Keeping yearly commitments in check

Every year in June we hear about the upfront market in the US, particularly in this year of the Covid-19 pandemic, where market activity is anything but normal. Other markets and other types of media are not exempt from this seasonal exercise either. Negotiating yearly advertising is a global practice in the industry and applied to all types of media. Let’s clarify what these commitments are, who they benefit and why they can sense.

What are yearly media commitments?

The idea behind yearly media commitments is for advertisers and agencies to commit to a level of spending for the year with a specific partner. A long-term media investment plan is signed as a contract with publishing houses, tv channels, web giants and so forth. The contract is binding and terminating the agreement has consequences, usually financial, which guarantees compliance with the conditions of the contract: spending per quarter, level of visibility, etc.

What are the benefits of yearly commitments?

An essential reason behind these commitments is visibility. Commitments make sure that publishers able to provide the quality content needed for a quality audience to tune in.

In return for their engagement, advertisers benefit from:

• Discounts: promising funds offers great discounts rates on top of agency ones.
• Beating yoy inflation: As part of the discount, year-on-year inflation is not applied. Long term partnerships have even given some advertisers discount rates that are off the charts.
• Visibility: guarantees impressions and may include placement quality.
• Mention: as an unofficial part of the deal, editors agree whether to mention brands as part of the “support” they provide to the publishing house. This is very important in the fashion industry and in the women’s magazine industry.
• Access to data: Target data is so scarce that advertisers are trading data as part of the commitment: “Tell me who is interested in my product and I will engage even 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 advertisers as well as new revenue streams for the teams.

What are the cons of committing?

Advertisers are legally bound, which means they actually have to spend! You are committed to an entire year; so any changes in the market, as we are seeing in 2020, can require extensive negotiations to maintain flexibility, goodwill and rates. That calls for a lot of creativity in the way of building the right balance between benefits and engagement.

There is no reason why publishers will not try and help you stay competitive and agree to make modifications if commitments cannot be met. However, this takes a willingness to invest in resources and time, strong negotiation skills and grit!

Which type of clients should consider yearly commitments?

Any advertisers investing over €300,000 in a single partner might want to consider negotiating extras by committing their budget. Obviously, this commitment makes sense if there is a clear correlation between advertising and sales volume/ROAS and financial flexibility is not a factor.

The same holds true if premium visibility/positioning is a priority and guaranteeing presence around key events and long lead times helps secure these spaces.

Finally, if budget performance is your priority, a yearly commitment can push the needle that extra bit you need 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 (8-figure range) are organizing these sessions to secure the benefits mentioned above.

German market negotiations kick in in October for all media publishing houses, OOH, audio, walled gardens, etc. The objective is for everyone to maintain some form of visibility at a base level of investment. Obviously, advertisers do not have to place all of their budget in commitments; they can decide to keep some “buffer” for last-minute deals.

How could Mercury Media Technology help?

At MMT, we have developed a dashboard that automatically collects and evaluates your spending levels vs. your commitments so that you can keep track of this data and anticipate negotiations, in real-time from anywhere, whenever you need it.