Five years ago, a seminal report from the Association of National Advertisers found evidence of “non-transparent business practices” by US media agencies that needed addressing. It was widely acknowledged that the problems identified and the report’s implications stretched across the Atlantic.
However, if you ask us, five years on, whether things have got better, we would reluctantly say no. In some respects, we believe things have got worse.
While we have seen positive change in many areas – and industry bodies on both sides of the Atlantic have worked to tighten up processes – we have also seen the market move in the wrong direction in others.
It is important not to generalise. The US market, where the ANA carried out its investigation, is different from, say, the UK or Germany or Spain. But these practices generally cross borders (in fact, in most cases, they originated in Europe) and most of the big media buying groups operate globally.
One area that was identified at the time was agency holding companies purchasing media and then reselling it at a mark-up to their clients. In our view, this practice has not only increased since 2016, but for some of the media buying groups it has now been industrialised.
This essentially means some media agencies are taking advertising space from media owners, marking-up the price, then recommending, marketing and selling it on to their clients.
This creates a fundamental conflict of interest. Media agencies have to decide whether they are an agency, independently advising clients on the best communications plans, or if they are a media owner, making their money from selling advertising space to their clients. You cannot credibly be both.
To be clear, as previously stated, we are not talking about all media agencies, but the handful who have taken this route in response to their large holding group masters.
The problem is this “handful” represents the majority of advertising spend in the market.
The simple question is what is the role of a media agency?
Agencies present themselves as a trusted partner of the advertiser, providing objective advice as to how a brand should plan and buy media. We believe that is what they should be. It is also what their clients and the overwhelming majority of people that work in media agencies want them to be.
However, some buying groups have accelerated the change from being objective media advisors into scaled media vendors.
For many clients, the media agency is now earning more through reselling media than they are in direct fees and commissions. Some UK agencies have passed a tipping point where they generate more revenue from selling media than they do from agreed client fees. Does this then make them a media owner first, an agency second?
Media bought this way has acquired a name – “inventory media”. Agencies will say they fully disclose when they are using inventory media in a product that they sell to a client, but this is often in the small print and not always clear to each advertiser.
Regardless, this kind of disclosure only provides some transparency of the agency’s role in the media supply chain. It does not provide transparency of the recommendation to the client.
The key question then is how can any advertiser expect an independent recommendation when the advisor is also the seller?
The well-rehearsed argument is that these group positions and products do not impact individual advertiser plans, but we don’t believe that is true.
Ask the people that work day-to-day in one of these holding groups’ agency brands and they will tell you they are routinely instructed, sometimes even targeted, to favour inventory media products over all else.
This model is soul-destroying for the media agency planners and buyers who are held back from the great work they would like to do, because the solution to any client brief is already prescribed.
The situation is not helped by some legacy media auditors who do not seem to understand inventory media. They simply rubber-stamp an ever-decreasing fraction of buying prices, failing to scrutinise whether the strategic recommendation was right in the first place.
There is a double whammy for the advertisers. The buying groups could be using the scale of their clients’ combined advertising spends to drive even better deals for the advertisers.
Instead, some of them are using that scale to negotiate with media owners with a primary objective of securing inventory that they can re-sell at a mark-up to those same clients.
We know that many advertisers reading this, certainly clients of particular holding groups, will recognise how much these products are pushed on them by their “independent” agency partner. If they do opt in and buy, how can they ever be confident that there was not a better alternative that could have been put forward?
There is another way. The Aperto Partnership believes that there are no circumstances under which a media agency should sell advertising space to their clients.
Instead, we advise clients to create commercial and contractual frameworks that remove this conflict of interest. By doing this, clients are set up to get the very best from their agency partners.
The role of the media agency is at a crossroads and it must be time for a proper debate. Perhaps the advertising industry’s combined Reset 2021 conference today is the time to start that conversation?
Scott Moorhead and Andrew Mortimer are co-founders of The Aperto Partnership
Campaign is interested in your views about the role of the media agency in 2021. Please email Omar Oakes, media & technology editor: email@example.com