In 2016, the Association of National Advertisers (ANA) published the results of an investigation of media transparency issues in the U.S. advertising industry – Media Transparency Initiative: K2 Report. Among the key findings:
- Numerous non-transparent business practices, including cash rebates to media agencies, were found to be pervasive in the U.S. media ad buying ecosystem.
- There were systemic elements to some of the non-transparent behavior. Specifically, senior executives across the agency ecosystem were aware of, and mandated, some non-transparent business practices.
- There was evidence of non-transparent practices across a wide range of media, including digital, print, out-of-home, and television.
To put it more plainly, advertisers found their media agencies 1) giving kickbacks to themselves through foreign subsidiaries, 2) profiting from undisclosed cash rebates from ad tech vendors, 3) arbitraging programmatic media buys through “trading desks” without telling their own clients, and 4) doing these things as part of standard business practices, mandated by senior executives.
Non-Transparent Practices Continue
In 2020, many of these non-transparent practices continue. Why? Many advertisers had not yet updated their legal agreements with their media agencies, to include things like the right to access data, the right to audit, the requirement of disclosure of rebates and other hidden compensation, etc. Updates to terms in the legal agreements typically occur during media reviews, when a new media agency is vetted, selected and awarded multi-year “agency of record” contracts. However, even then, some of the terms of the agreement which would give the advertiser the right to review their own data, to receive reports and data directly from ad tech vendors, etc. never make it into the agreements.
There is some evidence from a followup ANA survey in 2019 that showed “one-third of advertisers have made changes in their media agency contracts in the past year due to concerns about transparency and alleged rebates in media buying.” But there is also anecdotal evidence that even though advertisers had the legal right to receive and examine the data, there remained many hurdles to actually getting the data. The accountants at PwC that led the ISBA Programmatic Supply Chain Transparency Study noted that the study took more than 2.5 years to complete due to “data access difficulties” even though it only involved the “most premium of premium” 15 advertisers and 12 publishers.
Contract Templates to Use
For advertisers that have not yet updated their agency contracts, the ANA has provided contract templates for media planning and buying services that can be used as starting points and adopted as appropriate. Media Transparency: Prescriptions, Principles, and Processes for Marketers – ANA Contract Template
“Advertisers want contracts with their agencies which create trusted and transparent partnerships: Great contracts inspire and incentivize agency success but must also hold the agency accountable for any failure. We advise advertisers to do a ‘health check’ on their agency contracts every 12-24 months to avoid being disadvantaged as media buying practices continually evolve,” said Tom Denford, CEO ID Comms Inc – a media consultancy based in NY which co-authored the original drafts of the ISBA/ANA contract template
Additional Points to Consider for Your Media Agency Contracts
What follows are additional points that advertisers should consider…
