The Guardian reveals for the first time it pays rebates to advertising agencies

David Pemsel GuardianThe GuardianThe Guardian Media Group CEO David Pemsel.

The Guardian has revealed in its annual accounts it pays rebates to advertising agencies, Campaign’s Gideon Spanier first spotted.

Parent company Guardian Media Group’s (GMG’s) financial statements for the year ended April 3, 2016 includes a small section entitled “advertising rebates,” which details how the newspaper owner pays rebates in the form of “free advertising space, cash payments, or both.”

It reads:

“The Group enters into agreements with advertising agencies, which are subject to a minimum spend and typically include a commitment to deliver rebates to the agency based on the level of agency spend over the contract period.

These rebates can take the form of free advertising space, cash payments or both.

The rebate provision is calculated using the forecast spend over over the contract period and the rebate entitlement set out in the trading agreement.

Calculating the required provision therefore requires an estimate of future period spend in determining what tier of spend the agencies may reach over the agreement.”

It is the first time GMG has disclosed it pays rebates in its annual accounts, although the practice has been standard there for some time, according to Spanier. The filing does not reveal the amount the company paid out.

The Guardian did not immediately respond to a request for comment. The company declined to comment when contacted by Campaign.

Media companies paying advertising agencies rebates is commonplace in the UK.

But in the US — where The Guardian has an office and a number of advertising clients — rebates are controversial. Agencies have insisted for a long time that they do not take rebates in the region. However, an explosive report from the Association of National Advertisers published in June found that rebates and other non-transparent business practices were “pervasive” in the US ad buying ecosystem.

Rebates are contentious because some marketers believe any media owner bonus built up due to their level of advertising spend should be returned back to them. Some marketers are also wary that their media agency could be persuaded to spend more of their money with a certain media owner because they offer the better rebate, rather than spending in their best interests.

On the other hand, marketers should take responsibility for their media agency contracts and ensure they are happy with the terms of their contracts before they sign the paperwork. The issue isn’t so much the rebates themselves — which can be seen as a reward for agencies, which argue their buying power gives marketers the best ad rates — but the disclosure of the rebates to all the parties involved.

The Guardian’s disclosure makes it the second UK publisher to reveal in the past few months that it makes provisions for advertising agency rebates.

Back in December, Campaign’s Spanier reported that the publisher of The Daily Mail, the Daily Mail and General Trust, had set aside £26.5 million ($34.9 million) in cash and discounts for advertising agencies and advertising clients in the year to September 2015.

Business Insider reported in July that GroupM, the world’s biggest ad-buying agency, had revised the majority of its contracts with UK-based media owners in an attempt to shore up transparency concerns. At the center of the revisions was wording around what are known in the industry as “value pots” — the bank of free advertising inventory media buying groups accrue as credit once they reach an agreed level of spend with a media owner.

NOW WATCH: New guidelines have led to a big change for uniforms at the Rio Olympics

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.