BEST MEDIA DIRECTOR: HUGH DOW, M2 UNIVERSAL
BY DUNCAN HOOD
M2 Universal president Hugh Dow is making media history in Canada - again.
His gold win in Strategy's Best Media Director competition for the third year in a row is certainly a first, for starters. He's also recognized for leading the charge into an advertising future where the media department is king.
By helping to develop new services, such as product placement and media-driven multi-platform campaigns; new tools, such as truly integrated research data; and a new outlook, where the media firm becomes the advisor, planner and top-level executor, he continues to champion the entire community.
The media sellers who nominated Dow for this year's win label him "visionary" and "responsive to innovative, tactical ideas." They say he's "first and foremost a forward thinker," and note that "he recognizes the need for change, particularly in Canada, and he makes it happen."
Dow - who's entering his 43rd year in the business - obviously isn't afraid to break new ground, but many aren't aware that one of the areas where he's doing that is in remuneration.
As the services media companies offer continue to expand and diversify, the old commission models are becoming less and less appropriate, and M2 is at the forefront when it comes to developing new systems that will not only allow media companies to offer new products and services - but get paid for them as well.
To mark this year's win, we asked Dow to elaborate on how media remuneration has to change and why media profitability is the hidden force driving the changes taking place in the media marketplace.
The traditional media remuneration method is commission-based, meaning that the media agency skims off a set percentage of the total media dollars spent. What's wrong with that model?
The problem is that whatever that commission level is, it might not actually equate very well to the actual amount of work and staffing and costs involved in delivering whatever the media requirements are.
In other words, it might be easier to spend $10 million on a simple buy than $100,000 on a very complicated multi-platform buy?
That's absolutely right. It really depends on the volume, the complexity and even the medium. Because when you're dealing with a large number of units, as you often are in radio, you could well be involved with a totally different servicing cost, compared to buying double-page spreads in magazines at $40,000 a pop.
On the other hand, the one big advantage of the commission system is that it's relatively easy to understand, and it tends to be less contentious.
But wouldn't the commission system tend to encourage quantity over quality in planning and buying?
That certainly could be an issue. A number of advertisers, including a number of our clients, are thus moving to what's called a "scope of work" contract, where we work together to define the scope of the services that are required. Once you've done that, you develop a staffing plan to deliver that scope of work. Finally, once you have agreement on the scope of work and the staffing, you discuss what this is all going to cost.
You get into salaries and overhead and obviously, the margin. That should produce a fee, and assuming that the scope of work is acceptable and the staffing is acceptable, then the fee kind of falls out at the bottom end.
Now often there is some, ahem, discussion when the fee is developed, and there could well be some refinements, where we'll say, O.K., let's eliminate this from the scope of work and this from the staffing, or whatever.
Media agencies in general are offering more services than they used to, such as product placement and custom content. How do you cost those things out?
They could be included in a scope of work agreement. But it's more likely that they would involve a separate negotiation, and they could be costed out on an hourly rate or on a total project basis, or in terms of a management fee.
But clearly, some of the new areas that we're getting involved in are beyond the traditional placement of spots or pages; they involve very different skill sets, and very different workloads, especially in terms of the creative up-front development. The conventional remuneration system simply can't accommodate this.
What about other media agencies? What are the most common systems others are using?
From what I understand and hear, they are mostly variations on a commission system, where payment is a percentage of the media buy.
So M2 is hoping to lead the way in this area then?
Yes, I probably spend about 40% of my time addressing, developing and working with these systems. I'm really more of a businessman now than a media person. This is what I do. I run a business, and we need to get paid for the services that we provide.
Media agencies are also investing a lot more in proprietary tools and research. How much of that should the clients pay for and how much should come out of your margin?
Obviously someone has to pay for all that, and one approach is to build these into the fees. Some advertisers prefer to pay for those tools on an ˆ la carte basis. It's really a case of arriving at an acceptable scope of work and determining what falls within that scope of work and what falls outside it.
You know we have no other source of revenue except for our clients. So if we're going to develop new tools, we have to find some way of paying for those. And that can be a great source of mystery to an advertiser, but there's just no other source of revenue.
How important a factor is remuneration in the changing role media operations are playing?
In any company, there are departments or business units that are regarded as costs, and those that are regarded as revenue-generating. Historically, the media department was regarded by the agency or network as a cost. And really what we've attempted to do over the last 10 or 12 years, with the growth of the media management companies, is to change the media function from being a cost to being a revenue-generating opportunity.
And as soon as you do that, you obviously increase your profile, internally, and you develop the respect that many media practitioners have whined about for many years.
That has really been the sea change that we've gone through over the last decade. You know, we're quite advanced in Canada. This is something that has really only happened in the U.S. over the last five years or so, and they're still struggling with it.
It's been a very interesting 10 years, but from my perspective, totally worthwhile. We've had a lot of challenges in really demonstrating that the media function can not only be a business, but a very important business within the advertising agency environment.