Laurence Boschetto, CEO and president, Draftfcb is not above straight talk, whether it's about the changing revenue models in the advertising business today, procurement or the part that India now plays in global pitches.
Watch the first part of the interview (the other four parts are at the bottom of the page):
Says Boschetto, “A lot of clients are going through ‘discovery phases’. A lot of time, it's really a reflection of themselves. They are trying to be more effective in the utilization of their dollars and that has an outward manifestation through procurement and their CFOs. They are challenging their agencies to think of new financial models that will be more efficient for them. I think the days of the straight commission is over. I think there is an FTE model, which is you buy out the individual employees who work on your business, percentage of their time or full-time.” Elaborating on the various revenue models that one sees at play today, he said, “There is a cost plus model, which is cost plus whatever the overhead is. Then, there is the sliding scale based on performance. Then, there is the mutual metric model, which is that clients usually get compensated based on their performance metric within the organization and they require the agency to be aligned within those same metrics. I think the overarching goal is how do we get greater efficiency and at the same time, drive towards greater results.” Reacting to whether larger agencies/networks are under more pressure in this day and age because their structures are based on old revenue models, Boschetto said, “Let’s be honest. The smaller an agency or network is, the more flexible they can be, because of lesser overheads. The larger the agency, the more global they are, with more fixed assets, the more they are trying to identify new ways towards being more responsive to client needs. And it’s not always a one for one. For instance, if you take the FTE model, its factual based- It means salary, plus overhead equals cost of whatever that individual happens to be. The larger agencies are trying to come up with newer models, such as if you do a cost plus- which is no profit but we will have skin in the game along with our client so as you perform- so will we.” So has Draftfcb got relationships with any client where they get to have a ‘skin in the game’ equation with them? Boschetto answered, “Yes, for a couple of our clients who have come to us- depending on their size and scale. They say here’s what our financial model looks like and here is how we get compensated. As a result of that, we would like you to get compensated along the same methodology.” He further added, “We will do that, provided one thing. We have to have a voice at the table and we need to equally be part of their executive team so that if we are just turned into a network activation agency then we really are not doing what is fundamentally right for our business. So there needs to be a sense of inclusion at the table, having a voice, identifying what the best strategic approaches would be, and then being able to implement it.”