ADMAN SELLS A 'MACBANK' VISION FOR AGENCIES TO LEASE IDEAS
SIMON CANNING - THE AUSTRALIAN - SEPTEMBER 25, 2006
ADVERTISING agencies have been told to model themselves on the Macquarie Bank and lease their ideas to clients in a bid to head off threats to their revenue streams.
Russell Howcroft, chairman of the Advertising Federation of Australia, and incoming CEO of George Patterson Y&R Melbourne, said the threat that new media developments posed to the advertising industry meant advertising agencies needed to adopt new financial models or face the risk of seeing revenue decline.
Speaking at the Caxton Newspaper Advertising conference in Queenstown, New Zealand, Mr Howcroft said ad agencies needed to take ownership of the ideas they created for clients and lease them back.
"What I would like to do is, I would like to launch a marketing bank -- what I call the Macquarie Bank model," Mr Howcroft said.
"A marketing bank is a place where clients can go to get the money to do their marketing."
Mr Howcroft said that to survive, advertising agencies needed to "get some skin in the game", remodelling themselves so they carried part of the risk that came along with launching a new advertising campaign.
"At the moment, clients have all the risk and spend all the money, so we don't share in anything. Let's say a client spends $10 million on marketing. What if they only had to spend $5 million and the advertising agency comes in and says 'we will give you $5 million, but you have to pay the interest on the $5 million, you have to use our services so we get fees and we want a share of the upside because we are taking part of the risk'."
Under the proposed model, advertising agencies would create and own the infrastructure of advertising, and charge clients for the use of ideas for the life of the campaign.
He likened it to the method Macquarie Bank uses to manage its toll-way infrastructure, with the tolls themselves a continuing source of revenue.
Mr Howcroft warned that the tradition of advertising allowing their businesses to be relationship driven was a dangerous course.
"One of the big problems that we have is that our business is all about relationships and I'm not so sure relationships are equal to business strategies," Mr Howcroft said.
"And the thing about brands is that brands are no different to toll roads. Brand management is surety of cashflow into infinity.
"Currently, clients invest all the money and take all the risk. Let's give them the money they need to do their marketing."
The conference also bestowed the annual Newspaper Advertising Awards, with George Patterson Y&R taking the main prize for a campaign for the Melbourne Cricket Ground promoting the Boxing Day Test.