Display Ad Agencies 2.0

How to consciously refuse a high closed fees to earn no less, and be able to expand.

The newage. agency works with open fees for years. In this article, the founder of the agency, Oleksii Liakh, will explain how we switched to this format, earned no less, and at the same time, gained the opportunity to expand.

How Do Advertising Agencies in Eastern Europe Earn?

In media advertising, the main source of income lies in the price difference. You buy advertising space at a lower price and sell it at a higher price, trying to strike a balance that suits the client’s budget and allows you to earn a profit. Typically, during the first contact with a client, the agency will present the minimum cost at the expense of its profit, and over time, gradually increase it.

However, this approach has its downsides:

  1. It can compromise the quality of advertising placement.
  2. It can increase the overall cost for the client.
  3. It can lead to the development of hidden schemes and market opacity

Alternative — Open Fees

Until a certain point, we worked in the same way as everyone else. Although we tried to maintain our moral standards, the temptation was still great, and we began to make excuses. This has bothered me and the newage team for years. As a result, we started offering clients fully transparent open fees. With this scheme of interaction, we strive to obtain favorable conditions for the client and to place an effective advertising campaign. Here’s how it works:

  1. As experts, we help the client to agree on the terms of advertising placement. Often, working closely with the client allows us to agree on the most favorable conditions that we ourselves would not have received for the agency.
  2. We are motivated to work efficiently and focus on channels that work better, not just those that pay us more.
  3. We agree on a fee for all services, and the client understands what and when they will pay. If any of our services are not relevant to the client in this campaign, they do not have to pay for them, and we do not perform any unnecessary work.

This approach makes it easier to work with auction and programmatic systems, which in general helps develop the market, as it allows demand to determine the price. Additionally, it motivates us to grow our expertise to compete in the market by providing high-quality services. Overall, open fees drive and improve the industry, without the need for shady schemes, kickbacks, or other dishonest practices.

As a result, open fees allow for more effective advertising campaigns.

How to Measure the Quality of Placement With an Open Fee

For most of our clients, we have refused the closed fee. At the same time, we recognize that our open fee is not small, and clients initially perceive it ambiguously. However, when we show them the results of our work, most of their questions disappear.

At some point, we realized that in order to work effectively, we had to work twice as hard. The increase in the volume of work required an increase in the fee. Therefore, we devoted the entire year of 2017 to optimizing our actions, automating and templating many processes. This allowed the same team to do more work while keeping the fee for clients at the same level.

Currently, the newage. team is investing as much as possible in improving the quality of media campaigns. We have developed a Comprehensive Analysis methodology that allows us to comprehensively evaluate the effectiveness of advertising.

What we did during the transition to open fees

During the transition to open fees, we took several steps to increase efficiency without increasing fees for our clients.

  1. We automated and templated processes as much as possible. For example, we developed a dashboard that displays most of the agency’s processes.
  2. We introduced checklists for most processes to reduce errors resulting from acceleration and automation.
  3. We coordinated with clients to determine the work that was needed and useful for their specific campaign to avoid doing unnecessary work.
  4. We prepared clients and contractors for the transition to the new scheme.

This was hard work, but it was necessary, and we worked hard throughout 2017. This effort is now bearing fruit as it has allowed us to do more and better work with the same team! Importantly, we began receiving more data that has helped us to improve client campaigns.

How We Automated and Templated Our Approach

To streamline processes, we re-examined all of the team’s processes and minimized the duplication of work. Then we restarted and merged the ecosystem of working files:

  • media plan,
  • documentation
  • bookings,
  • performance report.

As a result, our media plan has become the basis and with the click of a button you can make reservations for sites, prepare a report file, a file for preparing click links and pixels for each site, and much more.

We have globally improved the advertising campaign report. Now, our specialists can compile a report on the campaign in just 15-20 minutes, as everything is fully templated or pulled through the API.

We also worked with PBR (Post Buy Report). We have always had and still have large and complete PBRs for the client. The main part is taken from the prepared places in the report, as a result, 20-30% are the conclusions themselves and the analyzes are done by hand.

Conclusion: what did the transition to open fees for clients give us

It is important that this approach to pricing, although it significantly reduced our fees percentage, significantly increased our volumes, and added customer confidence. Thus, increasing the size of customers and their number. Today we work with more than 5 advertisers from the TOP 30 advertisers in Ukraine. With a total number of more than 20 clients from different categories and lines of business.

Moreover, we understand that this scheme is not completely ideal, and we are always ready for a dialogue with the client, we are ready to transform, and most importantly, we are ready to be effective! We understand that fee is not always relevant to the work and time that the agency spends on a particular campaign (that’s why we are always in dialogue with the client), now we are developing various cooperation options together with clients:

  • project work, when we clearly announce the cost of our services for the complex of works that we will do;
  • hourly sale of services (as in IT), but unfortunately, this is still a difficult scheme for us, since it is difficult to calculate and evaluate resources in advance.

In any case, we are moving in a direction that is beneficial to the client and allows the agency to earn money and improve its work.

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