Rebates and other non-transparent business practices are “pervasive” in the US media industry, caused by a “fundamental disconnect” between advertisers and agencies. That is the conclusion of a report by the Association of National Advertisers’ (ANA) into media transparency.
The investigation was set up by the US trade body to investigate buying practices at media agencies amid allegations that agencies were collecting undisclosed rebates from media publishers. The practice is not allowed in the US and the major media holding companies, including WPP, Publicis, and Havas, have previously claimed they do not take rebates in the country.
While there is no suggestion at the moment that media agencies have done anything illegal and no fingers have been pointed at specific companies, the report suggests agencies have been boosting their profits by taking rebates and other payments and not disclosing them fully to clients. That has led to ethical implications due to what the ANA calls a “lack of full disclosure”.
“Advertisers and their agencies are lacking ‘full disclosure’ as the cornerstone principle of their media management practices.”
Bob Liodice, CEO, Association of National Advertisers
“Such disclosure is absolutely essential if they are to build trust as the foundation of their relationships with their long-term business partners.”
Most clients’ contracts with their agencies state that their money should be spent transparently so that brands are getting the best media slots for the message they want to communicate and the audience they want to reach. However the ANA report found a fundamental disconnect, with advertisers believing the agency “should always act in their best interest” while agencies stated the relationship is “solely defined by the contract between the two parties”.
Why marketers should care
Media buying has become an increasingly complex and opaque area. And while rebates are allowed in the UK market, the ANA report suggests they are much more widespread and the practice may go further than many clients realise.
Chris Duncan, chief customer officer at News UK, told Marketing Week: “Marketers are pretty focused on ROI. We manage budgets pretty tightly and want to know where the money goes and be clear that our money gets the maximum impact to customers.
“Any area that looks at money moving about that isn’t getting marketing results, most marketers will be interested in that.”
Chris Duncan, chief customer officer, News UK
Yet while the investigation points to agencies making undisclosed profits from advertisers’ billings, marketers should not lay all the blame at their door. There has been increasing pressure on media agencies to compete on price leaving little room to turn a profit and marketers have also failed to invest in media knowledge and skills, content to leave it to their media agencies.
Richard Plansky, executive MD of K2 Intelligence, the firm who conducted the research for the ANA, explains: “There is a responsibility for marketers to do more, not just agencies. Marketers need to be tighter on their agency contracts, have better training to increase their knowledge of the digital media supply chain and take more responsibility.”
Making media a c-suite priority
Brands spend huge amounts of their budget on media buying. John Lewis, for example, invested around £6m of its £7m Christmas ad budget on planning and buying media.
Given those figures, the ANA report will pull media buying up the corporate agenda. Tom Denford, chief strategy officer at media consultancy ID Comms, explains: “This is going to become a business issue, the lack of transparency and low trust in media agencies, so their CEO and CFO colleagues are likely to be asking some tough questions about their level of exposure and to whether they have a clear strategy to improve things ahead. I’m not sure many CMOs are fully prepared for this.”
Marketers will also need to take responsibility by equipping their teams with media skills and look to bring talent in-house to ensure they understand the media landscape. Proper governance will also be needed across the media buying process, not just for buying but for briefing and planning too.
News UK’s Duncan added: “[Marketers] need to understand where their money goes in the media buying process. But this situation is similar to ad fraud. Are there tools to do governance there? It has improved considerably since it has become clear CMOs are interested in countering the problem [of ad fraud]. There could be a similar effect on rebates.”
Both brands and media agencies also need look at their relationship more closely, rather than allowing it to boil down to who is cheapest. Brands espouse the virtues of a close bond with their creative agencies to ensure they get the best campaigns but the dynamic with media agencies can often be more rational.
Britvic works with M6 for its media planning and buying and says value for money is the most important consideration. Kevin McNair, GB marketing director at Britvic, speaking to Marketing Week, said: “You can look at it from a cost perspective but a lot of the time you get what you pay for. We want breakthrough communications. For us it’s about sales, winning share and growing the category for us and the retailer. If we can do that then cost is irrelevant.”
The ANA investigation has raised a lot of issues around media planning and buying that many marketers will find they are not in a position to answer. This points to a dearth of media talent and lack of understanding at brands that must be sorted at the first opportunity. But it is also an opportunity for frank conversations between clients and their media agencies in order to better understand their role, the pressures they are under and how the two sides can best work together.