ANA Transparency Report Released

June 7, 2016

By Bill Duggan

Today, we released the report, “An Independent Study of Media Transparency in the U.S. Advertising Industry,” conducted by K2 Intelligence. Key findings: 

  • There is “evidence of a fundamental disconnect in the advertising industry regarding the basic nature of the advertiser-agency relationship.” In general, advertisers expressed a belief that their agencies were duty-bound to act in their best interest. Meanwhile, many agency executives interviewed said their relationship to advertisers was solely defined by the contract between the two parties.
  • Numerous non-transparent business practices, including cash rebates to media agencies, were found to be pervasive, including:
    • Cash rebates from media companies provided to agencies with payments based on the amount spent on media. Advertisers interviewed in the K2 Intelligence study indicated they did not receive rebates or were unaware of any rebates being returned.
    • Rebates in the form of free media inventory credits.
    • Rebates structured as “service agreements” in which media suppliers paid agencies for non-media services such as low-value research or consulting initiatives that were often tied to the volume of agency spend. Sources told K2 Intelligence that these services “were being used to obscure what was essentially a rebate.”
  • The study revealed that non-transparent business practices were found across digital, print, out-of-home, and television media. In addition, the non-transparent practices were found to exist across the spectrum of agency media entities.
  • There were systemic elements to some of the non-transparent business practices. Specifically, the study revealed that senior executives across the agency ecosystem were aware of, and mandated, some non-transparent business practices. Contracts for rebates and other non-transparent business practices were negotiated and sometimes signed by high-level agency executives.
  • K2 Intelligence found evidence of potentially problematic agency conduct concealed by principal transactions; as a principal, an agency (or its holding company or associated company) purchases media on its own behalf and later resells it to a client after a markup.
    • Markups on media sold through principal transactions ranged from approximately 30 percent to 90 percent, and media buyers were sometimes pressured or incentivized by their agency holding companies to direct client spend to this media, regardless of whether such purchases were in the clients’ best interests.
    • Dual rate cards in which agencies and holding companies negotiated separate rates with media suppliers when acting as principals and as agents.
  • There were non-transparent business practices in the U.S. market resulting from agencies holding equity stakes in media suppliers. 

Full details are in the 58-page report, “An Independent Study of Media Transparency in the U.S. Advertising Industry.”

ANA is currently working with Ebiquity and FirmDecisions on practical solutions and best-practice behaviors to address the findings of the K2 research, and those are expected to be released by the end of June.

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