Has Extreme Gifting Gone Too Far?

'It's More Tacky Than It Used to Be'

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Did you hear about the senior media-agency executive who invites sales reps to her birthday party every year and gives them lavish gift suggestions? Or the media buyer who turned around his computer screen and said, "Here are the sunglasses I'd like you to get me" to a media seller trying to win his business?

The Association of National Advertisers is troubled enough by tales of what Group Exec VP Bill Duggan terms "extreme gifting" to look into extreme gifting with an eye toward developing recommendations on what marketers should do.

While gifts, entertainment and travel have been staples of the advertising business since at least the days of "Mad Men" and the primordial three-martini lunch, the concept of just picking up the check at 21 or offering the occasional theater ticket is now just as antiquated.

Some people working in the trenches of the digital-media marketplace -- albeit not speaking for attribution for fear of retribution -- say the gift economy today is a lot more mercenary and more blatant, with junior media buying executives increasingly making specific and sometimes outrageous requests to media sellers rather than simply waiting for an offer.

"It's more tacky than it used to be," said a media seller who requested anonymity. "You used to take people to lunch or movies or get manicures, but that was time spent with the person. This is , 'Here are the five retail locations I'd like you to take me and my team and buy us each stuff.'" The hottest items on shopping lists of junior digital-media buyers and planners this year have been custom Levi's and Nikes and eyewear from Robert Marc Opticians and Sunglass Hut, she said.

She added that when her company approaches a media buying agency about a working lunch and asks what staffers would like brought, "what you get back is either an email or a spreadsheet that you can tell they've used before that basically lists out all of their preferences, down to the order. And it's over-the-top incredibly expensive [stuff] from fancy restaurants."

It's not just junior execs: The bigger-ticket outlays are often for more-senior agency executives, though they may be less explicit about the ask. In one recent case, a media publisher treated a buyer to a $20,000 entertainment outlay that instantly netted more than 10 times that much in new business. But there are no guarantees, the publisher said, and some of the gifts and entertainment result in nothing. Overall, gifts, entertainment and travel for prospects eat up about 3% to 4% of the publisher's revenue, he noted.

And it's probably worse in the digital arena because there are so many choices for buyers. The publisher didn't realize when he started years ago "how much the gifting economy makes or breaks your business," he said. "The difference between a 0.15% click-through rate and a 0.19% click-through rate is not huge, as a media buyer, as long as you're putting your money on a site that 's respectable."

He recounted the story of a friend who went in to run a large digital agency and immediately wondered why so much spending was accomplished at just two publishers "when the performance was good but not as good as some others." He eventually correlated it to the ski lodges and summer homes offered by the publishers.

Recent articles from online digital-marketing site Digiday have highlighted some of digital media's "extreme gifts," ranging from agencies whose personnel had allegedly stayed at lavish Hamptons summer houses rented by media sellers to social-media vendor Izea's offering of iPads and laptops to agency executives who placed media buys for as low as $5,000.

Clients are largely ignorant of the practices. Some in particular are known for tough policies against gifts and gratuities for their own executives, with the expectation their agencies will play by the same rules. These include General Motors, Procter & Gamble, Walmart and CVS. People familiar with those working on the Walmart account say its executives still leave a dollar each time they take a soda or bottled water during an agency or media-company meeting. And if meetings at the Bentonville, Ark., headquarters run over into lunchtime, Walmart will pick up the tab for food from the commissary or sandwich shop.

Judy Beaudry, VP-global marketing services for Kao Brands, said her company has policies limiting gifts for its executives to things that have no intrinsic cost to the company providing them, such as music CDs and tickets to events marketers need to see because their company sponsors them -- though that doesn't include the travel to the events. Kao applies no such policies to its agencies, Ms. Beaudry said. "But if we ever heard of any of [extreme gifting] being done on our account, we would ask [to move] those people off of our account."

Some argue that in the end clients benefit from such gifts because they allow media agencies to pay their staff less and, in turn, charge less. Then again, one has to ask, Where does the money for the gifts comes from in the first place? Contributing: Alexandra Bruell

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