The Association of National Advertisers today released its eagerly awaited report on media transparency in the U.S. advertising industry, finding “evidence of a fundamental disconnect in the advertising industry regarding the basic nature of the advertiser-agency relationship.”
Among the “numerous non-transparent business practices” found, according to a posting on the ANA website, were:
- Cash rebates from media companies provided to agencies with payments based on the amount spent on media.
- 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.
“The study revealed that non-transparent business practices were found across digital, print, out-of-home, and television media,” the ANA reported. “In addition, the non-transparent practices were found to exist across the spectrum of agency media entities.”
The ad industry responded strongly to the report. Publicis Groupe released a statement saying, in part: “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.”
Adweek reported: “While the ANA stopped short of accusing agencies of any illegal activities, the charges are no less damaging: Agencies, for instance, have made markups on media of 30 percent to 90 percent on ‘principal’ transactions, where an agency acts as a principal and buys media on its own behalf before reselling it to a client. Media buyers also said they were sometimes pressured or incentivized by their agency holding companies to direct client spending to that media, regardless of whether that selection was in a client’s best interests, according to the ANA.”
Ad Age noted that the report “does not name any agency groups or media vendors specifically ‘due to the confidential nature of the assessment,’ said K2. The firm cited 150 independent sources and ‘substantial evidence’ from 41 sources who reported direct knowledge of rebate deals occurring in the U.S. market. Of those sources, 34 indicated rebates were not disclosed or returned to advertisers.”