The road to media transparency is paved with good intentions
The ways in which agencies have adapted since the ANA's 2016 probe into media rebates appear to have made some elements of trading even less transparent, writes Stephen Broderick
The 2016 report into media transparency from the US Association of National Advertisers (the ANA) has changed the atmosphere and the dynamics of how advertisers and agencies go about business together. That prominent research study found evidence for the first time that some agencies either fail to return accrued media benefits to their clients (as their contract obliges them to) or in some cases they do not disclose them to their clients at all.
These benefits include cash rebates, discounts, and free inventory space. Following publication of the study, FirmDecisions and Ebiquity wrote and published a report for the ANA. The report gave clear recommendations showing advertisers how to drive transparency into all aspects of media trading.
Since the report came out, the number of advertisers in the US choosing to perform financial compliance audits has more than doubled. This is an impressive and significant change. It clearly shows that major advertisers are taking the issue of media transparency more seriously, and that they are actively taking steps to address the issue.
Advertisers – particularly the big, national and global brands – are considerably better informed on the topic than ever before. They are exerting their influence on their agencies and the industry in general to provide more transparent solutions.
Those advertisers who are taking transparency seriously are now ahead of the curve. Many more now review and update their contracts regularly, working with independent consultants. They’re doing this in order to develop their understanding of potential changes in the media trading ecosystem. They’re also choosing to address potential challenges upfront in their agency contracts, instead of waiting for them to become issues not covered by contractual terms. Prevention is very definitely better than cure.
The challenge is that, since the ANA study, the ways in which agencies have adapted their practices appear to have made some elements of media trading less – not more – transparent.
Just as quickly as some loopholes have closed, so new loopholes open up in the complex modern media trading ecosystem, particularly – but not exclusively – around digital media and media traded programmatically.
Advertisers are also signing up to opt-ins that effectively waive their transparency rights. This means they lose the right to access the real cost of media and to have clear sight of the benefits the media agency accrues on their behalf.
Terminology in the media market is changing. Cash rebates were a concern for many years. Since the ANA report, many advertisers have tightened their contractual rights to ensure that they receive rebates owed to them. In some cases, however, rebates have been renamed as value pots, and while rebates may be covered by advertiser-agency contracts, value pots may not be.
In others, some agencies are reallocating the added value they receive from publishers and platforms as free space, which they then repackage and resell, often at very high margins.
Likewise, some advertisers have actively excluded inventory media for digital media trades. This has led to some agencies offering inventory media for traditional channels such as print and TV.
These are often not explicitly prohibited in rewritten contracts. To ensure that contracts are kept up-to-date, advertisers should review them regularly. Given the dynamic rate of change in modern media, this could be as often as every six months.
The principal concern about changing terminology is that new approaches and new names for established but outdated forms of media trading could see old trading practices continue under a new name. And these are practices that are not in advertisers’ best interests.
Investments and strategic partnerships
We have also observed that media agency holding companies are increasing the range and diversity of investments and strategic partnerships in the media supply chain. To some extent, this makes ownership of inventory and trading platforms less transparent, and potentially reduces how objective agency recommendations on a media plan may be.
For if advertisers are not familiar with the commercial relationships that agencies have in place with particular vendors, they can’t be sure of the motivations of specific recommendations. To be clear, they can’t be sure that the agency is making any given recommendation exclusively in their clients’ best interests.
In the 30 months since the ANA report, many advertisers have learned a lot about transparency. They’re better informed on the topic, and many are addressing transparency issues upfront in their agency contracts, rather than waiting for issues to become problems.
But the road to total transparency is long and winding. No doubt there will be stops, diversions, and road blocks along the way. And while progress is definitely being made, the industry-led changes in terminology – together with new investments and strategic partnerships – mean that it’s a case of two steps forward, one step back.
In addition to advertisers increasing the frequency and scope of their contract reviews to help make the media trading ecosystem more transparent, there’s also fresh evidence of increased regulatory interest in the U.S. media market. Last month, for instance, Federal Investigators from the US Department of Justice announced that they are set to probe the advertising industry’s media-buying practices, as reported in the Wall Street Journal.
We definitely live in interesting times.
Stephen Broderick is Global CEO of FirmDecisions. The company provides financial transparency in the client-agency relationship to the world’s biggest advertisers.