In the final analysis, none of the issues identified in the US Association of National Advertisers' report were new.
Most advertisers understand and have probed their agency's commercial governance for years, except in the US where many advertisers have seemingly been asleep at the wheel.
In my view four key industry issues emerge from the report:
1. The growing leverage and financial resources of the holding companies. Buying groups need to remember that with power comes responsibility. They need to re-align themselves towards their client's objectives and away from the lure of easy profits. Their role must involve policing the technology and media suppliers, not conspiring with them. The simple truth is that if buying groups cannot reestablish trust, then advertisers will dis-intermediate them.
2. The inappropriate trading practices within the digital lumascape. Media suppliers and technology vendors have operated exotic programmes to incentivise agencies to spend with them. It is well understood that the media sales markets are intensely competitive and over-supplied, but media suppliers have a responsibility too. Rebate deals with spend ratchets have no place in the industry, nor do "pay to play" service agreements.
3. The need to curb unhealthy advertiser procurement and contracting practices. For every action there is a reaction; advertisers need to understand and acknowledge that their partners and suppliers need to make profits and investments, and that agreeing reasonable, even motivating, levels for their business is not a weakness. Advertisers must face up to the fact that income lost in low fees and commissions will be compensated elsewhere in the supply chain.
4. The distrust fermented by irresponsible intermediaries purporting to be objective advisors. The relationship between advertisers and their media agencies needs time and effort to heal but this will not happen unless advisors adhere to professional codes of conduct and act more responsibly. Actively churning agencies through pitches and sharing confidential information across clients are behaviours which cannot go unchecked. Agencies must have confidence in those sent to adjudicate over them.
At MediaSense we think the industry needs to start putting things right now, so we are publishing a Code of Practice that covers advertisers, media agencies, buying groups and advisors.
All parties should acknowledge their responsibilities within the supply chain and pledge greater transparency of their practices and processes, in line with the following recommendations:
- Provide absolute clarity on fiduciary & compliance expectations
- Use credible, non-conflicted & suitably qualified advisors where necessary to ensure contracts include appropriate T&Cs to protect your interests
- Be respectful of Agency policies, procedures & intellectual property rights
- Respect the Agency’s right to be profitable & agree levels for the Company’s assignments
- Ensure internal stakeholders understand & comply with contractual terms & responsibilities
- Implement robust Agency Governance & Compliance procedures
- Insist on separate agreements for Principal media (where an agency buys inventory and resells it)
- Avoid reverse-auctioning agency hourly rates & payment terms
- Do not demand rebates or benefits beyond fair share
- Disclose all income derived from media & technology sellers
- Commit to full disclosure of all income and expenditure related directly or indirectly to Company expenditures & activities
- Permit full horizontal and vertical audit rights to professionally accredited & non-conflicted advisors
- Fully disclose all Principal media recommendations in plans & subsequent buys
- Offer full transparency of trading desk costs and revenues
- Identify all media bought from an entity where the Agency has an interest
- Directors must not permitted to have a financial interest in any sellers
- Refuse income for "services" from sellers
- Refuse to trade on ratchet-based volume incentive schemes
- Agree to full disclosure of performance processes and methodologies
- Offer data-pool opt-outs for trading offers made under pitch conditions
- All individuals involved in compliance auditing must be bound by a recognised professional code of conduct, e.g. Association of Chartered Certified Accountants
- Enforce and comply with strict standards on data protocols and confidentiality
For media / platforms owners:
- Support adoption of the Code of Practice by disavowing non-transparent trading practices, intended to reward agencies at the expense of the companies they ultimately serve
- Disclose total rebates paid in cash and inventory
There needs to be a fundamental shift in the levels of disclosure between all parties. Levels of governance need to be raised to the standards expected in other professions.
Our Code of Practice is not perfect, but we hope it will at least start the dialogue on the right footing, and ultimately lead to more trusting and transparent relationships.
We will not make progress as an industry by spending more time and resources in chasing the ace, finding needles in haystacks or inventing new words to obfuscate contract conditions.
An industry-wide behavioural and ethical shift is required now.
Graham Brown is a founding director of MediaSense