Bob Kaufman is the Founder and CEO of ConnexPay speaks to challenges within the ad industry around payments and business operations.
Advertising isn’t an exact science: at best, advertisers might be able to establish cause and effect between a particular campaign and ROI, but the why of why a campaign succeeded or failed is often a mystery. Advertising agencies and their clients will often have to move from quantitative analysis (each dollar spent translated to X amount of revenue and so on) to purely qualitative speculation (“this campaign really resonated with our core customers”). While there’s no reason that qualitative analysis can’t be true or helpful, when advertising as an industry is facing major challenges there needs to be something more solid to tell advertising professionals than “make better ads.”
In this article, I’m going to offer ways in which advertising agencies and in-house advertising departments can make structural changes that really affect their bottom line.
Where the advertising industry is today
Advertising is a $615.2 billion dollar industry in the US, and the average person is exposed to hundreds of advertising messages a day. This would seem to point to the industry as a whole being healthy, but those of us on the ground know that this is often far from the case.
In the past two decades, advertising has moved online, to the point that today digital advertising accounts for 62% of global ad spend. There are clear advantages to digital advertising, such as its ability to be highly targeted and (in the case of eCommerce at least) a much greater ability to correlate a consumer seeing an ad with a sale, but it has its disadvantages. Take for example the pre-roll ads seen on YouTube: 65% of viewers will skip them at the first chance they get, and 76% skip ads out of habit without even considering the content. This reflects a general malaise around advertising – as the number of ads increases, each individual ad becomes less effective.
We are also living through a similar downturn in the economy. Although there is some debate about whether the US and larger world economy is really declining, surveys have found that more than half of all businesses are bracing themselves for a recession by slashing marketing budgets. As you may know, when times are tough companies often make the mistake of cutting back on marketing or the subsets within (such as advertising), since it is often difficult to quantify their contribution to the company. This may become more common as the economy continues to slide.
Lastly, technological change is becoming much more rapid. The marketing technology (MarTech) landscape has grown by 22% since 2020, and technologies like artificial intelligence promise to be the “future of advertising.” Personalisation in general is a major theme, with some advertising campaigns making 64 different ads to break through the noise (those ads, incidentally, were about how much people hate YouTube pre-roll ads). However, advertising agencies can’t afford to chase every new technology – the industry remembers the “pivot to video” of 2016 that caused many marketers, advertisers and content creators to invest in expensive video production capabilities to capture a new market that many believe was largely a lie.
Given this environment, what can advertising agencies do to get ahead?
Focusing on fundamentals
In advertising as with any business, if you have more money coming in than going out, you will succeed. Your agency can’t change the economic or technological environment that you operate in, and the advice to “just make better ads” is no different to telling a sports team to just score more often, but you can look at the ways in which money enters and exits your company.
For example, media and advertising agencies often struggle to manage the finances of online campaigns through traditional payment cards because they can’t be configured with guardrails around the spend – if they overspend, then ads running on platforms like Google and Facebook will come to a halt. Additionally, running all ad spending through a single corporate credit card causes administrative headaches that agencies can’t afford. Requesting a new credit card from your bank might not be simple enough for use in a rapidly changing environment.
But there is another way: virtual credit cards, with the limit, expiration date, and other controls set by the advertising agency. These virtual cards can be multi-use cards (also called lodge cards) that an agency could use multiple times (pay-per-click advertising for instance), or they can be single-use cards for a particular payment to a supplier. When using virtual cards, your agency will earn cash rebates on every transaction, which directly contributes to your organisation’s bottom line.
The process by which funds go into your advertising agency can also be modernised, via a single platform to accept incoming payments, get immediate access to funds, and pay suppliers—all in real time. Agencies can be paid for their work immediately rather than waiting for clients to pay invoices—because such platforms connect the incoming customer payments with outgoing supplier payments in a single platform, payments can take place in real time, with no upfront reserves or lines of credit required.
Moving forward smarter
Creativity is the lifeblood of advertising, but money is the lifeblood of any business. Unless your company is taking a hard look at your financials and how funds are moving into and out of your business, questioning whether this is happening as efficiently as possible, then despite all your creativity you can still fail.
While new advertising technology may be getting the majority of headlines, just as much innovation is happening in financial technology, and it will “pay” to pay attention to it.
By Bob Kaufman
Founder and CEO
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