Moral hazard: the basic mechanics clearly apply to agencies
Moral hazard: the basic mechanics clearly apply to agencies
A view from Alex Hesz

Emerging tech is driving an explosion of moral hazard in advertising

Agencies are no longer invisible, if we're on the stage we have to take responsibility, writes Alex Hesz, executive interactive director, Adam & Eve/DDB.

On my very first day in advertising, back at M&C Saatchi, us grads were shuffled into the perfectly polished lift and whisked up to the rarified air of, I think, the seventh floor.

Up in that most literal of ivory towers we were imparted all sorts of gnomic wisdom, much of which has stuck with me.

"We don’t have a sign outside", I was told by Maurice Saatchi, "because it’s not about us. It’s about our clients. We’re invisible."

Invisible. And that’s exactly what we are, in agency land. We sit beside the stage, watching the show play out, watching the audience, whispering instructions from the wings, concealed, anonymous, unseen.

But today there’s real risk in behaving that way. Not just risk to us as agencies, but to clients and to consumers. And with every new technology that risk is getting bigger.

Moral hazard isn’t something we instinctively think applies to us. It’s for bankers and politicians and big pharma. But the basic mechanics of moral hazard clearly apply to agencies. We’re paid to act in a way that we know creates risk of a bad outcome, but we pass most of that risk on to clients and consumers.

To some extent systemic moral hazard has always been baked in to the agency model. We did (and continue to do) the ads for cigarettes or sugary drinks, we took the cash, and passed on the reputational risk to clients and the health risk to consumers. But the scale of that risk is ballooning.

Two things have happened to turbo-charge it. First, our work has moved from being largely one way, broadcast to a set number of consumers at a given time for a clear objective, to being uncontrolled, able to travel much further, much faster, and well beyond intended audiences.

Second, the very objectives of that work have become less simple and less explicit. Suddenly the sugary drink ad doesn’t just rot your teeth, it mines your personal data to sell to another company, cookies your device for retargeting and, in so doing, makes you more likely to see another ad for another sugary drink.

With lawsuits and adblockers and privacy campaigns on the one side, and programmatic and second party data markets on the other, the battle lines are being drawn. The fight will have casualties. Consumers are at risk.

Brands are at risk. However, the risk to agencies remains essentially unchanged, and very low. This is moral hazard on steroids.

It calls, just as it did in banking, for intervention. We have two options – await intervention from an external regulator, which will happen once we cross a line that reveals a moral hazard that can no longer be hidden (as was the case in banking after 2008), or intervene ourselves. That latter option relies on agencies taking responsibility for their work, responsibility for their clients (as you would hope would already happen) and also for consumers.

As regulation begins to bubble up in certain categories (sugar, fat, salt) we in agencies can either act like bankers, pushing back on it and looking to retain a status quo predicated on systemic moral hazard, or we can try to get out in front of it, looking to step out from the shadows.

To return to the seventh floor of M&C Saatchi, I hope we choose option two. I hope we step in from the wings, because if we’re on the stage we have to take responsibility. I hope we decide not to be "invisible" any more.