The Association of National Advertisers (ANA) investigation into rebates has exposed a worrying imbalance between the murky levels of governance, accountability and oversight applied to media budgets. The pressure is now on senior marketers to wrestle back some control of media management from the media agency.
The long-gestating great rebate debate has hit its apex;if the ANA's findings are to be believed, media agencies in the US are making money on the back of their advertising spending in ways that are not transparent such as taking undisclosed rebates from media owners. While the rebates themselves are not illegal, in fact it's widely knownthat they are rife in markets beyond the US, it's the growing clarity on how money is handed back to media owners by their biggest customers that’s sparked such concern.
Unsurprisingly, the agency groups in the ANA’s firing line have questioned the organisation’s objectivity, while marketers have (naturally) welcomed the transparency of the report. Procter & Gamble (P&G), the world's largest advertiser, has stressed the need for marketers to force through the agenda around media transparency in the wake of the report's release.
A spokesman from P&G said: “We appreciate the ANA’s diligence to study media transparency practices, particularly as technology is bringing a significant transformation in the industry. As a result of the study, it’s important that advertisers and agencies work together appropriately to deal with the changing media ecosystem.
“At P&G, we want and expect strong agency partnerships based on mutual trust, transparency and teamwork. We have a “trust but verify” approach that includes having clear and thorough stipulations in our contracts, regular audits on performance, and third party verification that ensures transparency. If we find irregularities, we will take remedial action.”
Research from the World Federation of Advertisers (WFA) has previously found that rebates are less prevalent in the US than in other countries. Markets such as China and Ukraine are blighted with some of the lowest levels of transparency in comparison to the rest of the world, according to the WFA’s ongoing studies.
The ad tech sector of the media industry is especially weary of the 'rebate culture', with many sources in this tier of the industry claiming that it is essential part of remaining on agencies' media plans. Indeed, some speculate that many ad tech outfits have changed their business models to charging for the use of their software - as opposed to taking commission on media fees - to extricate themselves from the culture of trading deals.
Some media observers say there are only a few bad seeds, while others like former Mediacom chief executive Jon Mandel maintain that there’s a widespread industry crisis of trust. In any case, the report and the sheer veracity of its findings point to the poor state of relationships between agencies and marketers. It’s natural for marketers to want to secure a ‘good deal’ out of an agency, and agencies naturally want the upper hand for themselves. To break this inward focus on both sides, chief marketing officers will need to find ways to make more informed choices about which agency they work with and how they work with them in future.
“Our advice to brands at this stage is to take a considered and strategic view of how to protect themselves in the future by implementing proper governance over the whole media investment process, not just media buying but briefing and planning too which is where most of the transparency issues actually originate from,” said Tom Denford, co-founder of media consultants ID Comms.
“It will be important to create an open and objective forum to discuss these issues constructively with the media agency. “The bottom line is that advertisers have the right to follow their own money and should use this report's findings as a catalyst and opportunity to assert that right more forcefully than they've done before.”
Rebates, unbilled media and market complexities are nothing marketers didn’t already know were issues. What the report – and the subsequent fallout from its findings – are doing is spotlighting the need to address the wider issues at play.
Firstly, is that advertisers have seemingly sapped fees from agencies in era of procurement-negotiated deals, meaning agencies have to make up for the losses from somewhere else. Marketers have then seemingly feigned ignorance because they’re presumably getting good value.
The second issue is how growing pressure from advertisers on agencies to achieve unrealistic volume buys with media owners is ballooning the financial risk for the former should they not hit those targets. Again, it's a tough situation that leaves media executives scrambling to secure ad placements - that aren't always the best - to avoid owing millions to publishers and broadcasters.
No good has ever come out of a relationship with dishonesty at its base. And the ANA recommendations off the back of the report’s findings attempt to purge that inherent distrust. From marketers being urged to “meticulously review all terms and conditions" with their media agencies via an independent third party to understanding whether said agreements allow them to “follow the money”, the trade body’s guidance amounts to full disclosure between both stakeholders.
“Such disclosure is absolutely essential if they are to build trust as the foundation of their relationships with their long-term business partners,” said Bob Liodice, president and chief executive of the ANA.
A way to move forward may be for both sides to reassess value and worth, one agency/client relationship at a time, suggested Jay Friedman, chief operating officer of programmatic business The Goodway Group.
“For example, in the pitch and negotiation process, agencies need to address questions like: ‘What is our value proposition?’ ‘How will results be delivered?’ “How will we measure and demonstrate success?” While marketers might need to focus away from getting a bargain to possibly paying more for good and honest work.”
If there was any doubt amongst the industry that its current processes aren’t working, then the ANA’s report has blown that wide open.
Or as Carl Erik Kjærsgaard, co-founder of AI media analytics platform Blackwood Seven puts it: “This report just reinforces the message that it is time for marketers to reclaim the power and embrace the technology that can give them what they want – transparency, efficiency, effect and speed - rather than settling for the opaque and antiquated services that they receive today.”