LH-S’ Smallwood slams ‘dodgy’ agency methods
Payment of hidden surcommission – or additional fees – to media owners and agencies is on the increase because of the structure of the UK media industry, the Media Circle conference in Guernsey was told last week.
Mike Smallwood, media director of Lowe Howard-Spink, told delegates in a closed session that the drive for media discounts by buyers and advertisers had stripped profit margins to the bone. This process is being exacerbated by an oversupply of media buyers competing for too few accounts.
Agencies had two choices, said Smallwood, to create added value services or get involved in dishonest practices to boost margins from the other side of the media fence.
“It is very depressing,” says one delegate who agrees with Smallwood. “The only hope for media agencies would seem to be to win business on dodgy terms or get yourself a network in Europe where either fixed ratecards or draconian laws guarantee transparency and honest profits.”
Practices believed to be on the increase include agencies supplying non-existent consultancy work to a media owner to hide surcommissions or agency deals that mean advertisers’ money is used in volume to create bigger discounts that are returned to the agency.
Agencies are also paying some media owners for non-existent research to help guarantee low rates and win new business.
“Everyone is paying roughly the same for media, so clients cannot get any more discount unless someone else is paying for it,” says another delegate.
Smallwood declined to comment any further on the speech.
