There is an old line, variously attributed, about the difficulty of getting a man to understand something when his salary depends on his not understanding it. Bob Lord, the president of Horizon Media Holdings, offered a variation on this theme at a conference in Lower Manhattan this week, suggesting that the large agency holding companies have built their entire economic architecture around a model that may have outlived its usefulness.
Speaking at an event hosted by Smartly, the advertising technology company, Mr. Lord took aim at what the industry calls FTE-based pricing — the practice of billing clients based on the number of full-time employees assigned to their accounts. This model, he argued, has become a kind of institutional inertia, one that discourages agencies from deploying the technology investments they have made over the past five years.
"You've made investments in technology," Mr. Lord said. "You need to monetize that investment, and you're going to force it on your clients."
He was careful to note that he was "not picking on anyone," a diplomatic formulation that allowed him to pick on everyone. (Horizon, it should be noted, is independent and thus has no holding company parent whose fee structures might come under similar scrutiny.)
Mr. Lord went further, predicting that within five years, clients would abandon the FTE model altogether. This would represent a significant shift in how Madison Avenue — or whatever we are calling the advertising industry's notional address these days — collects its fees.
The critique is not new. Marketers have complained for years that labor-based billing rewards inefficiency and punishes agencies for working quickly. But Mr. Lord's willingness to say so publicly, from a stage, suggests that the conversation may be moving from the hallway to the conference room.
Whether the holding companies are listening is, of course, another matter entirely.
Original story published in adweek.com: "Horizon's Bob Lord Takes Aim at Holdcos' FTE Pricing Models: 'It's the Old System'"