Manufacturers plan to shake up the best way they pay media companies

Solely 27% of world advertisers consider their media companies’ present pay construction is match for the long run, and 75% say they’ll change how they’re paid over the subsequent three years.

The World Federation of Advertisers (DRE) and consultancy MediaSense surveyed 80 advertising and marketing, media and finance executives from multinational manufacturers representing greater than $60 billion in international promoting spend.

Moreover, the businesses surveyed senior company executives to mirror on the findings, which revealed a broad urge for food for change in company compensation.

A number of levers are driving advertisers’ want for change, together with the perceived lack of business transparency on the a part of companies and synthetic intelligence that’s disrupting conventional media shopping for processes.

ADWEEK crunched the numbers to grasp what they imply.

Hybrid fashions are widespread, for now

Most advertisers use a mix of compensation fashions.

62% reported utilizing a labor-based compensation mannequin, whereas 65% pay commission-based charges. 22% pay a hard and fast price. 52% reward companies based mostly on efficiency and 9% pay on deliverables. Solely 6% of advertisers pay licensing charges to companies utilizing software program as a service (SaSS).

Three in 4 executives mentioned they plan to shake up their media company compensation mannequin within the subsequent 36 months, both with a brand new company or an present company.

For Most Entrepreneurs, Rethinking Compensation Is not About Value Reducing

Clients have been requested what the highest three causes have been for switching fashions. Solely 15% cited value discount. 61% mentioned they anticipated to pay companies extra over the subsequent three years.

Examine on the way forward for company compensationDRE

74% mentioned the primary motive for change was to align compensation with firm efficiency. Enhancing entry to expertise was the second most essential issue at 42%, and 41% indicated a want to foster better transparency.

AI is a double-edged sword for companies

Solely 18% of manufacturers plan to pay their media companies much less over the subsequent three years. On the subject of AI and generative AI, 58% of manufacturers plan to spend much less cash when the know-how is deployed. AI guarantees to research massive quantities of knowledge and generate media plans in minutes.

In complete, 26% of companies wish to disrupt their fashions to acknowledge the rising function automation and machine studying play in media planning and shopping for.

Alternatively, 54% mentioned they might pay extra to entry generative AI expertise, so what the know-how takes from companies with one hand, it has the potential to present again with one other.

Enterprise transparency is a serious downside

Because the shift towards performance-based fashions begins by 2028, manufacturers anticipate a number of challenges in evolving their present course of.

87% mentioned companies’ resistance to being extra commercially clear is a barrier. 84% cited a scarcity of knowledge and metrics to align media with KPIs or targets.

Examine on the way forward for company compensationDRE

Many advertisers really feel that their company’s enterprise mannequin is just not clear sufficient. 75% care about how companies earn a living, however solely 28% consider they’re clear about it.

Undisclosed income streams, similar to pooled company quantity offers, or AVBs, and opaque programmatic provide chains have been cited by entrepreneurs as issues.

The company takes…

Quite a few CEOs of the most important company holding corporations and impartial media retailers have been interviewed by the WFA for his or her response to the examine.

Qualitative information confirmed a optimistic response to the necessity for change, tempered by issues concerning the completely different targets of consumers and their procurement groups and the affect of customer-imposed cost phrases on transparency.

“We wish to transfer to an outcomes-based mannequin, nevertheless it will depend on procurement groups and their consolation with buying providers on this method. They’re not there but,” mentioned an nameless government quoted within the examine.

Tom Ashby, international head of media providers at WFA, mentioned: “The media panorama is evolving at an unprecedented tempo, as new channels proliferate and AI reshapes the business, bringing new complexities and even redefining roles advertisers, companies and media homeowners. »

“The company’s financial mannequin and with it the remuneration construction agreed with advertisers should proceed to adapt,” he added.