ANA report: Agencies = spivs, clients = innocents. Oh, yeah...
No one has come out of the ANA rebates probe with much credit, but there has been a distortion of such magnitude that it threatens its credibility, writes Dominic Mills
With exquisite timing, the ANA chose to publish its long-awaited report by K2 and Firm Decisions into US media buying practices just 10 days before the annual agency-client circle jerk-off that is Cannes.
Oh to be a fly on the wall at some of those expensive dinners agencies buy their global clients at the Colombe d'Or or the Eden Roc. There'll be a certain added piquancy this time. As the clients go for the most conspicuously expensive lobster and wine choices they can make (take that, you opaque bastards!), they will wonder whether it's actually their money they're consuming, or the agency's.
For those (like me) with their noses pressed to the window of adland, it's a good read. It's not much of a surprise, however. We all know this stuff has long gone on.
Here's a piece from a few years ago talking about agency opacity in the US, and the prevalence of rebates.
But some of the detail is riveting, and one conclusion of mine is that this report is damning, in different ways, of everyone involved: agencies, clients, ad tech players, and the oppressed media owners. No-one comes out of it with much credit.
Nevertheless, if the report leaves one impression it is this: agencies are spivs, some with mafia-like tendencies; and clients are members of the Mother's Union, naïve innocents abroad in a big bad world.
This is, of course, a ridiculous exaggeration, and a distortion of such magnitude that it threatens the report's credibility.
Many of the 'malpractices' laid at the door of agencies are exactly what clients do to their own suppliers when they aggregate up their buying power. We know the UK supermarkets were at it, finding dozens of ways to gouge their suppliers, and failing to pass all the benefits on to consumers.
Are the US supermarkets or chain retailers any different? Don't car companies do the same, telcos, travel operators and so on?
Yet I have no truck with those who, like the big cheeses at Publicis, castigate the ANA for granting its interviewees anonymity, and for naming no names. Did they really think anyone would talk on the record? And do the likes of Maurice Levy really think the ANA would name any of the malfeasants?
Of course not. They'd be tied up in legal hell quicker than anyone can say Agency Volume Bonus, or AVB as it known in the trade. In fact I think Levy's rant is borne of his frustration at being unable to unleash his legal aces on the ANA or any of the interviewees.
Nevertheless, if anyone may be in for a rough ride, it is the ANA and its boss Bob Liodice, the man who fired the starting gun for this whole process.
The day after the report was published, I was chatting to a somewhat flustered senior agency figure who'd just come out of a conference call with their colleagues and the CEO of their holding company.
"CEO A [like the ANA, I can't name names] is absolutely fuming. We've got three massive pitches going on, and this is going to screw them up. He wants blood," the agency exec told me.
There will be a lingering fear of the law of unintended consequences among some clients"
This puzzled me. "Whose blood?," I asked. "K2 were just doing their jobs. To go after the ANA and its members would be suicide."
"He wants Liodice's head on a plate," I was told. What this fellow wants, he usually gets - eventually. And, since you can't put the toothpaste back in the tube, this is about revenge.
I learnt three key things from the report.
1. The joy of semantics. Who knew there were so many synonyms, so many ways to disguise something as simple as a rebate? We've got discounts, referral fees, inventory media, agency-media owner service agreements, strategy advice and market research. All, in one way or another, are cover for the media owner handing the agency a wad of cash or inventory as a reward for spending money with them (p14 and following).
2. Some clients have been asleep at the wheel - possibly for years. It's not unusual, it seems, for many to be operating off contracts that are eight years old (p25 of the report and following).
Eight years old! That's pre-historic in the current media landscape: Twitter only launched in 2006, Facebook was a promising social media platform. Vivaki was taking its first steps in 2008, and Xaxis hadn't even been born.
So the idea that clients would entrust their agencies with hundreds of millions of dollars with contracts that aren't fit for purpose beggars belief. But, for some ANA members, that apparently is the case.
Even if clients had better contracts, they often didn't bother to find out what was going on. It's clear there's a whole cohort of clients completely out of touch with the market. Caveat emptor, eh?
3. When we talk about agencies as bad actors, as acting in opaque ways, we should define our terms. Time and time again in the report, it is the not the media agency or AOR where the fault lies, but the holding companies. They are the ones pulling the strings, orchestrating the deals and forcing their line agencies to compromise themselves (p29 and following).
4. While I have no doubt as the broad substance of the allegations, most of the sums of money involved were quite trivial in the broader context of client spend. As I recall, the biggest number that emerged was for $1m of inventory.
5. Pity the publishers. They are the ones ultimately funding the rebates, AVBs and so on. No wonder they're suffering.
So what happens next? I don't think there is much chance this will cross the Atlantic. One experienced media consultant tells me that US clients have historically been much more trusting of their agencies than European ones. So as much as this may be a shock to those in the US, it won't be elsewhere.
On balance, I think the report is a good thing. They say sunshine is the best disinfectant, and these practices needed to be exposed to the light.
My sense is that, for now, most agencies are lying low, waiting to see how the dust settles. Those clients that haven't pitched their business for a while will perhaps accelerate the process, while those who did in last years's Mediapalooza will probably not want to repeat the exercise despite the report because they got such phenomenal deals.
And there will be a lingering fear of the law of unintended consequences among some clients: that, finally, they and their agencies have a proper conversation about value - and they may actually end up paying more for their media agency services.
Now wouldn't that be a thing.