ANA report reaction: ‘The integrity of the industry is now under question’ | M&M Global

ANA report reaction: ‘The integrity of the industry is now under question’

Its findings may have been predicted at length, but prior knowledge of the contents of the Association of National Advertisers’ (ANA) explosive report into rebates and non-transparent practices has done little to prepare the industry for the fall-out which will surely now follow.

Money changing hands

Of immediate concern is the fact that the study – carried out with investigators K2 Intelligence – claims to have found examples of rebates from media owners to agencies, ranging straight-up cash transfers to more surreptitious exchanges of low-value research and consultancy services.

In the longer term, the greatest worry may be the “fundamental disconnect” which K2 alleges has opened up between advertisers and their media agency partners. It paints a picture of neglectful brands expecting total implicit loyalty from their agencies, while unfaithful agencies look to maximise their earnings within the letter of the law provided by loosely-written contracts.

As we await the full response from the major agency groups – who were denied the opportunity to view the findings prior to publication – the speculation has already begun about how the global media industry will be impacted by the ANA’s report.

Shell-shocked CMOs

The report will have stunned many a marketer that had been convinced by claims by agency groups that the US market was rebate-free, according to Tom Denford, co-founder of consultancy ID Comms.

“We’re in shell shock here. I feel a bit numb,” he says. “This is a sad day for the industry. The reason for that is the agency groups globally have been categorically denying that the US is a rebate market for years. We’re not surprised if brands are feeling deeply let down by their agencies. This is incredibly isolating for marketers.

“The US was always held up as a clean media marketing, and it’s the largest media market in the world. Now we know that that was a lie. It inevitably makes markets question every major media market in the world, because if the US, which was supposed to be immaculate, is rotten with rebate culture, then now who can we believe? The integrity of the whole industry is now under question.”

“If the US, which was supposed to be immaculate, is rotten with rebate culture, then now who can we believe?”

Graham Brown, co-founder of media advisory firm Media Sense, argues the report offers an “unsurprising, albeit disappointing” glimpse into the media world. He adds that the immediate reaction of many advertisers will be to dig out agency contracts to find out how exposed they are to these “non-transparent” dealings.

“I’m delighted that this has surfaced, and I hope now that clients and agencies will engage in sensible conversations, and put the appropriate measures in place to properly manage their media investments and assets,” says Brown.

“To restore trust that is required for this ecosystem to work, there needs to be strong contracts, proper governance and proper relationships. It’s the old adage, ‘Strong fences make for good neighbours.”

What happens next?

Spare a thought for those running the US operations of media agencies. According to Denford, CMOs will already be ringing to find out exactly what has been happening behind their backs.

“If you are a senior executive of a media agency in New York right now, you are going to be very uncomfortable, and expecting CMOs from your client companies calling you to fly down to their offices first thing tomorrow morning to explain yourself. This will have shocked marketers across the US,” says Denford.

Contracts will come under scrutiny from legal experts, doubly so once the ANA releases its final set of guidelines for members, currently being drafted by Ebiquity and Firm Decisions.

“Some will be thinking of putting their media spend on hold until they can get straight answers”

Some brands may be tempted to call snap pitches, to ensure that contract terms are “stacked entirely in the favour of the marketer”, but most will wish to find out how their contract language compares to that used by other companies, say Denford.

He adds that “some will be thinking of putting their media spend on hold until they can get straight answers” – a grim prospect for everyone in the industry.

Deprived of the ability to raise additional revenue through rebates, agencies may look to increase client fees, but Brown warns advertisers against blithely agreeing to new terms: “If you take away a source of income then it will need to be replaced.

“Agencies look at the total cost of owning a client, and that is based on not only fees and commissions, but also what rebates they can gain and other sources of income. Put all that in the round, with one element is going to go down, then another may have to go up – not in the short-term, but maybe in the long-term.

“But it shouldn’t just be [a case of clients] signing cheques for higher fees.”

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