Agencies still dispute 2016 ANA report on kickbacks
“One-sided.” “Inconclusive.” “Immense shortcomings.” The ad world’s response to an anonymously sourced 2016 study on media transparency conducted by the ANA, K2 Intelligence and analytics company Ebiquity was almost universally negative. As Publicis Media CEO Steve King put it, “The whole industry was tarred by one or two rogue players.”
Yet the report, which focused on cash rebates and other markups that publishers allegedly paid to major media shops without their clients’ knowledge, has had an undeniable influence on the most profitable part of the agency world in the two years since its release. Its findings frayed an already fragile sense of trust between clients and agencies, and they continue to affect the ways the world’s largest advertisers manage their own budgets.
P&G’s Marc Pritchard, for example, recently described the ongoing quest for greater transparency as “marketers taking back control of our own destiny.”
“It gets to the very root of trust and value between clients and agencies,” said P.J. Leary of PJL Media, who oversaw much of the study while serving as chairman of Ebiquity. He noted that his company was “well aware of the issue” years before a 2015 ANA speech by former MediaCom CEO Jon Mandel first “lit the fuse” on the matter of kickbacks.
And despite agencies’ protests, clients have been paying attention.
“Advertisers now see transparency as a competitive advantage,” said Tom Denford, co-founder of search consultancy ID Comms. “We have advised them on $5 billion in media negotiations in the last year, and the majority of this has involved progress on transparency.”
Agencies themselves have also acted, albeit reluctantly; most in the U.S. have adopted the ANA’s suggested media contract template, which came from the U.K.’s ISBA. In a more dramatic example, independent shop Crossmedia recently took what it believes to be an unprecedented step by hiring a major global accounting firm to conduct an internal audit of its U.S. operations.
According to a letter CEO Kamran Asghar sent to all partners, the goal was to “instill our clients’ confidence in us” by confirming that Crossmedia adheres to its own Seven Principles, which seek to eliminate any perception of conflicts or revenue drawn from sources other than “remuneration arrangements with clients.”
“All negotiated value is client value, meaning whatever we negotiate we turn over to our clients,” said Asghar, who calls his modus operandi “radical transparency.”
Why do so many agencies resist this approach?
“Transparent behavior does reduce profit margins,” said ANA CEO Bob Liodice—and Omnicom’s John Wren acknowledged as much in an early 2017 earnings call.
Crossmedia co-founder Martin Albrecht also said that “we would never claim to be the cheapest agency in town” while joking that he has yet to pay off his mortgage.
Trust, however, has no monetary value.
“The industry has gotten used to a conflicted business model,” Albrecht said, adding that agencies look to play the metaphorical roles of both doctor and pharmacist by advising clients to buy inventory that benefits their bottom lines. All involved parties, he said, have acted in their own short-term interests to the detriment of the larger ecosystem as holding groups look to squeeze ever-greater profits from their media wings.
Yet some industry leaders still claim the hype around transparency outweighs the reality. “Transparency is table stakes,” said one media agency veteran who noted that the vast majority of reviews still hinge on price negotiations. King even argued that the controversy has made Publicis Media stronger. While some of the network’s largest clients initially paused their media buys after the report went live, King said that Publicis passed “all 34” subsequent audits —and that the ANA study ultimately “acted as one of the best advertisements for our group.”
“I feel very strongly about trust, because a lot of people are throwing bricks at our industry,” King added, citing Publicis Groupe’s recent moves to make contract language clearer and its investment in the NewsGuard “fake news” content filter.
Liodice, who referenced a pair of 2017 surveys in which a majority of U.S. and U.K. marketers said the ANA report had led them to act, believes the movement has expanded well beyond its initial focus on kickbacks, and he remains “slightly optimistic” it will push clients to become more responsible stewards of their own budgets. When asked to predict its long-term influence, he said, “I have a feeling it will stick to our ribs better than we thought.”