The Association of National Advertisers has hired two consultants to conduct an inquiry to get to the bottom of allegations that undisclosed rebates are influencing media agencies' work on behalf of marketers.
Consultancy Ebiquity and its subsidiary Firm Decisions, experts on the players in the marketing and agency business, will work with K2 Intelligence, which is not associated with the industry but will bring expertise in "macro investigations, led by people who have experience in the law industry," said ANA President-CEO Bob Liodice.
K2 Intelligence describes itself on its website as "an investigative and integrity consulting firm." Jules and Jeremy Kroll founded the firm in 2009, and have a long history of investigating and uncovering hidden assets for both corporate and government clients. K2 in June hired the FBI's Cyber Division Chief Technology Officer Milan Pitel. The hire came on the heels of the appointment of Austin P. Berglas, Assistant Special Agent in Charge of the FBI's Cyber Branch in New York.
Ebquity and K2 will be tasked with "demystifying the landscape to provide a clarifying perspective on the state of transparency," Mr. Liodice said. "At this stage, because there's so much disparity in perspectives and opinions of those involved, it's incumbent upon us to bring something that will educate us, the industry and the clients and agencies that are directly involved. We'll get an unbiased articulation of the experiences of the industry. If the answer is there's nothing going on, great. If it's that there's lots of stuff going on, fine, we'll deal with what is found."
The selections are part of a series of actions that the ANA, the main trade organization for major marketers, has taken to address its members' concerns that agencies are collecting media rebates in the U.S. without their knowledge.
The worries date back to March, when former media agency executive Jon Mandel used a speech at an ANA event to allege that media agencies were letting undisclosed rebates from vendors influence their work on behalf of clients. That sparked a frenzy of media reports, including an Ad Age investigation, and the creation of a joint task force between the ANA and the 4A's to develop principles for agency-client contracts.
$46.8B Record U.S. agency revenue in 2015
"For many months, the 4A's has worked collaboratively as part of a joint task force with ANA members to develop industry transparency principles," said 4A's President-CEO Nancy Hill in a statement. "We expect those principles will be released in the very near future."
But that collaboration hasn't carried over to the ANA's latest effort to hire the two firms. "While the 4A's favored the continuity and effectiveness of our joint efforts, the ANA has decided to move forward with its solo sponsorship of a fact-finding initiative into agency media practices," stated Ms. Hill. "We look forward to the ANA's findings and the release of the transparency principles so that our industry can move forward with a framework designed to accommodate the individual requirements of today's advertisers."
Delay due to disagreement between 4A's and ANA
The ANA initially planned to announce the selections of Ebiquity and K2 prior to its Masters of Marketing Conference in Orlando last week. But it was delayed for two weeks after the ANA sent the initial draft of its release announcing the firms to the 4A's. "That initiated discussions between agencies and several of our members," said Mr. Liodice. "With the amount of conversation going on, we felt it better to hold off on a release, and have that level of dialogue. We're going to make them more aware of what we're finding as we're moving forward. We think that's a good step to ensure everyone has heard each other, and we understand the sensitivities."
Much of that dialogue happened at an ANA board meeting during the Masters of Marketing conference. Ms. Hill, along with 4A's Exec VP-Media Relations Bill Tucker and Bill Koenigsberg, CEO of Horizon Media and board chair of the 4A's, joined the ANA board meeting to present their point of view on the selection of the firms and the level of collaboration between the two organizations. The 4A's presented two objectives, according to a person who was in the room. One was for the 4A's to choose and hire a third firm to investigate the issues at hand. The firm would be chosen from one of the finalists from the ANA's review. The other objective was to try to get the ANA to agree to the early release of the principles that the 4A's and ANA drafted together as part of the joint task force.
"We don't expect to be in agreement, but more than anything else we had several rounds of dialogue," said Mr. Liodice. "We feel better that we've had the exchange."
Plenty of complexity
The joint task-force meetings have been "fascinating," said Lou Paskalis, senior VP at Bank of America and a member of the ANA-4A's collaborative effort. "I looked forward to them and dreaded them at the same time. I have an appreciation for the complexities of the agency side, and the issue, which is bound by both emotion and logic."
The ANA's selection of two consultants will "take some of the emotion out of it," he said. "Because of the way this issue burst on the scene on March 6, with Jon Mandel having these fairly specific but redacted examples of what was happening, there was an emotional covalence to a theoretically factual thing. It was hard to separate fiction from facts."
This latest ANA investigation doesn't have an end date. "We can't quantify to say whether it'll be two weeks or three years, but it'll probably be in the range of several months," Mr. Liodice said. "It has the potential of being a multi-phased approach. First will be the fact-finding, and what we hope to come away with are some truths or insights or perspectives that will [inform] what else we need to do."
The ANA initially sent out a request for proposals in June, thinking it would hire one firm to look into the issue, but ultimately decided that "the job was probably too big for one company," said Mr. Liodice. "The more we started to think this through, more we realized we needed someone [like K2] focused specifically and almost exclusively on fact-finding. [Ebiquity] is expert in the transparency arena and has great experience knowing who the players are, what exactly the allegations are, and providing expert insight into the pathway the investigative company can pursue."
He added that the effort goes beyond alleged media agency rebates to potential transparency issues around other agency activities in the increasingly complex media ecosystem, including arbitrage of digital ad inventory.
The marketer trade group and its members also want to better understand the role of the giant holding companies that control most of the agency business and whether marketers' own behavior undermines transparency among vendors, agencies and clients.
The consultants will interview people throughout the industry, globally and domestically, Mr. Liodice said.