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This edition of Digiday’s daily CES Briefing looks at how brands and agencies are seeing the need to change payment structures to account for AI tools handling some agency work, what marketing and media executives may have missed on the CES show floor, and how Disney’s tech show reflects the real – the time menu is finally fast enough for live sports.
A change in the way clients pay agencies seems inevitable in the era of artificial intelligence. However, how the agency compensation model should change is anyone’s guess. But it was a hotly debated topic during CES this week.
“There has to be a different model,” said Raja Rajamannar, director of marketing and communications at Mastercard.
And agency managers are well aware that their compensation models must change. Advertisers typically pay agencies based on the amount of time the agencies spend working on brand businesses. But agencies are increasingly using AI tools to do some of that work, such as crunching numbers and drafting campaign reports, and AI tools can accomplish these tasks in a fraction of the time it would take human agency staff.
“We’re in the hourly billing business, and AI is either a results bill or a platform or product bill. We were trying to figure out what that model looked like,” said Rob Silver, EVP and head of media at Razorfish.
“I have clients who ask me the same question… They ask, ‘If I’m paying for 100% of an analyst and suddenly there’s a robot doing 30% of their work, where are my savings? said Arthur Fullerton, Global CTO of Havas CX.
So… where are the savings?
“We’re not at the point where we can quantify the savings in time, but I suppose that day will come. We have to figure it out,” Fullerton said.
In fact, Havas is trying to figure it out. For starters, an agency needs to quantify how much time it will actually save—or not—by effectively outsourcing tasks to AI tools. So it sets up multivariate tests to compare how long it would take, say, a strategist and a data scientist to complete a task versus if the job was handed over to an AI tool. However, comparisons must consider more than just the time required to complete a task. Other factors to consider are what the potential time savings are in terms of freeing up human employees to do other work, as well as how much time human employees need to oversee the AI output and debug is.
“I don’t think there will be many cases outside of automation tasks where we set it and forget it. But we need to create these measurement frameworks and determine how it improves what we do,” Fullerton said.
But agencies like Havas and Razorfish also need to figure out how these improvements don’t come at the expense of their clients’ invoices. Some costs are easier to charge than others.
An AI agent created by an ad agency to handle audience research is a more tangible line item. “But if we then use that on the media management optimization side to write better briefs, to translate copy, to help us think through optimizations, it’s a little less clear how you would charge for that,” Silver said.
Mastercard’s Rajamannar presented three potential models. One would simply pay a flat fee on a project basis. Another would be a cost-plus model of paying for some combination of agency hours of full-time employees plus the amount of tokens that the AI tools would consume (tokens are like gasoline for generative AI tools). And the third would be compensation of agencies based on results, such as a brand identifying that it wants to achieve a percentage increase in product sales and offering to pay the agency a given amount for each percentage point increase.
“I’m willing to pay, say, $100,000 per point. If you [as the agency] manage to achieve that increase [at a cost to the agency of] $5,000 and $95,000 out of pocket, God bless you. But I look at it from my perspective: what is each percentage worth to me? said Rajamannar.
It sounds simple. Which of course means it isn’t. “Results-based compensation models should be the future,” said Digitas CEO Amy Lanzi. But it doesn’t matter.
“The hard part is the client’s ability to actually actually measure that performance metric [i.e. the outcome on which the agency’s compensation hinges,” Lanzi said. “Most clients don’t control all the factors that would allow that 1% increase, so then you’re not going to bet your compensation if it’s dependent on supply chain or the retailer accepting a new whatever or the sales guy showing up. There’s a lot of variables that make it hard for us to agree to something.”
Womp womp. Oh well. Maybe ChatGPT can come up with the answer.
Speedrun of the CES show floor
The Las Vegas Convention Center is ostensibly the epicenter of CES. But not really. At least not when it comes to the media and marketing executives in attendance who hardly leave the alphabetical Bermuda Triangle of the Aria-Bellagio-Cosmopolitan. So for those executives unable to make it to the CES show floor – as well as anyone who steered clear of Sin City altogether – here’s a speedrun of what they (may have) missed.
Disney’s programmatic presentation is launched
Programmatic’s real-time bidding technology is finally fast enough for live sports — that was more or less the gist of Disney’s Global Tech & Data Showcase on Wednesday.
During the presentation, Disney executives talked about the company’s recent moves to equip its live sports inventory for programmatic shopping — and vice versa.
- A certification program for ad tech companies — starting with Google Display & Video 360, The Trade Desk and Yahoo DSP, as well as Magnite — to programmatically access live sports and entertainment inventory and support real-time adjustments like increasing advertiser frequency limits. at the peak of viewership.
- Support for advertisers to deliver different ad creatives to audiences from a single advertiser in the same ad block during ESPN live broadcasts.
- Keyword-based targeting for live programming to show ads related to what was said during the live show, with a way to dynamically build ad creative on the fly.
The announcements are the latest fruit born of Disney having its own ad server, which the company acquired through its acquisition of Hulu.
Expanding its use of the ad server across its properties that previously ran on Google’s ad server, Disney is now extending the Disney Ad Server to ESPN, just in time for ESPN’s standalone streaming service to launch later this year. That was why so much of Disney’s presentation emphasized the intersection of programmed and live sports.
