The great media agency transparency debate

Leading figures in the industry react to Scott Moorhead's explosive claims last week.

Moorhead: alleged that some agency income comes from non-transparent practices
Moorhead: alleged that some agency income comes from non-transparent practices

Scott Moorhead, a former head of digital trading, has sparked a debate after writing in Campaign last week that the media agency model is "broken".

His claims about agencies making "undisclosed income" through non-transparent practices and auditors failing to challenge the status quo were less significant than the fact that this was a relatively senior figure – who had only quit the media agency world in October – speaking out. Few would risk going public as Moorhead did.

Campaign has asked industry figures for their reaction. Some strongly dis­agreed, either privately or on the record, with his analysis that the model is broken. But there was a near-unanimous view that things need to change.

Paul Bainsfair

Director-general, IPA

We acknowledge the need for constructive dialogue. However, we think the most vocal are those with most to gain from amplifying the scale of debate. We are engaging with ISBA on this and will continue to do so.

It’s important to point out the manner in which advertisers and their agencies trade with one another is a matter for them. Different agencies have different business models. It comes down to how much an agency can add value to a client’s business rather than how much they charge. The primacy of effectiveness and value over efficiency for its own sake.

It would be useful to have an agreement of the remit for media auditors – something the IPA is working on.

 

Nick Theakstone

UK chief executive, Group M

We must be sceptical of commentary by parties whose businesses are predicated on building a wedge between agencies and their clients.

Clients are not naïve; we build trust with them daily as they challenge us to deliver against their needs within the terms of their contracts. There are now numerous business models and this is why contracts are so important.

We objectively plan all our clients’ media to their brief and have a focus on delivering key performance indicators. Client needs remain paramount. Any agency not putting their clients first does so at great risk.

Paul Frampton 

UK and ireland chief executive, Havas Media group

I would concur with ISBA’s Mark Finney that there needs to be more constructive dialogue between agencies, advertisers and auditors. Havas believes all parties need to evolve beyond an obsession with price to focus on value and effectiveness.

 

Catherine Becker

Chief executive, VCCP Media

The agency model is not broken. This is making a generalist assumption. It assumes clients are not savvy and all agencies are deceptive. This is not the case.

The majority of our clients partly remunerate us on results from client service to pricing improvements to sales targets reached.

This gives us shared risk and reward, and creates a true partnership. We also work in this way with some media owner partners. It’s incumbent on agencies to lead the way. If agencies wait for clients or auditors to find that out, all trust is already lost.

Jenny Biggam

Co-founder, The7stars 

There is a lot of complexity in the industry – and it starts with the way agencies are asked to pitch for business.

Too often, business is won and lost based on fees that are untenable and rates that are unbuyable – and so the winning agency has to set up a complex ecosystem around upselling, non-transparent revenue streams and manipulation of buying results.

I’d welcome a joint industry group on defining best practice in how we move from pitching based on cost of service and cost of media towards delivering effective solutions.

  

Henrik Busch 

Uk chief executive, Blackwood Seven

Many media agencies have helped their clients cut their fees to the bone and even beyond.

Yet they are businesses which must turn profits, so they have put themselves in a corner in which they must bolster income from downstream – in so doing, becoming partial and losing clients’ trust.

Full disclosure over the billings of all bought media, alongside making the net cost forensically auditable, is where we see the future.

 

Jonathan Durden

Co-founder, PHD

Clients were complicit through selective blindness. However, over the years, the ad groups have returned to viewing media as a cash cow. This has undermined the primary purpose of our discipline – to offer best advice and embrace new opportunities for the benefit of customers.

As a media owner, there is no choice but to take part in this broken system or suffer. Transparency, fair fees and a spirit of trust must now prevail. Like every other industry, the old business model is screwed.

Trans­parency and a reassessment of what represents both value and skills are required, and to not be encumbered by the groups’ drive for profit at any cost. Otherwise, agencies will join the dinosaurs.

Tina Fegent

Procurement consultant

Every agreement made with every client ("terrible procurement" or otherwise) would have been agreed, one hopes, by the agency senior management and respective client.

Clients have outsourced knowledge and expertise and need to invest in media education. I agree with the Association of National Advertisers’ recommendation that clients should look at a chief media officer role.

 

Will Hamilton

Managing partner, Hamilton Associates

Some agencies are bruised but not broken. Reframing contracts and terms on a year-by-year basis is becoming the norm and some clients’ demands are excessive. Other agencies are investing and building their talent base and, through it, negotiating good terms of business. Agencies must invest in talent – zero investment will eventually lead to zero margin. Clients should stop counting hours but recognise the hard work agencies put in. Auditors and intermediaries need to recommend agencies that have a track record at delivering results.

Mark Jackson

MC&C managing director

The agency model isn’t broken, per se, but bad practice has crept in. Buying large audiences at scale has flipped the process of buying media on its head – with some of the bigger networks abusing their scale to sell what they have, rather than buying what clients need. Agencies still play a vital role in guiding brands through an increasingly complex media landscape.

 

Andrew Stephens

Goodstuff Communications founding partner

Broken is a strong and not wholly accurate word. It's about time we stopped hacking ourselves to bits and instead focused on the positives within our industry. Auditors need to educate clients on what fees are reasonable for an agency to make a decent margin without the need to look elsewhere.

 

Graham Brown

Media Sense, co-founder

Just because a system has to evolve does not necessarily mean it is broken. However, the commercial infrastructure is no longer fit-for-purpose and requires a radical overhaul, which will necessitate great leadership and a very significant mind-set shift by all parties. Agencies should move to total transparency in return for clients agreeing to reasonable remuneration, and conflicted auditors with legacy benchmarks should no longer have a role. 

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