November 28, 2016
Survey finds many clients and agencies still not discussing transparency
By Thomas Bridge
For well over a year, advertising industry trade publications have published countless stories regarding the lack of transparency between agencies and their marketer clients. The coverage rose sharply this past June after the release of an ANA-commissioned independent study, which found that numerous non-transparent practices were “pervasive in the U.S. media ad-buying ecosystem.” In August, to address transparency concerns and guide the client/agency relationship, the ANA released detailed principles and recommendations to advertisers, including a contract template.
So it comes as a surprise that many clients still aren’t fully aware of the questionable media-buying practices widely publicized by the ANA, according to a survey my firm conducted in October. Perhaps more distressing, many marketers have yet to have a conversation on the topic with their agencies. Even when those conversations have taken place, the client side largely initiated them.
We surveyed a total of 123 people at 43 of our marketer client companies, which collectively spend upwards of $13 billion a year in measured media (according to Nielsen Ad Intel). Many of these companies are leaders in categories such as automotive, beverages, retail, consumer packaged goods, and telecommunications.
The survey found that just 47 percent of respondents said they were “very aware” of the ANA transparency study and recommendations, while 53 percent said they were either “somewhat aware” or “completely unaware.” Importantly, half of the respondents said that they had no communication with their agencies regarding media transparency and the ANA findings. Of those who had some level of communication, they were more likely to instigate the conversation than their agencies.
Asked which area of media transparency was of most concern to them, a majority of survey respondents selected “all of the above” from this list: undisclosed/non-returned rebates, transparency issues in digital media, and principal-based agency buying activities. Twenty-one percent said they were specifically concerned with undisclosed rebates/kickbacks, and 20 percent pointed to transparency issues within the digital media ecosystem, including agency trading desks and programmatic exchanges.
Moreover, more than one-third of respondents said that they had either retained a third-party expert to act on the ANA recommendations or already made changes to agency contracts and other agreements. Just 9 percent of respondents indicated that they had not taken action to date and had no intention of doing so within the next six months.
As of this writing, the 4A’s has mostly dismissed the ANA’s findings while pointing to its own standards of agency conduct, which the ANA does not support. It seems to me that the 4A’s wishes the whole issue would simply go away. But it’s far from being put to rest, as evidenced by new headlines about marketers reviewing their media agencies for possible replacement.
With billions of dollars at stake, marketers should take nothing for granted.”
Whether or not you believe the 4A’s has handled this issue in the best possible fashion, it’s more likely to be resolved by individual clients negotiating with individual agencies than at the trade association level. At the very least, marketers should solicit their agencies’ opinions about whether they agree with the ANA’s findings. Their feedback can help frame subsequent discussions.
However, marketers should first review the ANA report “Media Transparency: Prescriptions, Principles, and Processes for Advertisers,” particularly Section 5: Recommendations for Advertisers. The recommendations are grounded on three key pillars: advertisers need to establish “overarching” media agency management principles; advertisers should assert “primacy” over the client/agency relationship; and advertisers and agencies should agree to a uniform code of conduct.
In the first pillar, the ANA contends that agencies should always act in their clients’ best interests, disclose any conflicts of interest, and agree to be audited to ensure transparency and compliance. The ANA would not have spent significant time and money on the independent study if it didn’t believe media transparency was a serious problem. With billions of dollars at stake, marketers should take nothing for granted.
The second pillar advises advertisers to take control of their agency relationships. To help with this effort, the ANA developed an “optimal media agency contract” template for its members. The useful tool can be used as a starting point for client/agency negotiations, as it calls for any rebates and incentives to be transparent and disclosed to marketers. There’s also the recommendation that marketers have the right to audit agency activities all the way up to the holding company level. This will be difficult given the extreme public pushback to the ANA’s findings from companies like WPP Group and the Publicis Groupe.
Finally, in the third pillar, the ANA recognizes that its members have a major responsibility to ensure that agencies can be successful on their behalf. Quite often, when a major brand marketer replaces its creative or media agency, people fail to realize that some of the dysfunction was on the marketer side of the partnership. The ANA believes that marketers must clearly articulate relevant business objectives, targets, and performance indicators while “rewarding the media agency’s work fairly” and being flexible in renegotiating compensation beyond the original scope of work.
We plan to repeat our client survey a year from now. Here’s hoping for more encouraging results.
Thomas Bridge is founder and CEO of Media Management Inc.
Photo Credit: monkeybusinessimages