Alex Churchill

For all the talk of adaptive marketing, performance-based compensation structures and the end of the billable hour, advertising, marketing and communications has remained a master and servant business. We make our clients’ lattes until they get sick of our lattes and go buy them somewhere else. It’s a service industry. C’est la vie.

Here’s the thing – in almost every other silo of professional services, the fee for service arrangement has been augmented (not supplanted) with an alternative, shared ownership or equity-based way of doing business. Think about what private equity has done for the growth of entire sectors of the economy with a number of different vehicles. And make no mistake, private equity, despite the obvious connotations of its name, is very much a service industry. It is the combination of two elements – financing and management consulting – applied to businesses on a sliding scale. Communications can be broken down in similar terms. Two elements – big ideas and execution – applied to businesses on a sliding scale.

In their offerings, both businesses offer expertise – management and big ideas – and both businesses offer a finite commodity – equity and execution in the form of production hours. So why has one been driving the larger economy for the last two decades while the other has been, optimistically, treading water for that same time frame?

Here’s the thing – while private equity long ago realized and popularized its relative value to the companies that might one day wish to avail themselves of the services of private equity, ad/marcom companies have never done so. Why? Well, it is very, very easy to sell perspective clients on the benefits of equity.  Every business understands just how much money it needs to keep the lights on. Or at least the good ones do. Combine that with the ease of accounting for its effect on the equation and you have a sector that essentially sells itself. Marketing on the other hand, while it gets a great deal of lip service paid to how indispensable it is, is the first thing cut when budgets get tight.

I contend it is time to put our money, or at the very least the best alternative we have for money, our labour where our mouths are. And I’m not talking about pay for performance – that’s just another form of blended rate (more on that in a later post).

I’ve coined this idea “joint venture marketing”. I propose something radically different. A form of marketing that puts the agency’s motivations squarely where they belong – in lockstep with the client’s by creating a shared vehicle for that motivation, and perhaps a new motivation altogether.

In this nascent form, I propose that it works something like this: I engage a company or brand on a pitch level. I throw a bunch of ideas at them. They like one, and at that point they start paying me my hourly rate. To push out the idea, I hire from my contact list of contractors – those fees are charged as a flow-through cost. We bring the idea to maturity, the client says go – at this point we become partners in a newco. I’m working on a boilerplate for this agreement.

Newco is a joint venture between Standard English Limited and Brand X. The responsibilities of the parties are Brand X: finance production of the agreed-upon project; SEL: Manage and oversee production and roll-out of Newco venture. Brand X would pay for my time and all parties used on the project as a flow-though cost (down the line, I hope to be able to forgo payment myself at this point). Newco is a media property “powered by” and “inspired by” the brand in question, but we would be accepting ads for other products on the platform with an eye towards making Newco turn a profit via advertising, merchandising and licensing. The joint venture would have shotgun provisions and a finite time frame (with extension possibilities) built in.

Now,  the pluses of this structure are legion for Brand X– low costs, a VERY engaged partner etc… The pluses for Standard English are the potential for a huge upside. The potential pitfalls (outside of the usual failure of the business, not hitting communication goals etc…) are a little more dire.

First and foremost, this “production company” model limits the TYPES of creative Standard English Limited can put out there. Obviously, there is little hope of a radio campaign ever making anyone any money. The actual creative product needs to be a media property with the potential for growth and monetization – and not every brand in the world can support that kind of framework.

However, all the turbulence and moving parts aside, I like this idea simply because it means that I and my clients are sharing the same motivations – and we will only profit when those motivations are realized.

More on this to come.