Is that your hand in my pocket, or…
It’s a jungle out here in ad land. There are media buyers who are double dipping (some even triple dipping) on their compensation, and who may be paying more attention to their own bottom line than they are to their clients’ bottom line. That is the premise of an investigation conducted by the Association of National Advertisers (ANA). Released on June 7, 2016, the full report is here.
The quick overview is that some media companies who are responsible for paid media investments may not be fully transparent about a few important issues. And even if they have a contract with a client that permits the lack of transparency, it may lead to questionable business decisions that may not be in the best interests of the client.
Breaking down the issues
With obscured compensation and non-disclosed rebates, media-buying companies may collect cash rebates or added value media activity in return for budget commitments with media publishers, but then don’t award those rebates or assign the “free” media back to the clients whose budgets earned them.
The hidden markup includes principal transactions whereby the media buyer pre-purchases media and then resells it at a markup to the client without disclosing that markup, and who benefits. While not necessarily a “bad” media investment, it can raise the question of the quality of the media buy. Was the buy made to benefit the marketing strategy, or because the company making the media buy benefited from the media placement? There is no clear conclusion for either scenario, but then again, “not clear” is the same as “not transparent.”
With undisclosed equity positions, media buyers may place business with publishers or ad technology companies, with which the media buyer holds undisclosed equity positions (ownership) in those companies. Those relationships may or may not be beneficial to the client’s marketing objectives. Again, transparency should dutifully be provided.
Searching for the proof
Not covered in the ANA report is the potential lack of performance transparency. Not all marketers require proof of performance of their media buys, either through ignorance, incompetence, or deceit by the media buyer. None of that is good. These practices cast a pall over all media buyers.
Several of the large agency holding companies have already responded to the ANA report with varying degrees of Sturm und Drang. We’ll let their responses live here. While nobody in an official capacity will confirm that they conduct nontransparent media buying activities, some do admit, awkwardly, that it’s in their contracts not to be fully transparent. Another justification by media buyers for their lack of transparency is that digital work is more labor intensive, and requires technology that a traditional compensation model does not support. Therefore, out of a need to service their clients appropriately, they have created new revenue streams. We applaud the creative financing, up until the part where they don’t disclose those practices or the potential influence on media buying and management decisions.
A clear view: Four tips for agency transparency
1. Review your agency’s (or internal marketing team’s) compensation and performance policies. Know what you are getting in terms of paid media and the services to manage those media buys.
2. Retain the right to request original copies of detailed media vendor invoices, and if you doubt their veracity (i.e., it is not the original content from the media vendor), contact the media vendor directly for copies of the invoices and compare to what your agency provided in their monthly billing packet.
3. Require that your agency use third-party validation of performance, and then require this level of reporting to you. This might mean using resources like Nielsen, SQAD, Integral Ad Science, or third-party ad server data to appraise the actual buy. Then compare the objective data to the planned data, and expect a rational and thorough discussion on any significant variance.
4. Remunerate your agency fairly. Great work and results are not due to luck. They are the results of hard work, smart work, and continuous work. If an agency is going to move your brand forward, they have to be profitable so they can hire the right minds and apply the right technology.
Be careful out there. If you want to have a fully transparent, no pressure, no obligation conversation about your media investments, contact us.