Opinion: Perspective - Interpublic clean-up raises transparency issue

They say a principle isn't a principle unless it costs your bottom line dear. Well, the principle of transparency - roundly applauded when the IPA president, David Pattison, made it a key plank of his manifesto - could just be about to cost some agencies very dear indeed.

It's IPG's fault (or good example-setting, depending on your point of view). In a final, desperate bid to clean up its act, the mired holding company is putting transparency at the very top of its agenda. As well as cleaning up its books after years of mismanagement and worse, IPG is trying to clean up every aspect of the way it does business.

That mission has some particularly thorny implications for media agencies, and not only those within the IPG family. As part of this clean-up, IPG's Initiative and Universal are being told to hand back any monies made from pretty much everything that isn't honest-to-goodness client fees. It's a nightmare scenario, and I'd have thought a pretty impossible one to pull off fairly. And it will certainly make profits harder to achieve at these companies in the future.

As any media agency will tell you, client fees alone do not a profit make (or rarely). So media agencies will make a bit extra here and there in terms of volume bonuses from media owners or holding on to money that clients have paid for their campaigns but media owners have neglected to invoice for.

All this is standard practice, and certainly not illegal. Some canny clients, of course, will have negotiated contracts with their media agencies to ensure that this sort of extra money gets paid straight back to them.

Usually these clients are willing to pay a proper price for their media agency service in return for such transparency. Other canny clients will pay their media agency dirt money knowing full well that the agency will work hard to make - and keep - revenue from these other practices.

But, let's face it, there are plenty of clients who are being taken for a bit of a ride on this one. Perhaps these are the sorts of clients who are bullish enough to think they can enjoy a first-class media service for a ball-breaking fee. So perhaps they deserve what they get. Or maybe they're just incredibly naive.

Either way, IPG's clean-up act has thrown the issue wide open again.

And ISBA - ever mindful of being seen to justify its membership fees - is sure to raise the issue with its members.

Anyway, the question remains: should the advertising industry welcome IPG's initiative - borne, admittedly, out of a despicable and wholly damaging negligence? Should other agencies applaud this new era of transparency? If the ad industry wants to move on from all the suspicion and sense of underhand practices that the IPG farrago has undoubtedly fuelled, then, yes, it should. But it will only be able to do that once clients realise that there is a price to be paid for transparency: a fair and workable fee structure that allows agencies to deliver the best possible service and make an honest profit doing so.

The IPA and ISBA have already been working towards guidelines on fair remuneration for agencies. But as any agency embroiled in a pitch or a fee renegotiation will tell you, guidelines don't always count for much when there are agencies willing to drop their Calvins to secure business.

And while procurement continues its relentless focus on cost, such offers will always be attractive to some clients.

The truth is that clients have little right to demand total transparency, unless they are prepared to pay for it. Of course, while the suspicion lurks that agencies will abuse their position to turn a profit behind their clients' backs, those clients will be reluctant to up their fees.

It's a classic, but dangerous, Catch 22 and if there is to be any resolution, then one side or the other must take a stand first.

For the moment it seems that agencies have little to gain and much to lose by being the first to proffer the transparency olive branch.


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