From Adweek · Christopher Cicchiello · · 1m
Brands Stall Shift to Performance Pay
Brands resist moving from hourly billing to results-based agency payments despite AI pressures.
In brief
Brands resist moving from hourly billing to results-based agency payments despite AI pressures. Brands delay adopting outcome-based remuneration for agencies as they fear short-term cost increases. Originally reported by Adweek.
FTE Model Declared Outdated
Bob Lord, Horizon Media Holdings president, called the FTE billing model the 'old system' at an industry event.
“The FTE (full-time equivalent) billing model is the "old system."”
AI Pressures Revenue Models
Agencies face revenue shifts as AI reduces time spent and headcount assigned to clients.
Outcome-Based Pay Models
Agencies push for payment tied to client targets like sales figures or stock price increases.
Coca-Cola Tests New Models
Coca-Cola seeks agency partners who can tie advertising to performance and sales metrics.
“I believe in actions and behavior, which in our business, means consumption.”
Client Resistance to Change
Clients worry new payment models will raise short-term service costs with tighter marketing budgets.
Agencies Push for Testing
Agencies should start educating clients on new models, identify metrics, and test with a few brands.
Procurement Hurdles
Procurement teams view agencies as cost centers, not strategic investments, requiring cost caps to agree.
“The problem is marketing says 'yes,' and when you get to procurement, procurement needs Linus' safety blanket; they’re worried.”
The headline
Brands delay adopting outcome-based remuneration for agencies as they fear short-term cost increases.
