December 2-5, 2007  |  La Quinta, California
Published: December 04, 2007
Agencies hunt for the money

Getting paid what you're worth keeps interactive marketers up all night. A panel of industry experts explains how they solve the compensation conundrum.

Speaking on a topic that's on the minds of all marketers, AdWeek digital editor Brian Morrissey quizzed a panel of notable interactive leaders on what the new agency model means for each shop's bottom line.

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"How do you get paid for what you do?" Morrissey asked his panel at the iMedia Agency Summit in La Quinta, Calif.

The question -- one that each of the panelists said they struggle with on a daily basis -- opened up a debate on ownership of ideas.

"In an ideal world, the client would put all of their agencies together at the beginning so that the sense of ownership could be shared, with each agency having a stake in the big idea," said Jane Snyder, senior innovation leader at The Growth Engine. "And then on the client side, the brand would have someone that manages the overall strategy, not just a collection of different -- and often competing -- agencies."

But Snyder's idyllic notion of collaboration only went so far for Tom Hespos, president of Underscore Marketing, who said ownership creates pride and passion for an idea, two virtues that are more important than ever in the digital age.  

For Mike Parker, director of digital strategy at Goodby, Silverstein & Partners, finding a balance between cooperation and ownership will be the order of the day for the immediate future, with clients also evolving the way that they think about the digital space.

Setting the debate over ownership aside, Steve Wax, partner at Campfire, took up the question of payment.

"It's a tough rule to live by, but we don't pitch on spec," Wax explained. "Right now, clients pay more for execution than they do for research and strategy, but that doesn't necessarily reflect the reality of our costs."

For Wax, that means the ideal client-agency relationship is one with a performance-based compensation plan because it places maximum value on the intellectual capital required to develop the idea.

Hespos, who agreed that performance-based compensation was ideal, stressed that marketers should split the difference with clients by finding a way to cover costs in the initial phases, but building in incentives for campaigns that take off.

According to Snyder, performance-based relationships also have another major selling point.

"When you work with some sort of performance-based compensation plan, your client should feel a little more at ease with your idea because you have a skin in the game," Snyder said.

While overall compensation may be a day-to-day question for all agencies, a similar strategic concern raised by the panel was the issue of specialization in the face of massive mergers and acquisitions, with a handful of mega-agencies gaining expertise in all specialties.

According to Hespos, a generalist's approach is the answer.

"Frankly, clients don't want to hear that you can't explain what's happening in one area because you're in the middle of running a search campaign for them," he said. "I'm skeptical of the challenge from big agencies because it's a question of what you do with the skills, not simply having them."

For Wax, marshalling the array of skill sets required for digital success is a question of revamping the DNA of the agency. But that's not something he sees happening at most agencies -- yet.

At Goodby, Silverstein & Partners, which Wax singled out as an example of an agency that began to change ahead of the times, the evolution has been top-down.

"Shifting our agency was made easier by the founders being willing to take the risk and turn the ship," Parker said. "At many traditional agencies, there isn't a panic to reinvent the model. We wanted to lead not follow. But those agencies are still making a lot of money. Their model is breaking down, but it's not broken."

For now, that means digital shops have a two-front war when it comes to compensation. While they need to figure out the best model for their business, Parker said they also face the challenge of explaining the true costs of interactive marketing to their clients.  

Michael Estrin is associate editor at iMediaConnection. Read full bio.