Are agencies trapped in a state of denial? | M&M Global

Are agencies trapped in a state of denial?

Mike Fletcher investigates what has happened since the ANA published its explosive report into US media practices in June last year.

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Deflect, lash out, refuse to take responsibility and blame anyone but yourself. America must be praying that its new President-elect does not revert to his campaign rhetoric once he takes office in January.

However, according to some media commentators, Donald Trump is not the only one who should think before he speaks. GroupM’s global chairman Irwin Gotlieb has come in for a lot of flak after giving a very Trumpesque response when asked recently about the ANA-backed seven-month investigation into US media practices, which in June reported that rebates and other “non-transparent” methods are pervasive in the American media-buying ecosystem.

On-stage at the Video Everywhere Summit in New York on 27 October, Gotlieb said: “I’m going to be really harsh. The entire effort was a biz-dev [business-development] effort. The ANA allowed themselves to be part of a third party’s business development.”

Gotlieb’s attempt to dismiss the findings of the ANA’s report as merely a cynical bid by Firm Decisions (a subsidiary of Ebiquity) and the forensic investigation team at K2 to win more business has, if anything, only served to put the ANA’s investigation and the issue of agency transparency squarely back on the agenda.

Tom Denford, chief strategy officer at ID Comms, was disappointed by the comments: “Irwin Gotlieb doesn’t say anything that’s not scripted or intentional so I was really sad to hear his remarks. It’s disappointing to know that agencies haven’t moved on and accepted there’s a problem and that it’s time to find a solution.

“Agencies are still intent on deflecting the spotlight and kicking up enough silt to get them from one financial reporting quarter to the next.”

More recent remarks from WPP’s chief executive Sir Martin Sorrell would appear to substantiate Denford’s point. During a third-quarter earnings call on 31 October, Sorrell tried to deflect the attention away from the $180bn media market in the US, by saying that the ANA should have pushed for greater transparency in Japan and the Middle East instead.

Tom Denford, ID Comms
Tom Denford, ID Comms

HEAD IN THE SAND

No-one can deny that a lack of transparency in these regions is a problem. In September, Tokyo-based Dentsu promised to pay back $2.3m (230 million yen) to clients it had overcharged for digital advertising work in Japan. Dentsu admitted that following a month-long investigation, it had uncovered 633 suspicious transactions affecting 111 clients, some of which date back to November 2012.

But what frustrates people like Denford is that, rather than daring to admit that transparency is a global problem, and that they should work together with clients and media owners to ensure that media one day joins the ranks of other, highly accountable professions, agencies continue along a road of outward denial.

Ebiquity’s chief strategy officer, Nick Manning, sums it up best by saying: “The industry has to stop denying the disease in public and start talking about the cure instead. It’s a global problem that for every dollar of media spend, only 40 cents reaches the publisher.

“The more it’s denied by agencies, the greater the loss of trust between clients and their media agencies”

“K2’s investigation found 150 clients, agencies and media owners across America who painted a picture of the industry that every media owner and ad tech player recognises. The more it’s denied by agencies, the greater the loss of trust between clients and their media agencies.”

Ebiquity’s role in the ANA report was to produce the recommendations document, which was intended to build on the investigation carried out by the K2 Intelligence Study, and move the conversation on from the revelations to prescribing solutions.

Its report recommends three overarching actions: a uniform code of conduct between advertisers and agencies; establishing media agency management principles such as complete transparency and better communication; and that marketers establish primacy over the client-agency relationship, and regularly re-evaluate and upgrade internal processes and practices.

Nick Manning, Ebiquity
Nick Manning, Ebiquity

FINDING SOLUTIONS

In addition to these three pillars, there were a further seven strategic recommendations for advertisers to consider, in order to reduce or eliminate the potential conflicts identified in the K2 Intelligence study.

One drawback, however, which Ebiquity’s Manning concedes, is that the three documents that make up the ANA report are so dense that not many people actually got as far as the seven strategic recommendations. There seems to be a widely held assumption that Ebiquity was only recommending auditing when, in fact, it was much broader.

“My hope is that, in 2017, we can spend more time talking about the solutions to greater client agency trust, which in turn will lead to more conversations about all the great advertising and media work taking place around the world,” Manning says.

“What can agencies do? Acknowledge the issues and then address them. However, it’s the advertisers themselves who have to step forward and take control of their media governance, in order to force real behavioural change.”

According to several industry sources, advertisers have responded to the ANA’s report in three ways. Some remain paralysed by the complexities involved in investigating or changing contractual terms with an agency, so have done nothing. Others, such as JP Morgan Chase, have carried out a full agency audit and found no wrong-doing, so are sticking by their agency.

Gerry D'Angelo
Gerry D’Angelo

BRAND-LED CHANGE

The third way could be a potential game-changer, however. With many advertisers planning global agency reviews, and some, like Procter & Gamble, recruiting chief media officers, there is a sense that the brands will hold their media agencies to better account.

A media professional who did not want to be named told M&M Global: “The ‘Mediapalooza’ of 2015 saw almost $30bn of business up for grabs, but it was very US-centric. In 2017, we’ll see even more global reviews as advertisers realise they need to sure up out-of-date contractual terms with their agencies and keep a closer eye on how media is bought, in the wake of the ANA revelations.”

One advertiser that has already been through a global review process is Mondelez International. Over a four-month period in 2015, it consolidated its agency roster and moved media buying in the US, UK and India to Dentsu Aegis’s Carat, while also giving the agency network global communications across all product categories. Carat also handles Mondelez in the Asia-Pacific region and most of Europe.

“We were pleasantly surprised though to find that those agencies who pitched really bought into this”

“The ANA report findings in 2016 didn’t come as a surprise to us because we’re a global business. Understandably, most US-only businesses regarded it as a non-rebate market, but the prior evidence from all other regions was compelling,” says Gerry D’Angelo, European director of media and global digital media partnerships at Mondelez.

“Well in advance of the report we were able to implement best practice from other regions, in particular Europe, and insisted that transparency by audit was a major part of our recent global media agency RFP. We were pleasantly surprised though to find that those agencies who pitched really bought into this,” adds D’Angelo, who is soon to join P&G.

Despite the continued attempts to discredit the ANA report by the likes of Gotlieb and Sorrell, other advertiser brands also say that, away from shareholder scrutiny, many agencies are cooperating professionally over client concerns around transparency.

It is possible that, if progress is happening, it is going on behind the scenes. Some agencies are even believed to be planning announcements for 2017 that will give clients more accountability and control.

If a second, more globalised pitch storm is brewing for 2017, agencies will need to focus on this internal evolution in order to avoid a potentially costly client revolution. It will mean placing transparency and trust at the heart of the media relationship.

THIS ARTICLE FIRST APPEARED IN ‘INTERNATIONAL MEDIA 2017′ – DOWNLOAD YOUR FREE COPY HERE

Mike Fletcher

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