In addition to the purchase of media, fees, succession fees, consultancies, projects, branded content and performance contribute to new revenue
This is not a recent phenomenon. But, more and more, advertising agencies are no longer tied to just one form of remuneration. In the Brazilian market, the model is ongoing and no longer only includes media commissions and incentives (BVs) granted by media outlets. Despite still being preponderant in the composition of revenues, the media started to coexist with fees, succession fees, consultancies, project development, product development, performance and, for example, studios to enable branded content actions and even audiovisual production.
The diversification of the portfolio does not violate the country’s mold for commercial relationships in the advertising trade: agencies, advertisers, channels and content producers. The management of all these disciplines is carried out within the agency structures, which use creativity and ideas as guiding threads for managing the marketing communication of brands, products and services. Outside Brazil, with exceptions, the media is a business that is part of creativity. In Brazil, the strategy is concomitant with the development of an action and professionals in this area are often the protagonists.
The Brazilian view does not include media companies, bureaus, common in large communication groups. The original concept of these units has evolved significantly and started to add value with expertise capable of better guiding a campaign’s procedures and making it more effective in interacting with consumers. In other words, bureaus are not just a purely financial operation. But the creative idea is an asset and agencies maintain and use this skill as their greatest strength.
The guardian of this model in Brazil is Cenp (Advertising Market Self-Regulation Forum), which has detailed statutes for all remunerations, with the aim of providing transparency to commercial relations, which is fundamental for proving ROI (Return on Investment), very is more required in this era marked by accurate data and charging company shareholders for returns to promote their businesses. And also lower financial margins.
Gone are the days of remunerating agencies with a 20% commission linked to the purchase of media and 15% on the value invested in productions, paid by the producers. In this way, the financial situation of the advertising business was much more comfortable. If the margins are leaner, however, according to experts, the search for creativity appropriate to action planning has become more evident.
Cenp-Meios monitoring, based on the values of PIs (Insertion Requests in channels), shows that in 2022 the agencies that make up the sample moved R$21.2 billion on average. In 2021, the value was R$19.7 billion.
The segment’s major global advertising festivals, such as Cannes Lions, Clio, New York Festival, Dubai Lynx, Golden Drum, El Ojo, Fiap and D&AD, just to name a few, began to see creativity in all areas involving advertising. advertising. If previously it was concentrated on the content of films and printed advertisements, now the vision is holistic, from media to live marketing, from performance to branded content, from commerce to direct, from PR to craft.
propmark listened to agency executives with the purpose of understanding how revenue composition is established. The result is surprising, even though it is no longer a big deal to consider services specialized in the financial blend. Check out the testimonials below.
“Average remuneration and bonuses still make up the majority of revenue in large agencies, the leaders in the rankings. We still see a market very tied to this type of remuneration. In Ghana, as a small and independent agency, we are less dependent on this revenue media. We established other types of remuneration that are more aligned with our business model and our clients. This way, we are able to grow and still operate with a focus on powerful creative solutions, linked to the real Brazil. We think about the forms of remuneration always within that that best serves each client and each project. For example, we have: fee, most of the time calculated based on the team dedicated to the client/man hour, which makes up the majority of our revenue; projects: we are called upon a lot for some jobs that we do not These are long-term contracts, but projects with a defined delivery date and scope. Thus, we charge with a dedicated team, project time, resources. Succession fee: increasingly becomes part of revenue. An important type of remuneration, the agency participates of the result, becomes co-responsible for achieving the goals. As we really believe in our work in connecting brands with real Brazilians, we really believe in generating results. Here in Ghana, our percentage in 2023 is revolving around fee: 77%; projects: 16%; consultancies: 4%; and average: 3%. a very challenging year. We are still looking for and doing projects and other jobs. But we can already say that the growth forecast is 18%.” Felipe Silva, founder, partner and CCO of Gana “Agencies have always had different remuneration models, in addition to the commission on media investment. The current market and communication context requires constant change and adaptation. So, with the increase in the disciplines required to deliver several new services and products, which go far beyond the average, such as content and data, among others, remuneration models have evolved to fee, succession fee and per project as well. We are evolving and transforming ourselves every day. Agencies are fundamentally remunerated for the scope of work they must deliver to each brand/client. In the past, when there were basically four media outlets (TV, magazine/newspaper, radio and billboard), the remuneration on the media commission was effective, because it paid the professionals needed for delivery, which was less complex and required a smaller number of specialist professionals, because we had fewer departments/specialties within the agencies. Currently, as delivery has gained new fronts, different means and channels, in addition to new technologies, we have had to double the number of professionals in the area of media (not counting the opening of new departments). Therefore, it was also necessary to evolve the form of remuneration, which could also be through a commission on media investment, but also through a fee, succession fee or per project, with predefined scope and structures agreed between the parties. Scopes and remunerations are modeled on a case-by-case basis, based on the demand and scope of each client. Due to a global strategic guideline, we cannot open data, but in a fragmented scenario like the one we live in today, each client and each project has a personalized model and this percentage varies greatly every year. Given the increasing complexity of the work carried out by agencies, margins are increasingly challenging. But we always work within the necessary parameters so that the company has the minimum profitability necessary for us to operate in a healthy and, above all, sustainable way” Marcia Esteves, skier and CEO at LewLara\TBWA“There are different strategies and models, but at Wunderman Thompson the average is neither the only nor the main form of remuneration. The average-based remuneration model made a lot of sense for a long time and created a market in Brazil with a very high level of excellence. It has been a long time, however, that the work profile changed and it was necessary to develop remuneration models that better aligned agency and client. We work with remuneration based on placement, fee for dedicated teams, revenue share and succession fee. Each contract is designed seeking to align the incentives and interests of the agency and its clients and, more than the participation of forms of remuneration in the agency’s revenue, we look at the health of each contract. Most of the revenue comes from fees, but we do not monitor the results in this way. We look the total result of the agency and per client, adding all remuneration models. At the beginning of the year, we had to reduce costs so that we could end 2023 within our profitability target. I can’t reveal the exact number, but the business is healthy!” Pedro Reiss, CEO of Wunderman Thompson
(Credit: Freepik)
Read the full article in the October 30, 2023 edition
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