Mideast media agencies holding publishers’ fate in hands

DUBAI: “Media agencies sit down every year and consolidate who they buy with — they literally cut off publishers from a list,” said Richard FitzGerald, the founder of Augustus and the publisher of Lovin Dubai. “We can’t even get on that list.”
Welcome to the world of publishing. With print in decline, advertising revenues falling and digital wreaking havoc on traditional publishing models, the power and influence of media agencies — those who advise brands on how, why and where to advertise — is increasing, especially in the eyes of new online publishers.
Digital may be the promised land, but with advertising spend some-times being controlled with an iron fist by media agencies, they are exerting a level of control that some believe is ruining any opportunity of success. Do media agencies active in the Middle East and North Africa therefore hold the fate of new publishers in their hands?
“To a large degree, the answer to this question is yes,” said FitzGerald, who himself has spent much of his career working for media agencies.
“New publishers are generally digital and digital accounts for about $800 million of the $5.5 billion of media spend across the region. These figures are what media agencies control. There is other marketing spend, but this is small in comparison and done directly with Facebook or Google by small businesses. Therefore, new publishers’ revenue stream is controlled by media agencies.
“Media agencies’ revenue models were designed at a time when it was all about volume, so the more that was spent on ‘paid media’ the more revenue the agencies would make. Now, less is being spent on paid media by brands who own their own pages and have recognized the power of experiences and are allocating budgets for earned media.
“In short, the percentage of spend is less and the total spend with publishers is less. Therefore agencies are under pressure to make revenue. When it comes to publishers they do this through trading deals. The more consolidated their trading deals, the better rates they can get, and in some cases the better rebates they get. All this does not bode well for new publishers, because there is nothing ‘in it’ for media agencies to spend with them.”

Questions over transparency
Rebates — cash paid back to big advertising spenders by media owners — are highly controversial. Last year the Association of National Advertisers (ANA) in the US produced what it classed as a “troubling report” that found “non-transparent business practices” were “pervasive” within the media agency business. The report found widespread evidence of rebates being paid to media agencies and not passed back to the client.
Through rebates, media owners incentivize agencies to spend more of a client’s money with them, offering cash back once a pre-determined level of spend has been reached. While rebates are not illegal in the Arabian Gulf, some have raised serious questions over the practice.
“(Rebates are) the main cause of why we are being cut out,” said FitzGerald. “Rebates are not allowed in most established advertising markets as clients demand to see what money is going back to the agencies. However, it is common practice here.”
Such a situation is frustrating for new publishers trying to break into the market, especially when they have proven web traffic. StepFeed (alongside its sister site YallaFeed), for example, has over 3 million monthly users and more than 5 million monthly video views, said Ray Dargham, co-founder and CEO of Step Group, which includes the digital publishing platform.
“Monetization for publishers (working) directly with platforms such as Google and Facebook brings in pennies for the dollar in the region, so online publishers are more reliant than ever on business directly from agencies and their brands,” said Dargham. “At the same time, the big players Google, Facebook and now Snapchat are eating most of the pie and leaving very little to publishers.”
The situation is stifling for new publishers seeking to enter the mar-ket. With advertising spend not forthcoming from media agencies, new publishers are forced to deal directly with clients, which in turn upsets media agencies. These agencies are also under pressure internally to work with “preferred partners.”
Media agencies refute most of the points mentioned above. For ex-ample, when asked questions relating to rebates, the Dentsu Aegis Network provided a global statement: “We do not accept non-disclosed rebates and we believe our existing process as it stands is robust and transparent for our clients and our business. Our media-buying process is clear, audited and subject to rigorous compliance processes, and all our clients have the ability to audit us.”
For media agencies, the fate of publishers lies in their own hands. “It’s all up to the publishers themselves,” said Siddhi Dhavale, head of Amnet, Dentsu Aegis Network’s programmatic arm. “Digital technologies are disrupting every aspect of modern life — from the way we communicate, to how we consume media, monitor our wellbeing and of course, how we find and buy things.
“Where we once had a tried-and-tested marketing mix for communicating with our customers, we now have a complex and rapidly evolving landscape. The consumer is connected at all times. Multiple devices, multiple channels, multi-tasking, on the go. This means publishers have to constantly evolve their offering to better connect with consumers and stay relevant.”

Survival tactics
The two entities — media owners and media agencies — are essentially at loggerheads. Is there a solution?
“I do not think there is one solution,” said Dargham. “Things will have to improve with advanced data analytics, efficiency (and return on investment), and awareness becoming more important than ever. I believe agencies, publishers and media tech companies will all be forced to adapt and transform in the favor of their clients — which is good.
“We have to keep in mind as well that we are at a time where survival is the goal for many players with such uncertainty and volatility in the Middle East. At the end of the day, it is also important for us all that the industry survives as well.”
For FitzGerald, advertising governing bodies could help work toward stamping out rebates, while clients can insist on full visibility over commercial agreements in their media agency contracts. A review of the media agency revenue model would also place less pressure on volume-based agreements.
“For the most part, media agencies are not doing anything wrong, they are doing the best in the current ecosystem for their clients,” said FitzGerald.
“At the end of it all, from our point of view, clients can see our numbers and we have an audience that they need to reach. They will find a way of spending with us. But there would be (fewer) roadblocks along the way if we were on an equal footing to other publishers in the eye of agencies.”