How much should your clients trust their advertising agencies. Well, according to a new report, not much. On Tuesday, the Association of National Advertisers released a very damaging 58-page report that hits advertising agencies hard in how they conduct business and look upon their clients.
Results of the study, conducted in conjunction with K2 Intelligence, state that there are many non-transparent business practices taking place, including “cash rebates to media agencies,” and other shenanigans.
The K2 study, conducted from October 2015 through May 2016, reveals “evidence of a fundamental disconnect in the advertising industry regarding the basic nature of the advertiser-agency relationship.” The report states that while advertisers expressed a belief that their agencies were duty-bound to act in their best interest, many agency executives said their relationship with advertisers was solely defined by the contract between the two parties.
Even more alarming was evidence in the report of agencies purchasing media on its own behalf and later reselling it to a client after a markup. The study also revealed that senior executives across the agency network 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. The study also found dual rate cards in which agencies and holding companies negotiated separate rates with media suppliers when acting as principals and as agents.
ANA Chairman Tony Pace said the report unearthed a “fundamental disconnect” between advertisers and their media agencies. “As media practices have become more complex, stewardship and oversight needs to become more precise, more thorough, and more fully transparent.”
The 4A’s, a trade association for agencies, responded to the findings in a statement that AdAge published: “A healthy and constructive debate about media buying can only happen with a bipartisan, engaged, industry-wide approach — and that is precisely the opposite of what the ANA has pursued. The immense shortcomings of the K2 report released today – anonymous, inconclusive, and one-sided – undercut the integrity of its findings. We call upon the ANA in the strongest terms to make available to specific agencies on a confidential basis all of the materials related to them.”
The ANA is coming up with a list of recommendations to fix these issues. You can read more about them HERE. You can download the entire study HERE
Advertisers, especially radio advertisers, who grow to the point where they switch their business from local stations to ad agencies should also be aware they are slotted into the “screwed, blued and tattooed” categories.
Then, the janitors, interns and the char-lady are delegated the creative function for those accounts.
This, while the account execs stomp all over the time-buys.
By the way, none of this is of the “breaking news” variety.
But, I do understand as “personal integrity” is such a vague and, so often, an inconvenient concept.