In this article, Lorena Hure, a Marketing and Media expert who is joining Portada’s Editorial Team, discusses the pros and cons of the exclusive (“premium”) media representation business in Latin America. The premium media representation space has opened up particularly after Punto Fox exited the space in early 2014.
For many years, Punto Fox was recognized, among other things, as the strategic partner of choice of major international media properties who wanted to operate in Latin America. For these media properties, Punto Fox was a gateway to enter the interesting but complex and unfamiliar Latin American territory.
Such was the case of Facebook and LinkedIn (just to mention two of the most widely known examples).These companies had been operating through Punto Fox organization for several years, before expanding their own sales teams into the region.
After Punto Fox departure in early 2014, IMS claims for the position of Punto Fox successor, having absorbed much of its workforce, as well as by replicating its business model (which continues to have LinkedIn’s exclusive representation, in countries where this media still does not have its own sales force.)
While it may seem an interesting business, the truth is that not everyone can be a strategic partner of a premium media property and live up to that role over time. Choosing a company for sales representation is the result of a long and difficult process of negotiation, in which one needs to know how to play up to media that has proven to be very successful in its own markets, while trying to build a similar success in Latin America. Many local ‘players’ get confused by the apparent advantages of becoming a strategic partners of these major media properties, but certainly only a few are willing to face certain disadvantages that would discourage many.
With Punto Fox departure in early 2014, IMS appears to be its successor, having absorbed much of its workforce, as well as attempting to replicate its business model
Some background: On the one hand there are the international media properties…
On the one hand, there are the international media properties, whose main source of revenue are ad sales. Generally, the marketing of these ad spaces is handled locally through a private team or through sales agreements with agencies who make specific purchases on behalf of their clients. So far, everything seems quite simple. However, the real challenge these media face is when it comes to expand their own horizons, and choose expand to other markets such as Latin America.
The main challenges they face are (to name only the most obvious) the language, local idiosyncrasies, and certain legal and tax issues that may hinder to carry out the operation in an efficient way.. What’s more, we have to consider that all these factors will duplicate in each of the countries of the continent; each local market has its own specific features.
… on the other hand, are the local ad sales rep firms.
On the other hand, there are local companies (usually advertising services providers) operating in most of the region, which know the specifics of each country and have a dynamic and skilled workforce able to perform internationally. These companies usually have little interest in developing their own products (probably because these endeavors involve a period in which no return will be perceived, and therefore are unwilling to take the risk.) Both international media and local companies have a common interest: they both want to obtain significant revenues in the short-term and recognize their counterpart as the perfect complement for the deal to take place. Thereby, via negotiations, they become strategic partners.
Both international media and local companies have a common interest: they both want to deliver significant resources in the short-term and recognize the other as the perfect complement for the deal to take place
The advantages for the local representative…
- Being the strategic partner of a major media property in the region, can enable the representative firm to obtain a better position in local markets.
- Representing international media enables the strategic partner arouse advertisers’ interest. Consequently, the sale of other products the rep firm offers becomes easier.
- It enables to generate economic resources without having invested in the development and maintenance of a successful product.
- It allows gaining experience and appeal to the interest of other international media properties.
… And potential disadvantages.
- When the company represents several Media, there is a risk of neglecting those who are less profitable, at the expense of the media that reports higher profits (which also may impact the fulfilment of agreements with all that this implies).
- Once the international media understands how the operation works, and begins to perceive a substantial turnover, it is time to set foot in the region. So, the representative will not only see its revenue decrease significantly, but also may have to re-allocate the workforce that was exclusively involved in the representation of the international media property. Sometimes, it is likely to lose key employees, who then may be employed directly by the international media property.
- If the company fails to balance its different sources of income, it may find itself in serious difficulties when it comes to renew the representation agreement.
- There are times when the media make use of the strategic partner workforce as if they were their own and this creates a gray area in which the employee will respond to the media rather than to the internal formal structure of the rep firm.
Being a strategic partner of a Premium Media Partner is an interesting business, but not all that glitters is gold. The best thing to do before taking over a major exclusive representation business is to evaluate thoroughly whether the potential benefits will be enough to compensate for the disadvantages.