The recent K2 Report on media transparency and rebates commissioned by the ANA has articulated what we have observed in APAC and especially Australia for the past 4 years or more. It has literally been like watching a train wreck in slow motion.
My recent claims of conflict within the AANA are driven by frustration over the continued lack of action on this matter, considering we have seen it coming since 2012. But in fact it all started before then with the Global Recession or Financial Crisis.
To explain why we remain so frustrated about the inaction of the AANA and other peak bodies, we’ve taken the time to detail all our main interventions, blog posts and comments around this issue over the last several years, with links for those interested in reading the original material.
The issue remains, in our view, vital to the health of our industry and requires serious, considered action from the peak bodies.
Following the Global Recession brought on by the Home Market collapse in late 2007 in the USA, we noted a large number of advertisers and their procurement teams driving savings in both the addressable spend of agency fees and increasingly demanding the agency commit to a buying position in the usually non-addressable spend of media pricing.
The belief of the procurement teams was that in a shrinking market there would be a glut of media and therefore for those buying there were opportunities for better pricing, a position supported by some media auditors.
In the highly competitive market and with a stagnant or shrinking economy, depending where you were located, agencies responded by playing along, discounting not just their fees, but committing to and in some cases guaranteeing a buying position from third party media owners.
This simply confirmed the belief that the market was overpriced. It also created the start of the race to zero, with advertisers using tenders to drive a better buying and fee position and agencies increasingly playing along. But even then it was not sustainable.
2012 – Time to speak up
By 2012 we had seen the downward process increase in tempo and become clearly unsustainable. We shared this concern with a number of clients and presented to the WFA Media Group in London on February 8, 2012.
We shared similar concerns with the AANA in Australia and the ACA in Canada. Interestingly in Canada, the majority of major advertisers were still using commission systems for paying their agencies and were not seeing the same trends.
On April 30, 2012 we published this concern on our blog with “The lack of transparency in media agencies is due to the agency remuneration models used”.
Around this time we first heard about ‘Value Banks” from one of our clients and soon discovered that media agencies and usually their holding companies were holding significant media credits from the media owners, provided by the media owners as a sales incentive and used by the media agencies to meet buying guarantees for their clients.
Confidential industry discussions proved that this practice was relatively wide spread.
In May 4, 2012 we published this along with suggestions on how advertisers can benefit if they incentivise their media agency with “The new media buying landscape requires marketers to outperform the market to benefit”.
It became apparent that the focus on media price that was driving down media prices was not increasing media value. On October 15, 2012 we wanted to move the focus from media price to media value with a talk I gave and this article “The media value chain: where value is created, lost and hidden”.
2013 – From worse to worse
By the start of 2013 it felt that rather than change, the downward pressure on fees and media pricing had increased as word spread around advertisers and marketing procurement of some of the ‘confidential’ deals being done.
In a conversation on the matter with Denise Shrivell of MediaScope we decided to partner with her on the annual “State of the media” survey that she had run previously which we announced with this post on March 18, 2013, “What are the biggest issues and challenges facing media today?”
Almost a month later we needed to goad the industry into participating with this post on April 10, 2013 “Is the media industry all talk and no action?” as it felt like there was either an apathy, complacency or resignation regarding the media industry.
The results of the “State of the Media” survey were published on June 17, 2013 as “Insights from the State of the Media industry survey”.
Ironically I made the comment then that the worse case scenario would be that we would be back there in 12 months time talking about exactly the same thing – which we were.
By the second half of 2013 it was an open secret that some media agencies and holding companies were holding millions of dollars in media inventory credits. This was of greater scale than the ‘Non-media income’, which included overpriced payments for ‘research’ by the media owners to the media agency.
But it made us pose the question on October 18, 2013 of “Who does your Media Agency really work for?” as it looked as if the agencies could be making more revenue from sources other then their clients.
The Value Banks were an interesting phenomenon in that it was only possible because of the increased volume of media inventory. Unlimited digital inventory and the increase in the number of digital television channels, combined with a continued soft economy meant that media owners had inventory they could use as an incentive.
It also had the advantage in that unlike cash or trade credits it did not appear on the agency financial accounts, which is why we warned on November 8, 2013 “3 reasons a financial audit will not give transparency in media buying”.
It was also why we continued to explain the fluid nature of media pricing and therefore the questionable benefit of media auditing on December 6, 2013 with “What have media rates got to do with the price of milk?”
2014 – More of the same
At the start of 2014 few realised that by the end of the year the issue of media agency transparency would explode in Sydney with the announcement of misreporting by MediaCom hitting the business media.
But from the previous year, nothing had changed and again we highlighted the consequences of the race to the bottom on February 3, 2014 with “Have media rebates and kick-backs killed media neutral planning?”
We had also noticed that media agencies had got into a pattern of brinkmanship with increasingly more ridiculous and unsustainable discount positions, guaranteed. Yet advertisers found it hard to ignore our warning of the inability of the media agency to sustain or even deliver these promised discounts as the agency would insist it was guaranteed.
That is why on March 5, 2014 we published “6 excuses media agencies use to not deliver promised discounts” raising the issue of these broken promises.
We followed this highlighting the issues of this trend and its impact on advertisers, media agencies and media owners on March 24, 2014 with “Life at the bottom – why the media buying rate game is not worth playing”.
It was time to revisit the “State of the Media” survey with Denise Schrivell at MediaScope and we launched the survey on April 4, 2014 with “What are the biggest issues facing the media industry?”
Again we encouraged participation on April 11,2014 with “Add your voice to the State of the Media Industry debate”.
And we presented the results again with a panel at Mumbrella360 on June 2, 2014 with “State of the Media Session at Mumbrella360 2014 in Sydney”
The “State of the Media” survey was summed up with this video we published on June 11, 2014 called “What is the state of the Australian media – an industry perspective”
The irony is that post this second survey, both Denise and I agreed we would not do another survey as it was clear the industry wanted to ignore the issues, with no leadership on this from either the advertisers or the agencies through the AANA and the MFA respectively.
During this time we revisited the issue of media agency revenue and the impact the media owner rebates were having on the media agency on May 12, 2014 with the video “Who is your media agency really working for today?”.
We continued highlighting the issues on August 11, 2014 with “When it comes to media there are a lot of elephants in the room”.
And provided some clarity on the confusion around trading desks, programmatic buying and the like with this plain language explanation on September 8, 2014 with the video “Trading desks, demand side platforms and programmatic buying explained”. It has received more than 13,000 views on YouTube to date.
Yet advertisers continued to over value the promises of media discounts over the real value media agencies could provide. This constant and unsustainable pressure would soon have obvious public implications, but on November 3, 2014 we were encouraging advertisers to change their focus with “Can an agency win a media pitch without discounting rates?”, which continued to fall on deaf ears with both advertisers and agencies.
We made the decision in late 2014 to stop providing Media Buying Benchmarking because we could no longer see any value to our clients, when the media pricing had become so corrupted and fallacious.
Instead we shifted the focus from media price to media value with a proposed service providing Media Transparency, Performance and Value Assessment.
2015 – Post MediaCom
In early 2015, David Angell joined the TrinityP3 team and brought a client and agency perspective to the media services we offered with his first contribution to the TrinityP3 blog on February 25, 2015 with “Pitch for the Stars: 5 things to look out for in a great media agency” focusing on what advertisers should be looking for in their media agencies.
I also made a personal decision to invest in a new industry service called Calibr8or to bring a greater level of rigour to the evaluation and calibration of media agency strengths and capabilities, which I wrote about here on February 27, 2015 on “How Calibr8or calibrates the strengths and capabilities of media agencies”
As the MediaCom issue dragged into the New Year we responded to the issue on March 18, 2015 with “A cynical view of the on-going media agency saga?”.
We also highlighted to the industry and the industry bodies that this was not an isolated incident and that the practice was wide spread on May 11, 2015 with “Media agency transparency is not a local issue, it’s global” with revelations from the US that ex-MediaCom CEO had confessed rebates were rife there too.
Still nothing from the industry and no leadership from the industry bodies representing the parties involved. We responded by providing a summary of the cause and effect on July 8, 2015 with “Wondering how media advertising got so screwed up? Read on.”
In response to the growing controversy, many of the massive global advertisers launched global media pitches and reviews in what became known as Mediapalooza and why on July 27, 2015 we spoke out with “Why the media agency ‘Mediapalooza’ could be a huge waste of time”.
This was in light of the fact that it was rumoured that the objective was mostly to reduce prices and make the agencies more accountable. In the end it resulted in simply changing deck chairs on the Titanic.
It was around this time I was contacted by the MFA to participate in an interview being undertaken by Price Waterhouse Coopers (PWC) on the media transparency issue. The interview was undertaken and led to the widely criticised “Transparency Framework” which overlooked many of the insights and recommendations provided.
As part of our Industry Webinars in the second half of the year, David Angell delivered a brilliant two part presentation for Creating transparency and trust in media with Part 1 “The Agency” and Part 2 “The Advertiser”.
We summed up the current situation in media locally and globally here on November 2, 2015 with “How to increase media agency transparency and accountability”.
There had been one highlight in the year, which was the growing number of advertisers who had approached us to undertake a Media Transparency, Performance and Value Assessment. On November 16, 2015 we were able to share one of the many success stories with a “Case Study: A FMCG Media Agency Contract and Remuneration Assessment”.
Today – Where to now?
The first half of the year has seen both the ANA and ISBA, the US and UK equivalent of the AANA, launch quite strong responses to the media transparency issue. The ANA commissioned K2 to undertake a forensic investigation into the issue and ISBA developed a new media contract and nothing further from the AANA or the MFA in Australia.
Before these were launched we were optimistic that the IAB had responded with a Programmatic Buying Fee Transparency Calculator and highlighted this on April 22, 2016.
Post the ANA Advertising Financial Management Conference in Boca Raton, Florida, attended by myself and Lyndon Brill, we were informed the K2 Transparency Report would be released soon and on May 16, 2016 we tried to set the tone and agenda with “You want transparency from your media agency? Look at your own behaviour first” as we were concerned that the report would escalate a culture of blaming the media agencies alone.
We presented to the AANA and the MFA a unique opportunity to use the Calibr8or platform to create a Media Values Index for the industry as a way of monitoring and focusing the participants to the wider issue and not just a single-minded focus on media agency transparency.
This was not a commercial offer as the proposal was that the platform and the management of the process would be offered free of charge. The proposal was reviewed by the AANA Media Forum and we were politely informed again that while it was absolutely right it was not required.
Four years of being rebuffed and ignored by the AANA and the MFA led to me speaking out as I believe the composition of the ANA Media Forum and the agency financial members of AANA pose a conflict of interests in this matter stopping them from responding appropriately.
The K2 Report for the ANA arrived and on June 10, 2016 we provided our point of view in “The K2 Intelligence Media Report: Rebate-Gate or Stalemate-Gate?”, which continues our view that this is an industry problem and not just an agency issue.
We followed this with some practical advice on what marketers should be doing on June 15, 2016 with “What can marketers do now to manage brands through the media transparency debate?”.
For more than four years we have observed these trends. For more than four years we have exposed the behaviours and more importantly made recommendations on how advertisers and agencies should respond.
Some advertisers have taken action.
Many have not and continue to ignore the issues, either because they consider them too hard or too complicated to confront. Or perhaps they are simply following the actions of the industry bodies that represent them.
But the industry is demanding action and increasingly asking what next?
Hopefully by better understanding the causes, issues and history outlined here you are better placed to answer that question for yourself. In the meantime we will continue to tell it as it is, because clearly there are vested interests that would prefer these problems to all just go away.
TrinityP3’s Media Transparency, Performance and Value Assessment takes a holistic look at the operation of your media agency, assessing against best practice at every stage of the journey. It aims to give you the tools to improve the output of your media agency.
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