The Association of National Advertisers (ANA) published on Monday the second half of the investigation it commissioned into transparency — or the apparent lack of it — in the US media agency business.
The first half of the report, published in June, said investigations firm K2 had found evidence of “pervasive” non-transparent business practices within US media ad buying ecosystem, such as agencies taking secret rebates from media companies and not disclosing them to clients.
It alleged a huge loss of trust between advertisers and their agencies and, as the ANA noted on Monday, suggested that agencies “can no longer deny that the ‘rebate issue’ exists in the United States.” In the US, the biggest players in the business have denied for years that they take rebates in the region (rebates are common business practice in markets such as China, Europe, and Brazil).
On Monday, marketing analytics specialist Ebiquity’s Firm Decisions published a 36-page set of guidelines to help publishers ensure their ad budgets are being spent in the right way by their agencies.
The guidelines set out three “key pillars” for the recommended actions advertisers should now take:
- Advertisers should establish overarching media agency management principles that can be easily understood and executed.
- Advertisers should establish primacy over the client/agency relationship. Advertisers should regularly re-evaluate and upgrade internal processes and practices.
- Advertisers and agencies should have a uniform Code of Conduct to guide the relationship and engender trust.
Ebiquity’s guidelines also include seven more “strategic” recommendations around specific remedies, such as revising contract wording.
At the same time, the ANA also released a recommended contract template it believes US marketers should use going forward, replacing their current services agreements with their agencies. That contract was initially created earlier this year by British advertiser body ISBA and has been adapted for the US market by the ANA’s general counsel ReedSmith LLP.
Speaking to Business Insider over the phone shortly after the guidelines’ publication, Ebiqutiy group CEO Michael Karg said he believed the US advertising industry is at a “turning point” and that the investigation and recommendations had helped build a foundation to help marketers cope with the increasing “complexity” of the media-buying market — particularly as digital advertising rises in popularity.
Ebiquity addresses the criticism from the agency community over the report
Advertising holding companies roundly denounced the findings of the K2 investigation when it was published in June, with most of their immediate statements in response to its publication saying the decision not to name names in the report only served to tar the entire industry with the same brush.
The world’s biggest advertising firm WPP has been particularly vocal in its criticism of the report, with its CEO Sir Martin Sorrell suggesting the study was “in no way independent” as he believed it included little input from the six major holding companies. He also disagreed with the selection process for the firms to carry out the probe because representatives from Ebiquity were among the selection panel that chose K2, which employs former FBI agents, to carry out the investigation.
Karg said the selection process was defined by the ANA and that Ebiquity was not party to any of the interviews K2 undertook as part of its investigation, ensuring the study was independent.
“I am a bit confused by the argument. From my perspective, the ANA had to select someone knowledgeable about the industry and its processes,” Karg said.
That said, Ebiquity and K2 also stand to make hay from their reports’ publication. As Business Insider first reported last month, JPMorgan Chase has hired both Ebiquity’s Firm Decisions and K2 to carry out an audit into its media agency ZenithOptimedia as a direct response to the ANA’s report.
When companies appoint auditors to look at their media agency relationships, they are looking for reassurance that they are getting what they paid for when it comes to their advertising spend and that the agency has been compliant with the contract. Sometimes, audits result in overpayments being returned to the company, or contracts being renegotiated.
Ebiquity’s recommendations also includes a whole section on audit rights, saying advertisers should “have robust and far-reaching audit rights which allow them to fully track contract compliance and measure media value delivery.”
But Karg said the aim of participating in the investigation was not that it would lead to more audits.
“This is about get advertisers to the point in which they can make informed decisions about [accountability within media trading] to help them stay more competitive,” he said.
He points out that the recommendations do not just include ways in which marketers can impose harder terms on their agencies, but also ways in which marketers need to make improvements.
The recommendations suggest, for example, that marketers need to ensure they are fully-trained on media management, with digital an immediate priority.
It also suggests that companies need to do a better job of increasing their own accountability, with one of the recommendations saying big firms should appoint a “chief media officer” to oversee all global media strategy, agency partnerships, and work with third-party suppliers.
And another suggestion is that contracts should be revisited much more regularly to ensure any areas of non-transparency don’t slip through the net.
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