Advertising’s Transparency Crisis

February 21, 2014

By Bill Duggan

Marketers, agencies, and media sellers need a trusted environment to build successful and enduring partnerships. But lately there have been increasing concerns about the issue of media and media agency transparency — i.e., sellers and agencies providing honesty and clarity to marketers on costs, placements, and data.

What began as a whisper a few years ago has increased dramatically in intensity. It’s not an overstatement to say that ANA has heard more concerns about media transparency in the past year than at any other point in memory. The industry is facing a transparency crisis.

There are various issues that have contributed to this transparency crisis, including:

  • Agency trading desks: Clients have expressed concern about conflicts of interest (agency trading desks act simultaneously as both buyer and seller) and double-paying (paying their agencies to manage media and then paying again for the services of a trading desk).
  • Media rebates/incentives: The practice of media companies providing rebates or incentives to agencies for referring or influencing client spending toward that media company, and then the agencies not reimbursing those funds (or disclosing such transactions) to the client.
  • Agencies arbitraging ad inventory: That is, the simultaneous purchase and sale of ad inventory in different markets to profit from unequal prices.  In these cases, is the agency trying to get the best price for the client… or the best price for the agency?
  • A complicated media marketplace: With many intermediaries between buyers and sellers, especially in digital — demand-side platforms, ad exchange networks, and more.
  • Agency consolidation: Finally, increased agency industry consolidation limits advertiser choice for agency services.

This transparency crisis is global. The World Federation of Advertisers (WFA) recently asked its members to rate a number of “priorities” of interest to marketing procurement professionals. From a list of twenty options, “cost transparency: understanding kickbacks, pass-throughs, and rebates” ranked second (surpassed only by agency compensation).

Our business has historically been built on trust and relationships. But this transparency crisis is causing trust to break down and ultimately that will affect the relationships marketers have with their agencies and the media.

Marketers need to be inquisitive and ask questions. “Fool me once, shame on you. Fool me twice, shame on me.”

Thanks to The Economist Group for first publishing this perspective in their Lean back marketing blog.

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