Month: September 2016

McDonalds and the ‘zero-profit’ agency model

McDonald’s new ‘zero-profit’ agreement with incoming agency Omnicom has caused it’s fair share of controversy over the last few months so it’s interesting to come across these two contrasting points of view on the deal that were shared by James Whatley in his weekly newsletter.

The nub of the controversy is around the chain allegedly insisting that it’s new agency operates at cost, with all profits tied to unnamed performance goals.

Bob Hoffman (aka. The Ad Contrarian) takes the common Ad Land stance that a deal like this sets a destructive precedent for the industry for a number of reasons and explains why he thinks it’s unlikely to prove successful.

  • The agency will have full responsibility but virtually no authority.
  • As any agency profit will be based on whatever performance goals McDonalds sets, this could easily be a problem further down the road if targets are not met.
  • They will have no control over the creative product or strategy.
  • They will have no authority over either pricing or operations.
  • It’s hard to make a creative impact with primarily price-based promotions.
  • Franchisee buy-in will be a nightmare.

While the thought of an agency working for a client as big as McDonalds and essentially not making any guaranteed profit might be unjustifiable to those in the advertising industry, Mark Ritson puts forward a few potential positives of the move.

  • This incentivises the agency to focus on increasing overall sales in the long-term rather than being happy with fluffy campaigns.
  • It underlines the ‘digital first’ mindset and prioritises an integrated approach.
  • As media spend is part of the deal, it avoids any ‘shadowy gouging of client funds’.
  • It will force agencies to re-evaluate their structure and make themselves more efficient.

Either way, it’s a big bet for Omnicom. It’s very much a relationship that benefits the client in this case and not many brands will have the pull of McDonalds to convince an agency to go along with something similar. But with more than 60% of new advertising business in the US featuring a performance-based component, this is starting to become more and more common. And for brands you can see why. As Mark Ritson puts it;

“The agency’s skin is now very much in the game. Rather than obsessing over billing, creative work or ‘extra-curricular activities’, McDonald’s can now rely upon its trusted agency to exhibit a passion for burger sales like their life depended on it. Because it does.”

Posted by Rob in Advertising, Branding, Marketing

Will a lack of Ad targeting options be Snapchat’s achilles heel?


Originally featured in the August 28th 2016 issue of Campaign Middle East

Ever since last year’s Cannes Lions Festival, where Snapchat was the darling of the young tech companies strutting their stuff, Ad Land has been waiting for the company to make a serious push into scalable advertising. Snapchat’s advertising revenue is growing at an incredible rate, rising from $59m last year to a projected $250-350m this year, but this has mainly been on the back of branded geo-filters, lenses and sponsored stories.

While until now this has only been accessible to brands with huge budgets, it seems that Snapchat is now on the verge of scaling it’s advertising offering by forging new partnerships with third-party creative agencies, as well as API platforms that facilitate the buying and delivery of ads on the app. All of this will help make managing ad campaigns on Snapchat much easier for brands and agencies alike.

A few months ago, the platform rolled-out auto-advance stories, a process that automatically plays friends’ stories one-after-another creating a seamless video-roll of everything you’ve missed since your last visit. It’s here that they plan on inserting what they term ‘Snap Ads Between Stories’, i.e. ads that automatically play between your friends’ posts.

The route to advertiser accessibility

While this might be good news for the company, as well as for brands and agencies willing to experiment with new ways of reaching younger consumers, there’s still one aspect that I feel will hold back Snapchat from reaching the same scale and accessibility as Facebook and Google when it comes to advertising – and that’s targeting.

Snapchat simply doesn’t have as much information on its users’ demographics and tastes as some of the other platforms competing with it for advertising dollars. With the advanced targeting options offered by Facebook and Google based on a mountain of user data and search behaviour, advertisers can laser-focus their ads. In this digital age, and especially on digital channels, advertisers expect this level of precision.

Without these options for advertisers, Snapchat is a bit more like TV; great for big brands with big budgets that want a broad reach, but not really suitable for smaller companies that have less of a budget to experiment with. For any digital platform that truly wants to scale, accessibility and flexibility are paramount.

Targeting in a post-demographic age

While Snapchat lacks the detailed user info and search behaviour data that Facebook and Google have, if it can find a way to accurately profile it’s users by ‘Interests’, as opposed to demographics, it could prove to be a more meaningful variable for targeting them. After all, we live in a post-demographic world in which it has become less accurate to segment consumers based on age, gender or location etc.

While Facebook for example has an endless treasure trove of its users’ stated Interests, Twitter bases much of it’s targeting on the themes and topics that users frequently feature (via keyword tracking) and on the high-profile accounts they follow.

As there is little text-based content from it’s users to scrape, Snapchat will have to approach this kind of content tracking in another way, analysing what it’s users are snapping about, and better evaluating popular accounts so as to more accurately profile their followers. With Instagram trying to muscle in on Snapchat’s turf with their new ‘Stories’ feature, the pressure is well and truly on.

Snapchat is an immersive and engaging platform with a unique potential for ads that engross and inform users. Think Facebook Canvas-style immersive scrolling pages and videos for brand awareness campaigns, click-to-buy snaps for sales-based campaigns, and simple info entry forms for lead generation campaigns. All this could happen within the app itself rather than redirecting to a separate website or landing page making for a more frictionless experience for the user.

As more advertisers come on board, the focus turns to measurement and accountability, and this is another aspect that Snapchat must also address. Facebook’s Dave Jakubowski outlines this challenge; “marketers are going to start asking questions when they get out of the experimental budget phase … when the dollars get big enough, somebody someplace says ‘What am I getting for this?”

CEO Evan Spiegel may have previously said publicly that Snapchat is against “creepy” targeted advertising that follows you around the web. But if they can nail targeting within the app, and scale the success they’ve had with some larger brands to brands with smaller budgets as well, then they can really start looking towards competing with Facebook and Google for a more broad range of advertising dollars.


Posted by Rob in Campaign Magazine, Marketing, Snapchat, Social Media