ANA (Association of National Advertisers) has published this same morning the report on transparency in the media buying market carried out on behalf of the Association by K2 Intelligence.<\/p>\n
The research shows that non-transparent business practices, such as cash rebates to media agencies and other incentives for referring or influencing client spending toward\u00a0the media who provides the incentive, are widespread in the USA media market.<\/p>\n
The report also shows how the engagement of media agencies in principal operations (buying ad spaces in media on their own and then reselling to their advertiser clients) not always favor the interest of the clients but the media agency own interests.<\/p>\n
Publicis Media protests<\/strong><\/span><\/p>\n Just published the K2 report, Publicis Media published an official statement saying: \u00abThe ANA has failed its members, advertisers, agencies and the entire industry by releasing a report that relies on allegations about situations involving unnamed companies and individuals to make broad, unsubstantiated and unverifiable assertions. Despite repeated urging by Publicis Groupe and others in the industry to include names and sources in its report, the document hides behind suspicions and anonymity rather than encouraging real accountability.\u00bb<\/p>\n \u00ab…The unsubstantiated claims are already causing serious damage to the reputation of the industry and endangering the most valuable component of the agency-advertiser relationship: trust.\u00bb<\/p>\n \u00ab…We are crystal clear: we are committed to full compliance with the terms of the client-agency agreements we sign.<\/p>\n \u00ab…The report fails to achieve a constructive outcome of encouraging change that can assure advertisers and agencies are well-equipped to work together in a rapidly evolving media environment. The various highlighted practices distort the picture of the marketplace by suggesting that they are pervasive. These allegations are too serious for the ANA to act in such an unhelpful way.\u00bb<\/p>\n K2 does not unveil the name of its sources or the identity of the respondents.<\/p>\n 5% of media agencies operating in the USA experienced non transparent practices<\/strong><\/span><\/p>\n Of the 150 sources interviewed by K2, 117 were directly involved in media buying in the U.S. market. Of those 117 sources, 59 reported direct experience with non-transparent business practices, including rebates (34 sources) and principal transactions that enabled potentially problematic practices (33 sources).<\/p>\n Some of these sources reported multiple experiences with separate and unrelated non-transparent business practices (e.g., the same source reporting both rebates and problematic principal transactions).<\/p>\n 41 respondents reported rebates and the 82% of them said probably not disclosed to advertisers<\/strong><\/span><\/p>\n 41 sources reported that media rebate deals occur in the U.S. market. Of those 41 sources, 34 reported indicia that the rebates were not disclosed to advertisers, were not passed through to advertisers, and\/or were demanded by agencies. K2 also obtained corroborating documentary evidence of rebates, including email threads and contracts between media suppliers and media agencies.<\/p>\n Rebates ranging from 1.67% to 20% of aggregate media spending<\/span><\/strong><\/p>\n This collective body of evidence showed a range of instances in which media suppliers paid rebates to agencies, or entities affiliated with those agencies, in amounts ranging from 1.67% to approximately 20% of aggregate media spending, depending upon the deal. K2 identified several cases in which the percentage of the rebate owed increased along with agency spend.<\/p>\n K2 identified evidence of several methods by which rebate deals are structured, including financial incentives in the form of cash or free media. Other sources noted that rebates are often structured as service agreements whereby the fees for the services \u2013 usually described as consulting or research \u2013 are tied to the volume of agency spend. Moreover, these services were either of minimal utility, significantly overpriced, or not provided at all.<\/p>\n Principal transactions not always in the interest of the advertiser<\/strong><\/span><\/p>\n K2 found substantial evidence that the lack of transparency inherent in principal transactions enables agencies act in their own interest, not in the interest of the advertiser.<\/p>\n The report shows that many advertiser-agency contracts contain \u00abopt-in\u00bb provisions that allow the agency to engage in certain principal transactions with advertisers. In a principal transaction, an Agency Holding Company essentially acts as a media supplier by purchasing media on its own behalf and then reselling it to the advertisers. K2 report shows that media sold through principal transactions can range from approximately 30% to 90%. Sources also indicated that media buyers are sometimes pressured and\/or incentivized by their own agency holding companies to direct client spend to this media, regardless of whether such purchases are in the clients’ best interest.<\/p>\n Media agencies holding stakes in media companies<\/strong><\/span><\/p>\n K2 found evidence of non-transparent business practices in the U.S. market arising from agencies holding equity stakes in media suppliers.<\/p>\n Several former senior level agency employees reported that they felt pressure from the senior executive level of Agency Groups or Agency Holding Companies to direct spend to companies in which the agency or holding company held an equity investment.<\/p>\n Practices not limited to multinationals or an specific type of media<\/strong><\/span><\/p>\n Non-transparent business practices were not limited to a specific type of agency. The report finds substantial evidence of non-transparent business practices both in agency holdings and in certain independent agencies. Non-transparent business practices were not limited to one specific type of media. K2 found evidence of non-transparent business practices across digital, OOH, print, and television media.<\/p>\n Systemic<\/strong><\/span><\/p>\n These practices appear to be part of the regular course of business. Specifically, K2 found evidence that senior executives at agencies and Agency Holding Companies were aware of and even mandated some non-transparent business practices, suggesting high-level buy-in.<\/p>\n K2 also found evidence that contracts for rebates and other non-transparent business practices were negotiated and sometimes signed by agency executives.<\/p>\n K2 requested interviews with 281 sources and ultimately conducted 143 interviews with 150 individual sources, representing a cross-section of the U.S. media-buying ecosystem.<\/p>\n
\nWhen this happens, the original purchase price as well as other potentially relevant information is not disclosed.<\/p>\n
\nEvidence included both detailed source accounts and significant documentary evidence.<\/p>\n