On the media business's cycle of wrong incentives
On Wednesday, we talked about how the RFP process is a waste of time for publishers, if not completely borked.
But, there’s another side to this story, and in light of all the media layoffs (let alone the future of the business), it might be good to start having the conversation about the sell-side incentives.
But first, a story.
I remember one time when I was on the branded content side of the house, after getting an RFP, my team came up with one of those ‘never-been-done-before’ ideas. We wanted to take a video crew to an offshore oil rig and create a virtual reality experience to show readers what it was like living on water in dangerous environments. There was a whole content and ad plan behind it beyond VR, but that was the ‘big idea.’
For branded content it was a bit of a risk, but it was a great story in a compelling format. It was also, after budgeted out, a months-long multi-million dollar idea. The agency wanted big. We gave them an ocean.
But the sales rep pushed back, arguing that this client wouldn’t pay. Even though the RFP was a big-money/big-idea proposal.
Further conversation with the sales rep cut to the heart of the challenge: the sales rep was behind on their quarterly numbers. They thought, not irrationally, that the chances of winning this RFP was slim-to-none, and that the better play would be a more pedestrian program. Sling a few banner ads; sponsor some section of the site.
“If I can cobble together a few $50,000 deals over the next few weeks, I hit my goal.”
When your business model is dictated by a sales team staring down the barrel of a gun every day—gotta hit those numbers!—it's hard to think, let alone act, for the long term benefit.
This, my friends, is what I call mediocrity by necessity. It’s the biggest culprit of our current media climate: the focus on the short term cripples the long term.
(To be fair, there are plenty of media companies that have long-term and/or big idea deals with clients. The trick is getting them to come back.)
And this is one of the underlying reasons why we’re seeing many media businesses flail right now. We’ve been on a short term wavelength for so long that we’re trying to heal the economic symptoms but not affect the root cause. One might even say it’s trying to heal a gunshot wound with gauze. The incentive on what’s in front of our faces instead of looking a bit farther out means the results end up in a bad place.
So instead of saying to the agency or client, “You know what? We’ve got this killer idea that we’d love to work with you on, but it’s going to take longer to create and will cost more money, but you’ll be better off,” reps will too often say, “In order to win this business, we’ll give you something that is safe and easy; it won’t help you long term, but it’s ok, we have a place for your ad and we’ll run it because I need the money.” Of course, they don’t say this out loud.
(Or even worse, give away the farm. Sales organizations are like improv comedians, saying “yes, and” to everything. “Yes, let’s do it and then let’s add this on top.” To which the teams that have to execute on that … )
I've watched sales execs say yes to the dumbest and worst ideas just so they can ink that $50,000 or $100,000 deal, fully aware that all the parameters of the deal signal failure—which leads to anxiety, as well as make-goods (costing more money) and then not having the client re-up the contract.
The last (overly simplified, I know) part of this equation is the scary part: with client attrition, media companies lose ad revenue (sponsorship, events, all of it).
The media business is a vicious cycle of wrong incentives, ultimately leading to an economic model that can’t sustain itself.
Sometimes it’s better to pass on a deal.
As Jason Koenigsknecht, an industry sales exec, commented earlier this week: “The need for leadership on the publishing side to empower their organization to say ‘no.’ Many leaders and/or sellers live in fear of the ‘missed opportunity’ or fear of damaging a relationship that could impact future consideration. Trust is an integral part of the relationship and being transparent to thoughtfully manage expectations often helps build that trust.”
But in an industry that focuses on the quarter, this kind of strategic thinking often dissipates like a fart in the wind.
And in light of the current media bloodletting, when sales teams are paid multiples more than journalists, it’s not hard to see why the incentives need to change.
So if a seller’s goal is to sell $1 million in ads, they might have a comp plan that gives them a percentage after they've hit their goal. They’ll also get a nice bonus at the end of the year based on other company goals and metrics. Reporters, at least the vast majority of them, get none of that even though it's their work that the sales team is selling.
Perhaps it’s time for the media business to discuss how to break the cycle of wrong-headed incentives.
Robert Johnson, “Me and the Devil Blues”
Keeping it short today, as I realized this is the 20th edition (I haven’t written 20 straight days in years; it is exhausting!). Wild to think that it’s been only four weeks since I started this little experiment of a newsletter of some loose thoughts, and that there are now almost 2,100 subscribers. Thank you! For signing up, for reading, for your time, and for allowing me in your inbox every day.
As always, I welcome any tips you may have, or any thoughtful discussion. Just drop me a line!
I’m going to take Monday off to relax, because being unemployed is very stressful. Hope you’re able to spend some time off the internet this weekend, and I’ll see you on Tuesday morning.
Some interesting links:
Senate passes bill to delist Chinese companies from exchanges (Bloomberg)
The Artisanal Pizza You Ordered Might Secretly Be Chuck E. Cheese (OneZero)
16 media buyers identified the media companies that are poised to gain and lose the most as the pandemic upends advertising spending (Business Insider)
Adobe study suggests people are tired of the ‘we’re with you’ ads (Ad Age)
Target And Walmart Earnings Show How American Shopping Has Been Reset (AdExchanger)
Pfft is right!