If your ad agency is ripping you off, it’s probably your fault

The media is awash about clients losing trust in their agencies because they feel like they (agencies) are not being transparent, and are making huge profits by hiding the true cost of services, particularly in the digital space. News flash…they are!

The one thing agencies are better at than even advertising – is making money.

Agencies have surfed the wave of digital media for years finding new and creative ways to make money off their clients budgets. When traditional media rebates were being slashed, agencies figured out they could charge client’s a 20% margin on digital spend and get another 10-15% rebate from publishers. Agencies were making a fortune.

How did this happen?

The truth is most clients have let this happen to them. For years agencies have been clients’ trusted partners, helping them to navigate the ever confusing and expanding digital advertising space.

The savvy marketers have kept on top of the latest digital channels, trends, vendors and platforms. They have kept their agencies honest by pushing them to be transparent, demanding detailed analysis of their spend and forcing agencies to lift their game.

But many marketers (like most of us) are time poor, juggling a million other business pressures and through either lack of time or necessity have given their agencies carte blanche to take their digital marketing budget and spend it (as they believe) in the most efficient way possible.

This for an agency is the perfect client. They trust you to do what you want, and as long as you hand them a report of how you hit their KPI’s then you can pretty much use every trick in the book to increase your margins from 20% up to as much as 60%.

I spent nearly 20 years working in agencies doing exactly that.

How can you stop it happening?

Putting pressure on your agency to be more transparent is a nice idea but it’s easy for agencies to hide the true cost of programmatic, ad-serving, trafficking, display and even account servicing.

So you’re left with two options:

1. Get smarter about the digital space

The only way to really be sure your agency is being honest with you is to know as much about the digital space as they do. And all it takes is a little of your time;

  • Talk to vendors – there’s nothing stopping you having a direct conversation with the people your agency is spending all (or some) of your money with. You have the right to pick up the phone and call Google and ask them to take you through exactly how your money is spent with them. Or if your agency is using say Adobe, you can actually speak to them as well! If you’re running programmatic, go and have a discussion with the DSP provider that your digital budget is being spent with. You’ll not only increase your knowledge but you’ll also have the ability to discuss things like a direct relationship with them – which can save you money too.

  • Talk to other agencies. Any agency will be happy to have a conversation with you and there is nothing stopping you from doing that. Get an understanding of what it might cost to run your digital campaigns with them. There are lots of specialist digital agencies around that can do just as good a job as a full service agency and usually for a lot less.

  • Understand data. The future is all about data, and if you’re not an expert about all the data your campaigns are collecting and how it can be used to increase efficiency (not just in your advertising but in your business operations as well) then you’re already behind. Make a point to attend a data industry event and learn more about your own data. Most agencies are still getting up to speed on data as well, so it’s easy for you to leap ahead of them in this space and start driving the conversation instead of listening to it.

2. Engage some experts

I have to point out that I am biased here, because I run a consultancy that does exactly that – helps clients understand their marketing technology and improve their digital marketing activity.

So why use a consultancy? Well if you choose the right one then some of the key benefits you get are:

  • Experts that have worked in both agencies and vendors who actually know what they are talking about – this is a key point. Your ad agency, management consultancy or software vendor, are all biased. Agencies have kick-back deals with company like Adobe, Google and Salesforce. Management consultancies have kick-back deals with the big vendors like Oracle and Microsoft and vendors are all trying to push their own solution. So make sure who you get your advice from is truly independent.

  • An impartial audit of your current activity. We recently conducted a global audit of a major brands ad-serving activity and found their agency was charging them double the actual cost of their digital advertising on a multi-million dollar budget.

  • Independent evaluation and selection of the right partners for you to work with. Every brand has different needs and different digital ecosystems, getting the right advice about what you need (without any hidden agendas) is critical. Having an independent and external partner run your RFP could save you millions, as it did for one of our clients this year who were paying 3 times more for their technology than they should have been, before we negotiated new agreements on their behalf.

What to do next?

If you’re concerned about how your budget is being spent there are a couple of things you can either do yourself or ask an independent consultancy to do for you.

  1. Run an audit of your digital activity and technology (I shouldn’t have to point out that you don’t want your current agency running this audit for you, as they will undoubtedly offer to).

  2. Talk to your current vendors and investigate if you can engage them directly and how much that will save you?

  3. Revisit your digital strategy and be clear about what your key objectives in this space are (Lead generation? Awareness? E-commerce?) and then look at how your main objectives match up to the activity your currently running.

  4. Get smarter – no matter what you do, the only way to keep up with market and make sure your agency (or anyone else for that matter) isn’t ripping you off, is to know as much as they do, and in the digital age of information, that’s not hard to do.