I wrote this post for the company I work for – MMT – it is also posted on their blog
Every year in June we hear about the Upfront market in the US, and this COVID year, particularly as it, could not happen in its normal sense. But the other markets or media are not exempt from this seasonal exercise: the negotiation of yearly advertising is a global practice of the industry and exists for all media. Let’s clarify what these are, who they benefit, and why it can make sense.
What are media yearly commitments?
The idea behind yearly media commitment is for advertisers and agencies to commit to a level of spend for the year with a specific partner. Long term plan of media investment is signed as a contract with publishing houses, tv channels, web giants, and so forth. The contract is binding and disengaging has consequences – usually financial – to guarantee respect for the conditions: spend per quarters, level of visibility, etc.
What are the benefits of yearly commitments?
An essential reason for commitment is visibility: it keeps publishers able to provide the quality content that brings the quality audience to tune in.
In return for their engagement, advertisers benefit from:
- Discounts: promising funds offer great discounts rates on top of agency ones.
- Beat yoy inflation: As part of the discount, there is also the engagement of not applying year on year inflations. Long term partnerships have led to some advertisers having discount rates off the charts.
- Visibility: it guarantees the impressions and can also include the placement quality
- Mention: it is the unofficial part of the deal where editors accept to mention or not mention brands as part of their “support” to the publishing house. It is very important in the fashion industry in the female magazine industry
- Access to data: Data from WG are so scarce that advertisers are trading data as part of the commitment: “tell me who are interested in my product and I engage more”.
- Free services: As part of the package, Publishing houses can offer a strategic recommendation, community management, content production, insight, and so on.
The goal is to secure as much budget as possible from the advertisers and new revenue streams for the teams
What are the cons of committing?
Advertisers are legally bound: they actually have to spend! You are committed to an entire year; so change of market – like 2020 – requires a lot of negotiations to maintain flexibility, goodwill, and rates. That requires a lot of creativity in the way of building the right balance between benefits and engagements
There is no reason for any publishers to not try to help you remain competitive and accept to modify when commitments cannot be met. But this requires an investment in resource and time, strong negotiation skills, and grit!
Which type of clients are recommended to engage in yearly commitment?
Any advertisers investing over 300,000€ on a single partner may consider negotiating extras by committing their budget. Obviously, this commitment makes sense when there is a clear correlation between advertising and sales volumes / ROAS and financial flexibility is not in discussion.
Also, when premium visibility/positioning is a priority and guaranteeing presence around key events, long lead time helps to secure these spaces.
Finally, when budget performance is your priority, it can push the needle an extra bit for ROI results.
How does it work in practice?
As a newcomer, you benefit from new business negotiation rates/agency rates if you use one. Generally, major advertising investors (two digits million euros) are organizing these sessions to gain the benefits mentioned above.
German market negotiations kick in in October for all media publishing houses, OOH, audio, walled gardens and so… The objective is for everyone to maintain a form of visibility on a base level of investments. Obviously, advertisers do not have to engage all budgets in commitments, they can decide to keep some “buffer” for last-minute deals.