The final round of last month’s pitch for the Tourism Authority of Thailand’s full service account was decided not in front of a client, but a computer.
McCann Worldgroup and Leo Burnett put away their Powerpoint slides and business-winning chat-up lines and huddled inside bidding booths to see who would offer their services for less.
Each agency was given a 30-minute slot in which it could lower its price until it reclaimed the bid, denoted by a small hammer symbol on its screen. Meanwhile, the client, who could see both bids on a screen of his own, sat back and watched his fees shrink.
Telekomunikasi Indonesia (Tel-kom) has asked Bates/GroupM, Euro RSCG/MPG and Saatchi & Saatchi/Zenith to do the same in a final round of ‘pitching’ later this month.
Such eBay-style auctions are, say those who’ve done them, rather fun - a bit like playing a real life computer game.At least the first time round. But are they a passing fad or a sign of things to come?
1 E-auctions can save time and money for agencies as well as advertisers. A negotiation process which used to take months to conclude (with clients playing one agency off against the other on price), can be now completed in a hassle-free few hours. And as the auction is online, agencies don’t necessarily have to ‘attend’, so staff in other network offices with
e-auction experience can join in the bidding. “Could we see the rise of specialist pitch teams peopled by online gambling junkies?” wonders one agency boss.
2 Critics decry e-auctions as tools for clients who, they say, know the cost of everything and the value of nothing. They fear that they will become more popular with advertisers who increasingly see the advertising and media they buy as no less a commodity than paperclips or tampons.
“Online auctions are a sad indictment of the client-agency relationship,” says David Shaw, director of brand marketing and integrated marketing communications, Lenovo Asia-Pacific. “To imagine that you would pick a strategic communications partner solely on the basis of price and a trigger-happy clicker-finger boggles the imagination. Why call it a relationship anymore?”
3 But as long as strategy and planning are kept out of the bidding, e-auctions have a viable future in the business, argues Mark Ingrouille, Southeast Asia area director and Thailand president of McCann Worldgroup, who led the bid for TAT. “Media agencies are scared of e-auctions because of an ultimate fear that they are merely suppliers,” he says. “But media buying was commoditised long ago. Media pitches nowadays are effectively auctions over airtime prices anyway.” Besides, should agencies whose business it is to get the best deals be so uncomfortable with a process designed to do the same thing?
4 Like it or not, e-auctions are likely to become more popular with clients (particularly government-linked ones like TAT and Telkom) under heavy public scrutiny to become more transparent. A ‘black-out’ period during online auctions forbids the agency to have any contact with the client, ruling out the possibility of under-the-table deals or last-minute calls from ‘connected’ agency bosses.
E-auctions also supposedly put an end to collusion between competing agencies. But, says one source at an Indonesian agency, there’s nothing (yet) to stop shops sending text messages to one another to agree on a basement price below which neither will go.
5 As attractive as the benefits are to marketers, there aren’t many who think e-auctions will be around for long. Having procurement people run pitches is one thing. Removing human beings from the process is quite another. Online auctions were trialled in the US, but were shooed from the industry by the belief that they ran counter to already strained client-agency relations.
“I doubt there’s been a single online auction that’s worked really well,” says Matthew Godfrey, chief executive officer of Publicis Asia-Pacific. “We hope clients understand that we’re a business and we need to make money too. Sure, online auctions save a lot of time. But it takes a lot of time to build a relationship with a client. One created in this way will be strained from the beginning. E-auctions show a lack of interest in our people, our business and our work.”
What it means for…
Advertisers
- What normally takes months can be done in a matter of hours.
- Because agency contenders are housed in separate bidding booths, there is far less opportunity for collusion or shady dealings.
- E-auctions are not suitable for advertisers with much interest in communications planning. Sophisticated clients who plan around the needs of the consumer before they think about media will have no use for e-auctions.
- However, property developers looking to advertise until they’ve sold out, or luxury brands, which want to buy space for ads created in Milan or New York, are better suited to e-auctions.
Agencies
- Lower fees. Agencies will need to approach e-auctions with a very clear view on a basement price.
- Agencies will have to ensure that the client is absolutely clear on what is included in the auction. If strategy, planning and tools are lumped in with buying, it might be an idea to walk away.
- If price is given priority over an agency’s people and skills in the final round of pitching. This can often speak more loudly and truthfully about a client’s values than any corporate manifesto.
