Until recently, broad awareness of media rebates – what they are, how they work – did not exist among advertisers in the US marketplace. The ANA, through its Media Transparency Taskforce and the K2 Intelligence study, recently found substantial evidence of non-transparent business practices in the U.S. market in the form of rebates.
An Independent Study of Media Transparency in the U.S. Advertising Industry
From October 20, 2015, through May 31, 2016, K2 Intelligence, on behalf of the ANA, conducted an independent study of media transparency issues in the U.S. advertising industry. K2 was selected to lead the fact-finding portion of the study after a request for proposal process initiated by the ANA on June 17, 2015.
Over the course of the study, K2 conducted 143 interviews with 150 individual sources, representing a cross-section of the U.S. media buying ecosystem. K2 kept the identities of all participating sources — and all the individuals and corporate entities named in their accounts — confidential from the ANA throughout the study.
Results of the study were delivered by K2 in a comprehensive report. Among the key findings:
- Numerous non-transparent business practices, including cash rebates to media agencies, were found to be pervasive in the U.S. media ad buying ecosystem.
- There were systemic elements to some of the non-transparent behavior. Specificaly, senior executives across the agency ecosystem were aware of, and mandated, some non-transparent business practices.
- There was evidence of non-transparent practices across a wide range of media, including digital, print, out-of-home, and television.
Media Transparency: Prescriptions, Principles, and Processes for Marketers
As a followup to the initial report, the ANA and Ebiquity/FirmDecisions came together to craft the report Media Transparency: Prescriptions, Principles, and Processes for Advertisers. The report includes a framework to help advertisers and agencies address transparency issues identified in the K2 Intelligence study, create a code of conduct to guide the client/agency relationship, and restore trust — the core of an effective and beneficial relationship.
“We outlined specific actions marketers should consider to diminish or eliminate non-transparent and non-disclosed agency activities and to ensure that their media management processes are optimized,” said Bob Liodice, president and CEO of the ANA.
In addition to the recommendations, the ANA, in conjunction with its General Counsel, Reed Smith LLP, has developed a media agency Master Media Buying Services Agreement which can be used by advertisers in developing their own agency agreement. The ANA would like to thank ISBA (the Incorporated Society of British Advertisers) and its legal counsel Fieldfisher, for their consent to use the ISBA Framework Agreement For Media Buying and Planning Services as a guide for some of the provisions in the ANA template.
Specifically, the report recommends that to achieve full transparency advertisers should:
- Establish overarching media agency management principles that can be easily understood and executed. These include requiring media agencies to ensure complete transparency in all transactions with parent companies, subsidiaries, affiliates, and third parties. Agencies should err on the side of communicating everything to marketers, the report said.
- Establish primacy over the client/agency relationship, and regularly re-evaluate and upgrade internal processes and practices. The report said it is essential that advertisers have a thorough understanding of the existing client/agency relationship and know when the agency is acting as an agent on behalf of the client, or as a principal representing itself.
- Create a uniform code of conduct between the advertisers and agencies. The code of conduct, between advertiser and its AOR, would be mutually agreed to, signed by both parties, and serve as an addendum to the master service agreement.
In addition to these three key pillars, seven strategic recommendations for advertisers are advocated to reduce or eliminate the potential conflicts identified in the K2 Intelligence study. They are:
- Where the agency is acting as a principal versus an agent, the advertiser should have a disciplined and reliable process for managing conflicts of interest.
- Advertisers should ensure contracts with the media agencies include robust language to deliver full transparency.
- Advertisers should insist on robust and far-reaching audit rights that include tracking contract compliance and measuring the media value delivered.
- Advertisers must implement disciplined internal processes to deliver contracts designed to ensure strict accountability, rigorous process governance, and senior management oversight.
- When it comes to data and technology, advertisers should take ownership and exert control over the decision-making.
- Advertisers are responsible for more active stewardship of their media investments and compensating their agency partners fairly.
- A culture of trust is needed between advertisers and media agencies, through the uniform code of conduct.