WHAT DO WE KNOW ABOUT MEDIA TRANSPARENCY, AVBS AND MEDIA AGENCY REBATES?
While on the record acknowledgements of AVBs and rebates in the U.S is scant,
- The claims in the ANA report, though unsubstantiated, cannot be ignored.
- A growing discomfort among our team, our clients and industry contacts is questioning how, with progressive pressure on agency compensation, holding company profits have been strong.
- We note the increasing agency deployment of programmatic trading desks and purchasing media as principal, rather than agent.
- We have direct experience in international markets where such rebates are common.
WHAT WE SUSPECT
While there’s lack of clear, definitive publicly available evidence of AVBs, it’s reasonable that with the backdrop of non-transparent trading desk and principal media buying, that some form of financial asset is, in fact, being obtained by agencies and not identified nor shared with their advertiser clients.
Moreover, we are troubled by the possibility of conflicts of interest in the planning and recommendation of individual media vendor placements.
WHAT SHOULD WE DO ABOUT IT?
Clearly, advertisers need to take all appropriate action to protect themselves in all matters dealing with their advertising agency. Below we’ve detailed some of the key steps we recommend to advance the protective shield.
First and foremost, we recommend our clients meet with the most senior executives of your agency holding company to obtain
a) Their commitment to share in whatever assets may be obtained by the agency. This includes your willingness to negotiate a specific figure or percent of your spend.
b) A listing of those vendors with whom they may obtain such assets.
c) A formal review of the internal protocols and safeguards to address the conflict of interest in planning and recommending vendors that may not be the best option for your media plan.
2. We have over time encouraged our clients to strengthen language in their Marketing Services Agreements to precisely define their expectations and tolerances as it regards such assets. There should be no doubt or lack of clarity in this language. We continue to believe this is the first legal line of defense.
3. We recommend our clients receive an affidavit stating that no assets have been obtained from third parties based on the agency’s purchase transactions. This should be received at least annually, from both the agency and holding company, preferably from the most senior management.
4. We suggest that your agency agree to a specific compensation program for all trading desk, other programmatic and principal based buying efforts on your behalf, including your option to audit.
5. If the agency will not be open to audit is to modify your commission structure to not include such buys. That way they’ll only be able to keep the spread of what they buy as principal.
There clearly are more demanding and likely punitive provisions that can be implemented, but at this time, we believe that finding a mutually agreeable framework for honesty and reasonable transparency.
This subject will continue to evolve and the ami+partners team will continue to monitor this situation and advise of any changes in both the course of the ANA’s efforts and additional recommendations to protect our clients’ interests.
We are available to assist with suggested contract language regarding the above recommendations.