A healthy and constructive debate about media buying can only happen with a bipartisan, engaged, industry-wide approach – and that is precisely the opposite of what the ANA has pursued. The immense shortcomings of the K2 report released today – anonymous, inconclusive, and ane-sided – undercut the integrity of its findings.
We call upon the ANA in the strongest terms to make available to specific agencies on a confidential basis all of the materials related to them. Without an opportunity for agencies to assess and address the veracity of information provided to K2, sweeping allegations will continue to drive attention-grabbing headlines; this does nothing to foster a productive conversation or to move our industry forward and could cause substantial economic damage to all media agencies.
We are firmly committed to ensuring appropriate governance practices are in place.
World Federation of Advertisers:
It is now well understood that media agency groups receive rebates and other forms of income from media owners, leveraged by client volume spend, all around the world.
WFA’s position on this, as established in our Media Charter, is crystal clear: advertisers expect agencies to fully declare revenue streams directly or indirectly related to their business, for example, via rebates and ‘arbitrage’ among agency trading desks.
Research from the WFA has previously identified that rebates are less pervasive in the US than in other countries, but that a large share of these are being retained by media agencies.
We are not against rebates and AVBs in and of themselves but we believe that advertisers should receive a fair share of these and, crucially, that rebates should not create issues surrounding conflicts of interest.
Markets such as China and Ukraine suffer from some of the lowest levels of transparency when considered globally, as identified by WFA research, which we conduct on an ongoing basis.
Rebates, unbilled media and market complexities characterised by layers of intermediaries and brokers are all widespread issues contended with by clients around the world.
Globalisation and new media trading practices have amplified and deepened transparency concerns, and the news from the ANA today, itself a member of the WFA, confirms that these issues are also taking place in the world’s biggest ad market.
Media transparency requires constant global scrutiny and WFA is extremely focused on helping clients to navigate and address this complex issue. WFA guidance and best practice guidelines in relation to strengthening media agency contracts, programmatic media, and now ad fraud (see here), help clients to understand and mitigate the costs of an opaque and often inefficient ecosystem.
Had the ANA been willing to have an open dialogue with our industry we would have been immediately ready to cooperate, as we did last year, and that is reflected in our engagement with the 4A’s. By refusing such a dialogue and choosing a sensational approach, it seems clear that the ANA is not trying to find a solution to the alleged problems, and instead is acting with other goals in mind.
The ANA has failed its members, advertisers, agencies and the entire industry by releasing a report that relies on allegations about situations involving unnamed companies and individuals to make broad, unsubstantiated and unverifiable assertions.
Ultimately, the industry has been diminished and maligned by the ANA’s short-sighted and unilateral agenda of casting aspersions on an entire industry, rather than promoting trust and transparency, which should be paramount.
The ANA report and the objectivity of its authors and advisors needs to be examined carefully. The report should not be allowed to tarnish the entire industry, nor every company in it.
As we stated from the outset of the ANA’s exploration, GroupM does not seek, nor accept rebates or hidden revenues in any form from media partners in the US. Nor do we accept service fees from vendors that are not disclosed to clients.
GroupM is straightforward with clients concerning our proprietary media products and the value they provide; clients always exercise an informed opt-in to participate.
As we’ve already indicated, we insist that the ANA share any specifics relating to our group with us so that we can ensure continuing contract compliance. If clients have any questions, they should contact us.
Greg Paull, principal and founder, R3
This has to be a huge wake up call for the industry globally. Marketers are going to need to reinvent their agency relationships—with different contracts and different independent measurements. More and more will be building internal capabilities and going direct to publishers.
Ian Whittaker, analyst at Liberum Capital, investment bank:
It looks like the ANA report is fairly damning. What does this mean for agencies?
1) It is unclear yet whether there will be any legal / regulatory investigation by US authorities but that has to be a risk as does potential action by the ANA and / or advertisers;
(2) If clients do re-examine their existing contracts with media agencies, this could – in theory – lead to another blizzard of account reviews, following 2015's 'tsunami' of reviews;
(3) If accounts are reviewed, it raises the risk of pricing pressure on media contracts, thus putting margins at potential risk;
(4) Media is the most profitable part of the agencies business (by margin), so greater scrutiny is a potential risk.
Tom Denford, chief strategy officer of ID Comms, media consultancy:
The ANA have done a great job to invest the time and money to fund this landmark project. The report has provided clarity where previously suspicion and speculation had created a highly troubled relationship between major advertisers and their media agencies.
We are very concerned at some of the practices that have been uncovered and it would be good to know whether these problems are focused on particular holding companies. We think this report will now push the issue of media right up the boardroom agenda and should be a concern to CFOs and CEOs.
It exposes a worrying imbalance currently between the poor levels of governance, accountability and oversight applied to media budgets that represent huge company investments.
Jenny Biggam, the7stars, the independent UK media agency:
It would be wrong to dismiss the ANA’s concerns as limited to the US. Today more and more advertisers and the marketing services groups employed by them are global. Techniques and principles adopted in the US can, and do, easily travel. The ANA report has given added impetus to UK concerns of trade bodies, agencies and advertisers over a rebate system which needs to change.
Whatever the ins and outs, one undeniable fact stands out. All advertisers, regardless of their size, do not trust their media agency partners. Media agencies now need to do the leg-work of rebuilding trust and ushering in a new wave of much greater transparency across all aspects of their business.