client-agency contracts. Contracts aren’t just about the single agency entity or brand, but need to be at agency group level.

“Contracts aren’t just about the single agency entity or brand, but need to be at agency group level.” They must cover issues including data ownership, audit and data rights, rebates, and transaction cash flows, both open and hidden. Advertisers need to understand whether their media is being bought competitively and what additional value is available to improve or balance this level of competitiveness. 2. Because we need to get back to basics Media auditing is and always has been about the three fundamentals of advertiser price and quality: i.

Where are you today? Is the current position competitive?

ii. Where should you be? Is it competitive enough and how much better could it be?

iii. How do you get there? What specific actions will achieve required improvements? (i) Where are you today? To address the first question, you need a meaningful and reliable competitive benchmark to understand the real nature of existing media deals. Agencies will always say you have a great deal, as will media owner stakeholders. Imagine you have a 90 percent discount off the media owner rate card – that’s a great deal, surely? If the other 30 advertisers you’re compared against in a pool get an average 95 percent discount, the cost per GRP is actually 10/5 = 100 percent premium to the pool and market. Not such a great deal after all. Rule number one with discounts and fixedpoint comparisons: Media owner rate cards are almost meaningless, created devoid of real pricing dynamics. You need a pool to do that. (ii) Where should you be? For the second question, the main objective is a clear understanding of the gap between your buying value and the wider market of your peers represented by the pool. Fixedpoint benchmarking, year-on-year, cannot Martin Sambrook is International Practice Leader for Media Audit and Effectiveness

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address this gap. For instance, an improved deal year-on-year of 10 percent is of little consolation if your pricing is 100 percent higher than your peers, as above. And if you’re a tenacious media procurement person, even leaving 5 percent on the table is galling. Gap analysis also must factor in local market trading dynamics, including spend volumes. This is only relevant in some markets, including Germany, Russia, and France. Client-related volume trading, which is the market norm in such markets, determines the starting point for the assessment of media price and quality competitiveness. So, on the face of it, fixed-point, year-on-year pricing comparisons might deliver a useful 10 percent improvement. What they won’t tell you is whether advertisers of your size and volume should be enjoying a price 20 percent better than this, prior to any clever targeting and planning by the agency.

“To understand this pricing potential and the competitive position of your peers, you need a pool and a good contract.” Rule number one with volume-related media price markets: Make sure you are receiving the value that you are entitled to as a minimum. You need a pool to do that. If we look at the gap analysis in those markets that have little or no volume relationship in the pricing delivered, a peer group comparison is even more vital because there are no rules. In the UK, for instance, achievable media pricing is primarily driven by the nature of the client-agency contract as regards agency remuneration, performance-related bonuses, and penalties. Here the agency is both principal in the deals and broker of how value is distributed. To understand this pricing

View more insights at blog.ebiquity.com

potential and the competitive position of your peers, you need a pool and a good contract. Advocates of fixed and year-on-year pricing benchmarks assert that the existence of Station Average Prices (SAP) in the UK negates the need for a pool, since the industry provides the price benchmark anyway. This may be true to a point, but it’s not helpful without understanding the real net price experience of advertisers buying specific target groups and the competitive price relationship to the SAP benchmark. So, even with SAP, you need a pool. (iii) How do you get there? For the third fundamental part of the media audit process, we need to propose a plan of action to deliver tangible improvements in value. This can be as simple as proposing a percentage improvement on current pricing, and a year-on-year benchmark may suffice if we are satisfied with the answers to the ‘Where are we?’ and ‘Where should we be?’ questions. The drawback of this approach is what is often called the ‘wisdom of the 5 percenters.’ That is to say, as a consultant, if in doubt, propose a 5 percent improvement target. At issue is the difference between opinion and advice rooted in empirical data versus opinion. A recommendation that proposes a precise improvement number, together with a specific and granular identification of how much improvement with which media owners and channels, is a far more powerful opinion. Considered and measured advice creates significantly more traction with internal stakeholders and agency partners. Rule number one with value improvement recommendations: Use the best supporting data to generate belief and credibility in what is recommended. You need a pool to do that. 3. Because of media inflation Media inflation is often the most important variable when conducting year-on-year audits, whereby agencies undertake to improve clients’ media pricing net of inflation and, in delivering this guarantee, earn bonuses or variable remuneration. This would be acceptable, except for the fact that there is no generally agreed inflation index for

media, so clients must take agency assertions on inflation as valid or else appoint media consultants to validate agency claims. There are three obvious sources of data for checking inflation estimates, all of which are either cheap or cost-free. First, agency estimates that – miraculously – always seem to allow them to earn full bonuses; second, estimates sourced from other agencies; and third, the inflation estimates or rate card increases provided year-on-year by media owners. There are good reasons why these data sources come cheap. They’re not very good or accurate, and certainly not procurement best due diligence territory. We should remind ourselves what a measure of media inflation is: the increase in the cost per standard unit or cost per standard audience unit of media, period-on-period. The key factors of this price variable are actual demand for, and actual supply of, that media unit, year-on-year. There is a precise, calculable inflation price that can be derived from a media audit data pool in this respect. Rule number one with media inflation estimates: Test them against empirical data based on real bought net prices paid by the advertisers year-on-year. You need a pool to do that.

In summary If you’re tempted to abandon or ignore the data pool benchmarking described above in favor of your own internal, year-on-year benchmarking and a touch of consultant fairy dust, ask yourself the questions about your competitive positioning: 1. Do you know where you are today? 2. Do you know where you should be? 3. Do you know how to get there? Are your answers based on instinct, experience, and opinions, or empirical data and real facts? The realignment of multimillion-dollar, or multibillion-dollar, media investments requires a significant degree of due diligence and consideration. You need a pool to do that.

COMMUNICATIONS INSIGHT

ADVERTISING EVOLUTION

Party positioning in the UK General Election The 2015 UK General Election was full of surprises – inaccurate polling throughout the campaign, David Cameron winning an outright majority, and all parties failing to make genuinely impactful use of social media tools and platforms. As Jenny Naish, Senior Strategist in Ebiquity’s Insight team, explains: While 2015 was the most social election ever, truly compelling content came from voters not parties.

reating online communities

On Facebook, the Liberal Democrats used inclusive language. They referred to followers as ‘family,’ consistently responding to comments and encouraging dialogue. Labour posted a series of YouTube videos featuring celebrities pledging support. Community was given an aspirational quality, creating a ‘collective’ of values through endorsement. A clear pattern in most social media activity for all parties was that these communities were largely inclusive and often talking to an existing supporter base. The Scottish National Party (SNP) was an exception, here, for its use of hashtags, placing the party within the

domain of open debate rather than its own enclosure. It used terms such as #ge2015 to push messages beyond existing supporters. This made it appear more vital, involved, and open. The creation of communities was invariably also about funding and support. The Conservatives’ well-documented #Team2015 initiative, running since 2013, organized events via Facebook and email to rally its troops and encourage new recruits through in-person gatherings. The UK Independence Party (UKIP), meanwhile, keenly employed social marketing tactics such as the use of ‘Thunderclap’ – a crowd-sourced message sharing platform https://www.thunderclap.it/about – which helped garner support and raise awareness.

Building a coherent narrative Jenny Naish is a Senior Analyst at Ebiquity

Labour’s use of celebrity and influencer endorsements gave it thematic continuity. Overall, the party identified itself as being about policy. Online, however, this meant a surfeit of stories, pushing viewers into different directions, without a unifying, golden thread.

Meanwhile, the Lib Dems broke down their manifesto into a series of videos on YouTube, emphasizing real people and their experiences with the issues raised. Beyond the thematic connection of the manifesto, there was little narrative drive or hook in the party’s online presence. It was only the Conservative Party that almost managed to meet the golden rule of content strategy: the creation of a joined-up narrative that can flex to different channels. Traditional channels avoided Cameronbased imagery and focused on undermining Miliband, while online platforms sought to engage in a personality push, with the Prime Minister directly addressing viewers in videos. By demeaning Miliband in one medium and championing Cameron in another, it stayed faithful to the party’s core narrative: leadership.

Harnessing youth platforms Engaging the disenchanted youth and encouraging them to vote has been high on the political marketing agenda. Furthermore, the first general election for five years offered a prime chance for new voters to become new recruits.

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“While the 2015 UK General Election was the most social poll ever, the truly compelling content came from voters not parties.”

The user-generated craze of Milifandom, for example, saw young people positioning the Labour leader as a hero or crush icon. He became part of a co-created firestorm of photoshops, soundtracks, and films. The meme generated its own language (desirable things became #milibae, for instance). This gave the party new and exciting ground on which to engage with youth – not to mention the power of a catchphrase. Was this a knock-on effect of Ed Miliband’s interview with Russell Brand’s YouTube channel ‘The Trews’? This saw the leader attempt to align his values with – and make himself accessible to – the anti-voting demographic, for which Russell Brand had become the spokesman. Subsequent to this interview, which received over 1m views and was dubbed ‘milibrand,’ the host performed a nimble 180-degree about turn and directly appealed to his anti-establishment youth fan base to ‘emergency vote’ for Labour.

Although lampooning Miliband for engaging with Brand, David Cameron nevertheless placed the Conservatives firmly in the youth battleground via an interview given to BuzzFeed. This relied on the power of the platform (BuzzFeed having a global audience of over 130m) over the influential status and personality of the interviewer. The effectiveness of this was questionable, with BuzzFeed itself drawing attention to the lack of engagement shown in this content.

View more insights at blog.ebiquity.com

Pushing shareable video content As in traditional media, negative messaging was the most frequent, with comedy the main angle and – interestingly – music the core content.

Making it local Facebook and YouTube accounts were awash with the use of local candidates and party-supporting citizens offering firsthand testimonials and experiences. Labour positioned itself as the ‘party of the people,’ a stance bolstered through its use of videos of candidates addressing real issues in real local communities. The Green Party used the same strategy, populating its YouTube channel with direct addresses from supporters and influencers, as did the Lib Dems. Comments for all three parties were left open – encouraging dialogue and debate and making the parties seem accessible. The Conservatives went local in a different way. Purchasing pre-roll video ads for YouTube to micro-target marginal constituencies meant the party could gain a dominant presence in the areas crucial to its success. This was the first time a party put considerable budget behind paid-for video advertising that could – controversially – also operate as a TV substitute, as TV ads are not allowed in UK election campaigns.

The Conservatives sustained its main tactic of attacking Labour through its dual ‘mock and menace’ technique. The ‘Call The Tune’ video, for example, featured Ed Miliband as Nicola Sturgeon’s dancing puppet, a comedic skit that conceptually built on a print ad earlier in the year in which Miliband waved from (former SNP leader) Alex Salmond’s pocket. The online video continued to warn of a Labour-SNP coalition, creating a narrative designed to induce panic and belittle Miliband’s leadership qualities simultaneously.

While the Greens and the Lib Dems were the only parties to really use a language of positivity, comedy attack tactics were prominent. The Lib Dems #SaySorryEd (for ‘crashing the economy’) Facebook video overdubbed a series of Miliband speeches to give the impression he was singing the song ‘Sorry seems to be the hardest word.’ Meanwhile, the Greens clearly targeted students with ‘Change The Tune,’ a spoof that depicted its competitors as members of a homogenized boy band. Launched on YouTube, this followed the party’s thematic positioning of being ‘different’ from the others. However, the execution had no follow-up and didn’t tie in strongly enough to any other media, meaning it quickly lost momentum.

MEDIA VALUE MEASUREMENT PJ Leary is Ebiquity’s Chairman, North America, and Executive Director, Media Value Measurement

SOAPBOX Transparency and trust: the time has come for media industry action For too long, the media industry has been fogged on issues of transparency and trust. After witnessing an epochal exchange between industry titans at a recent trade event, PJ Leary – Ebiquity’s Chairman, North America, and Executive Director, Media Value Measurement – calls for both agencies and advertisers to step up and tackle the key issues head on.

t the most recent Association of National Advertisers (ANA) Financial Management conference in Phoenix, Arizona, Irwin Gottlieb, global chief of WPP’s GroupM, sat down with Bob Liodice, President and CEO of the ANA, for a ‘fireside chat.’ It was a brilliant session and one of the highlights of the conference. Irwin delivered exactly what one would expect from a legend in the business. He was honest, direct, and informative. He was also smart, prescient, and unflappable. Sadly, he was unable (or unwilling) to extend the session by taking comments from the audience. But there were moments in the discussion that were reminiscent of a memorable scene in the Aaron Sorkin movie A Few Good Men, starring Jack Nicholson as US Marine Colonel Nathan Jessup and Tom Cruise as US Navy Lawyer Lieutenant Daniel Kaffee. There were tensionfilled scenes containing dramatic dialogue, though no “You can’t handle the truth!” proclamation or “You’re damn right I ordered the code red!” cry from the ANA dais. That would have made for even more compelling conference theatre. The scene I was reminded of was the pivotal exchange between Colonel Jessup and Lt. Kaffee that begins to shed light on the motivations of the central characters. As almost an afterthought at a lunch meeting, Kaffee asks Jessup to provide copies of the flight logs from Guantanamo Bay, Cuba, to aid

his investigation, to which Jessup responds: “You see Danny, I can deal with the bullets, and the bombs, and the blood. I don’t want money, and I don’t want medals. What I do want is for you to stand there in that [EXPLETIVE] white uniform and, with your Harvard mouth, extend me some [EXPLETIVE] courtesy. You gotta ask me nicely.” On the stage at the ANA conference, the chairman of GroupM, the largest media buying agency group in the world, told a crowd of over 700 – many procurement and finance professionals from the largest marketer organizations in the world – that they needed to ask the right questions in order to get the answers they were seeking. It was the “ask me nicely” moment. In fact, it appeared to me and others present that he was politely admonishing marketers for not doing their homework and, in a sense, challenging them to meet media agencies halfway in order to have a more productive and meaningful exchange of information. The implication was that this would lead, potentially, to a deeper understanding of the evolving business relationship between client and agency. At the same conference, I had the opportunity to have a very candid conversation with a senior agency executive, both of us in reflective moods about the direction of the business. I was struck by this executive’s take on the tone and tenor of recent publicity

around rebates and the narrative about the state of client/agency relations in general. He dubbed it the TMZ effect, after the US paparazzi media brand, and observed that relations are worse than they’ve ever been in the advertising business. The intentionally sensationalistic print and web headlines seem designed to pit good against evil and draw in audiences who have a narrow attention span and a 140-character ticking clock in their heads. We agreed that sensationalism is a dangerous feature in the discourse of a professional industry. This leads me to trust. Trust in any relationship requires equal, two-way communication between peers. Both parties need to talk and share, both need to learn and grow, both need to be transparent and honest. Even if – or perhaps particularly when – what they’re being honest about doesn’t sit particularly well with the other. GroupM’s Gottlieb is being honest. He’s transparently non-transparent, and it’s up to all marketers to really interrogate that model to see if it’s right for them. How does it benefit you to relinquish your transparency rights? Let’s be direct. We owe it to ourselves if we care about this industry. Oh, and a little civility and R-E-S-P-E-C-T goes a long way to building trust too. And this is a door that swings both ways.

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MEDIA INVESTMENT

FOCUS ON… Transparency in short supply in Latin America Like every other region in the world, Latin America still has a long road to travel if advertisers are to benefit from full transparency around their media investments. Tony Newcomb, Managing Director, FirmDecisions Latin America, explains what’s different about this geography.

inancial transparency around media investment is in limited supply in Latin America. This is not unique to the region – indeed, as readers of Response will know, transparency is an issue the world over. But the reasons for opacity in Latam are peculiar to the region, and two prominent causes are the concentration of media investment with a limited number of suppliers and statutory restraints. Almost all providers in every Latin American market offer agency volume bonuses (AVBs). But in many key markets, more than half of all marketing expenditure is concentrated in the hands of just one or two media providers: in Mexico it is Televisa; Globo in Brazil; Clarin in Argentina; RCN and Caracol in Colombia; and Venevision and TVC in Venezuela. This concentration leaves media buying agencies little leverage with the providers. The secondary media providers in these markets – and, indeed, sometimes the primary providers too – often offer generous incentives to the agencies to maintain or gain market share, in the form of:

• • •

Generous, undisclosed early payment discounts The opportunity to purchase inventory on liberal terms Consulting agreements with the media provider

View more insights at blog.ebiquity.com

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Ostensibly free services, which are then billed to clients

How agencies disclose these incentives to clients (or not) contributes to the lack of transparency, and we are frequently required to assess and quantify whether practices and incentives such as these comply with agency contracts. Brazilian law limits the amount of transparency between the media provider, agency, and client. First off, statutes do not permit media buying agencies to operate in the market. As a concession to the agency industry, statutes provide for minimum remuneration: 15 percent on the gross cost of media. Additionally, AVBs must stay with the agency and cannot be credited to the client. Likewise, agencies must sign non-disclosure agreements with the media providers regarding these AVBs. Violation of the law results in the advertiser paying the full rate card for all media, until the advertiser has remedied its non-compliance practices. The most obvious impact is that clients do not know what their agency is earning on their account. Indeed, it is quite possible that the media provider on the account will be compensating the agency more than the client is. The limitations imposed in Brazil mean that we are frequently required to help clients navigate the regulations, making sure that they are not deemed in violation of local

statutes. Additionally, we estimate total agency remuneration, including AVBs, on each account. These estimates attempt to make the financial terrain clearer. Moreover, we ensure that advertisers do not pay for expenses that should be absorbed by the agency. We often find that clients are paying for marketing and creative expenses which, technically, should be absorbed by the agency. Finally, transparency would be enhanced if the master service agreements were translated from their original language into the local language. Local personnel, on both the client and agency side, are overwhelmed by complex agreements in non-native languages. This complexity not only increases the risk of non-compliance, but also causes material noncompliance and overcharges to advertisers.

“Concentration leaves media buying agencies little leverage with the providers.” Tony Newcomb is Managing Director, FirmDecisions Latin America

RESEARCH

FEATURE

Why it pays to take the drama out of a crisis

Brand equity can suffer significantly during a crisis, with profound and enduring effects on subsequent corporate performance. A pioneering study by Max Backhaus and Marc Fischer from the University of Cologne has found that acts of corporate misbehavior, such as bribery or corruption, can have a deeper and more enduring impact than product failure and recall. Max Backhaus explains.

t is well established that when companies’ products cause real (albeit unintended) harm to consumers – such as supermarkets selling tainted or infected food products, which are then recalled – both brand equity and corporate financial performance suffer as a result. The scale and duration of this impact depends on a number of factors, including a brand’s track record and established consumer goodwill, as well as how quickly brand custodians respond to the crisis.

how this compares with product crises. We also wanted to learn how strong the effects are, how persistent the damage is, and how long they endure. Lastly, we looked to identify factors that amplify and attenuate brand damage effects.

crisis as well as the duration of that effect. In addition, we identified the key drivers that reveal the conditions under which a crisis event can develop into a severe crisis. It is worth noting that the events studied all took place in Germany, and the consumer responses tracked were those of German consumers. The principal measures used to analyze the impact and effects of the crises study included YouGov’s Brand Index (see table, below), advertising spend allocated before, during, and after the crisis (Ebiquity), and consumer interest shown by search trends and terms (Google Trends). YouGov’s Brand Index score is particularly sensitive and revealing, as it tracks brand perception weekly. In this study, the data sets analyzed covered 254 weeks, from 2008–2012.

Types of crisis events

“Brand damage is, in fact, greater for corporate social misbehavior than it is for product failure – the crises are deeper and last longer than product harm crises.”

The accepted academic definition of corporate brand crises is “unexpected events that threaten a brand’s perceived ability to deliver expected benefits, thereby weakening brand equity.” We set out to investigate the effects of brand crisis events on consumer brand ratings. We were keen to know how corporate social irresponsibility damages brand equity and

The study analyzed the impact of more than 200 different crisis events over 5 years, encompassing 69 brands from a dozen industry sectors. The crisis events covered both product failure and corporate social misbehavior, and we estimated the immediate and cumulative brand damage effect of each

Much less well understood are the effects of companies and corporate leaders behaving badly. In the first study of its kind and depth undertaken, our research group has assessed for the first time the impact on companies shown to be guilty of corporate social irresponsibility (CSIR) or misbehavior, such as bribery.

The study found that brand damage is, in fact, greater for corporate social misbehavior than it is for product failure. CSIR crises are deeper and last longer than product harm crises, and the cumulative effect is equivalent to a 78 percent loss in brand perception ratings, compared with 50 percent for product harm crises. The surprising results may be explained thus. Product failures are often believed to be the result of bad luck, and they’re very rarely caused deliberately. It’s certainly true

ISSUE 20 Q3 2015 RESPONSE RESPONSEMAGAZINE MAGAZINEFROM FROMEBIQUITY EBIQUITY

that the salmonella crisis that struck Cadbury in 2006 and 2013’s horsemeat scandal that dented many European food retailers and manufacturers were the result of cornercutting and inadequate health and safety controls. Yet even the most hardened critic is unlikely to level charges of deliberate wrongdoing. This contrasts starkly with CSIR, where the failing is both the deliberate wrong-doing and being found out. The study also showed that media coverage significantly amplifies brand damage, while higher brand strength serves as a shield to protect brands in the long term. Crises typically dent reputation for ten weeks, with the strongest impact three to four weeks after the crisis hits, although the impact can last much longer, depending on both responsibility and reaction in the corporation at question. Sales losses, too, are by no means immediate and may take months to unfold.

“Media coverage significantly amplifies brand damage, while higher brand strength serves as a shield to protect brands in the long term.”

We concluded that this study into the anatomy and consequences of reputational crises should help brand managers forecast the impact that future crises will have on brand equity and time to recovery, as well as providing them with guidance and a toolkit for appropriate reactions. We recommend that brand custodians invest in brands to protect against the danger of crises, as well as keenly monitor media coverage to predict the depth and duration of the crisis.

Max Backhaus is Research Assistant, University of Cologne

QUALITIES MEASURED BY YOUGOV’S BRAND INDEX MEASURE

QUESTION

Brand quality

Does the brand stand for good quality?

Brand fairness

Does the brand provide good value for what you pay?

Brand satisfaction

Are you satisfied with this brand if you are or were a customer?

Brand trust

Would you recommend the brand to a friend or avoid the brand?

Brand identification

Would you be proud or embarrassed to be associated with this brand?

Brand emotion

Do you have a general positive or negative feeling about this brand?

Brand Index Score

Score between -100 and +100, based on comparison with category brands TYPES OF CRISIS EVENTS

UNETHICAL CORPORATE BEHAVIOR (CORPORATE SOCIAL IRRESPONSIBILITY)

PRODUCT HARM CRISIS

Fair operating practices violation

Human rights/working conditions violation

Environmental scandal

Product recall/product defect/production stop

Management misconduct relating to corruption

Violation of compliance

Endangerment of environment, animals, people

Deviation from product quality or inadequate service

Libor manipulation 2008

HP corporate spying scandal 2006; Deutsche Telekom 2008

View more insights at blog.ebiquity.com

Lidl listeria in cheese 2008 BP Deep Water Horizon 2010

Blackberry outage 2011 Tesco horsemeat 2013

MEDIA DIGITAL Franc Carreras is digital advisor to Ebiquity Spain

ASK AN EXPERT

Can an app in your pocket challenge live television? A new generation of apps enabling live streaming of video content is threatening to revolutionize one-to-many narrowcasting – and broadcasting. Franc Carreras, digital advisor to Ebiquity Spain, demystifies meerkats and periscopes.

he emergence of social media during the last decade created a whole new category in digital marketing, but it is no longer a new thing. The majority of internet users already spend a significant amount of their online time on social media. This has caused shifts in consumer habits that inevitably affect marketers in their efforts to capture some of that fickle attention that is now moving to and between different screens.

in submarines. Since then, the presentation of Meerkat at Austin’s South By Southwest (SXSW) festival, and the knee-jerk launch of Twitter’s Periscope in response shortly afterward, shot these two mobile applications to the top of the download charts on Apple’s App Store. Now they are also available on Android phones.

As an example, Facebook has gone from dorm room pastime to challenging Google on mobile advertising. In a different way, Twitter has changed the way news is spread around the world, and Instagram has turned photography on its head.

Fast-growing social networks have been shown time and again not to attract any significant volume of advertising until user acquisition slows down. Because of that, most pundits don’t expect to see meaningful volumes of, or revenue from, advertising on either Meerkat or Periscope for quite some time yet. That said, the following lessons from the explosion of both platforms must be taken into consideration:

When it comes to video, Google’s YouTube is now taking the millennial generation’s attention away from their parents’ TV at such a pace that advertisers are rushing to online video to increase the reach of their television campaigns. But to the readers of this publication, none of this is news anymore. That said, once every few years a new player barges into the social media landscape, bringing with it the potential for fresh disruption. Here’s one that was missing from every 2015 prediction I saw at the end of last year: live streaming of video directly from mobile phones. Before March the words ‘meerkat’ and ‘periscope’ were merely a small carnivorous mammal from the mongoose family and an observation instrument commonly found

What does this mean to advertisers?

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Audiovisual is king: Video has proven to be a superior form of media over text, image, or audio. As compression improves, broadband expands, and data plans cheapen, the main barriers to user adoption on mobile phones are crumbling. The YouTube generation: Google has shown how appealing pre-recorded, ondemand online video can be on YouTube. A whole generation has grown up skipping from video to video just with a swipe on the screen of a tablet. Live video is next. Mobile is the present: Last year, mobile overtook desktop in internet traffic for the

first time in most of the developed world. Consumers are moving from ‘mobile too’ to ‘mobile first’ and some are already on ‘mobile only.’ Just watch a baby boomer shoot video next to a millennial. One will use two hands to shoot landscape thinking about how it will look on the flat-screen TV in her living room. The other will shoot vertical with one hand, knowing she and, crucially, her intended audience are likely to only watch it on their ever larger mobile phone screens. Considering these three take-outs, plus also the incredible volume and diversity of video being broadcast from all over the world in real time, it is not hard to imagine the future. Witnesses broadcasting live as news happens in front of their eyes (cameras) will be able to attract audiences in their millions just seconds after any major unexpected event. And what advertiser wouldn’t pay handsomely for a slice of all that attention? It is clear that the clock has already started ticking, although the tsunami may still be slow to come. But brands should avoid the temptation to dismiss live streaming video as yet another new social media fad that will fade and die. Live streaming from mobile devices is here to stay and the major national and global news networks should watch out, both for the source of new content and for a rocky ride from some serious, independent, and disintermediated competition. And if you don’t believe me, just watch!

ISSUE 20 Q3 2015 RESPONSE MAGAZINE FROM EBIQUITY

CONSUMER BEHAVIOR Tim Thomson is Client Service Director at Ebiquity Australia

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Subscription Video On Demand – Down Under It seems Aussies and Kiwis have a healthier appetite for subscription video on demand (SVOD) than initially expected, with no sign of a retreat on the horizon. Ebiquity Australia’s Tim Thomson explores what this means for both subscription and linear TV.

VOD’s current honeymoon phase Down Under is being fueled by free trial periods and an abundance of rich content just waiting to be explored by consumers. The free trials have been broad and generous, ranging from one month (offered by all providers) up to a twelve-month trial from LightBox in New Zealand, offered by the major Telco provider, Spark. Adding in content lists of an average 1100 titles per provider, it’s clear to see why there has so far been such an impressive trajectory for SVOD in Australia and New Zealand. However, the growth rate to date does appear to be unsustainable, with many expecting a period of consolidation in the short term, once viewers – bloated after bingeing on their favorite programs – opt out. The longer-term view still looks strong and, if the US experience is repeated Down Under, there’s a lot more to come for SVOD. Nielsen’s most recent Total Audience Report (Q4 2014) indicates 40.3 percent of American households have access to an SVOD service and, while Australia is unlikely to reach those levels of penetration soon, it does suggest busy times ahead for this new platform.

Who will win the SVOD battle? Currently there are four major SVOD players in Australia (Netflix, Stan, Presto, and Quickflix) and four in New Zealand (Netflix, Neon, LightBox, and Presto). While several have been around for some time already, the

View more insights at blog.ebiquity.com

market really started to gain traction in March 2015 when Netflix launched on both sides of the Tasman Sea. And it’s fair to say that Netflix has been winning the battle for eyeballs since launch, with streaming data from News.com.au suggesting Netflix in Australia is achieving around 750,000 daily visits, and there’s a considerable amount of clear air between Netflix and Presto (closer to 50,000 daily visits). Although visits don’t necessarily translate to actual viewing, current traffic strongly suggests that Netflix is already the leading provider in these markets. It is almost certain that some competitors will fail and, given the relatively limited size of the market (9 million households in Australia and 1.6 million in New Zealand), attrition looks likely. But what will distinguish winners from losers? While Presto and Stan senior management say local experience and relationships will get them over the line, Netflix CEO Reed Hastings was more blunt when he told Fairfax Media: “It’s just money. If you pay the most money, you win the show.” In an environment where content is king, SVOD providers need scale and deep pockets to survive. Interestingly, as Response was going to press, SVOD providers in Australia rejected the idea of introducing ads to their service, maintaining their commitment to their subscription model, despite many questioning whether the market will be able to maintain so many competitors. Commitments came from both Netflix and Presto.

The impact of SVOD on Subscription and Linear TV Of the two rival formats, Subscription TV (STV) providers Foxtel Australia and Sky NZ appear to be the most vulnerable, given the similarity of their offerings to SVOD. So it’s not surprising both have SVOD skin in the game, with established stakes in Presto (Foxtel) and Neon (Sky). That said, both STV and Linear TV appear insulated to a degree thanks to their safe haven content of news, reality TV, and sport – territories in which SVOD traditionally struggles to compete. And of these three, sport may well be the hardest for SVOD to crack, particularly in Australia where it is protected by anti-siphoning laws that shield free-to-air competitions such as the Olympics and the World Cup. SVOD is making a strong move in both Australia and New Zealand, but it seems at this early stage to be more complementary than destructive. In these early skirmishes, SVOD has so far delivered more of a kick to the shins than a knockout blow.

“40.3 percent of American households have access to an SVOD service.”

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