WSJ, Bloomberg

Explosive Report Will Say U.S. Ad Agencies Accept Rebates From Media Companies, The Wall Street Journal Reports

Jun 3, 2016  •  Post A Comment

“An eight-month probe by a marketing trade group revealed that ad agencies in the U.S. are accepting rebates from media companies, said people familiar with the matter, findings likely to stoke concerns about transparency in the industry,” reports The Wall Street Journal.

The story adds: “The Association of National Advertisers found that media companies are using rebates to reward ad agencies for buying a certain amount of advertising time or space on behalf of their clients, the people said. The group found that the practice was widespread within the sample it studied.”

Reports Bloomberg, the report of the probe “will lay out a variety of ways in which global ad agency networks used the combined buying power of advertisers to pad their bottom lines, according to the person, who asked not to be named before its release.

“The findings spotlight an issue that has long been hidden in the background of client-agency relationships, opening up a debate over whether advertising conglomerates are agents working on behalf of advertisers or counter-parties in today’s complex media marketplace. Ad agencies have come under pressure from a shift to digital marketing, which threatens to displace them as a middleman between advertisers and media outlets.”

Adds The Journal: “Rebates or agency-volume bonuses — in cash, free ad space or other services — are a common business practice in Europe and countries such as China and Brazil. But, historically, they haven’t been part of the way U.S. advertising deals work. Some ad firms have said publicly that they don’t accept rebates in the U.S.

“The trade group told the advertisers that while some of the practices it uncovered didn’t violate marketers’ contracts with ad agencies, they were worrisome because the advertisers were unaware of them. It said the problematic practices extended beyond digital advertising to television, print and outdoor advertising, according to the people familiar with the matter.”

To read more about this topic, please click here to read the full WSJ story, and please click here to read the Bloomberg report.

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