Agencies are reeling in the wake of RECMA's $378 million billings readjustment yesterday, with industry honchos complaining that the Australian market is devoid of any accurate agency rankings reports.
The market was unimpressed after RECMA readjusted its figures for 2012 and added an additional $378 million in billings to Mitchells, pushing the Aegis-owned agency to the top of the list. Meanwhile MediaCom, which had celebrated becoming the country's highest billing agency just weeks ago, was relegated to third position, as RECMA shaved $33 million from the original total.
Are RECMA rankings a valid metric? Vote below.
The readjustment has caused several industry leaders to vent long-standing frustrations with the RECMA rankings. Nielsen – which produces the other major agency rankings system – has also been criticised. Local agency seniors have suggested the marketplace has no accurate industry-wide agency evaluation reports. Some called for a new report which measures “actual billings” and “actual revenue”.
One agency source was particularly vocal. “It's ridiculous, it's just about agencies saying 'mine's bigger than yours'. Any system that relies in part on self-reporting is open to abuse and people inflating their own figures.
“The single biggest issue with RECMA is that agencies can report their own figures, and the checking of these figures cannot be incredibly robust because the checking is done from Paris. Agencies can inflate within reason, because there is self-reporting of staff, billings, wins and losses. If you are too honest, you are penalised.
“The inflation of figures has been happening since the unbundling of agencies, when volume was the play. It's all about the big players hitting the $1 billion mark, with the idea that it gives them stronger bargaining power. It's the $1 billion club. If an agency is getting close to that mark, they say, 'Well, let's just add another $200 million', and this has just become ingrained across the whole agency landscape.”
He suggested that it can cause issues when the agencies RECMA is reporting on are also the measurement company's clients. He admitted that RECMA has checks and balances in place to curb outright gaming of the system. But he argued that there is still room for inflation of figures.
The agency most affected by yesterday's changes was MediaCom. When chief executive Mark Pejic was asked about the results, he said: “A $378 million restatement is a stunning turnaround.” The company is in dialogue with RECMA about the revised methodology.
Meanwhile, UM chief executive Mat Baxter told AdNews agency rankings reports place too much emphasis on billings: “Being the biggest does not necessarily mean you are the best. Any measure of the market should focus on who is getting the best results, who is producing the quality results for clients, not who has the largest billings. That's what the market should be talking about.”
Another agency source, who also wished to remain anonymous, complained that market evaluation reports focus too much on billings. He argued that the focus should be on performance, revenue and profits, but suggested many clients might still see rankings reports like RECMA as the relevant measure of success.
He said there was "nothing which adequately measures the market.”
The focus on agency evaluation metrics also brought Nielsen into the cross-hairs, with one agency leader lamenting that “Nielsen is not an accurate estimate, because there is so much that is left out of its reports, like subscription TV, digital, mobile, search”.
So if there are no adequate agency measurement systems in market, what is the solution? One source argued that the best solution would be to forensically examine the financial reports of the major holding groups. “Of course, these don't break down into individual markets and specific company performance, but if they did, that would be the best measure, because it would be accurate.”
Meanwhile, multiple sources have suggested a “more accurate” billings report might be produced by SMI, which measures agency invoices. SMI doesn't currently release an agency-by-agency rankings report and agencies agree to feed data into SMI on the understanding that their billings will remain confidential.
So what's the solution, is RECMA the only global game in town? Vote below.
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