Five Ways Agencies Goose Their Media Business

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Kickback payments tied to U.S. media-agency deals are real and on the rise, according to Ad Age interviews with more than a dozen current and former media-agency executives, marketers' auditors, media sellers and ad-tech vendors. Here are five ways they happen.

Volume bonus or discount

The agency receives a benefit for committing to spend a certain amount of money with a media seller or ad-tech vendor. It might be a discount, cash or free access to software. The agency then pockets or reinvests any money or media assets involved without the marketer's knowledge. Ad-tech vendors often need to make volume commitments to get on the agency's "preferred vendor list."

Arbitrage or invest rebate

The agency commits to a bulk buy and gets a percentage back in media value (as opposed to cash). That sits in a barter group or the agency's trading desk, which can arbitrage it -- package it with data and analytics, tack on technology fees and resell it.

Earn rebate through barter

The agency might ask the client if it wants to make a buy for a discount through its barter group, which owns some inventory. The agency then pockets the margin. Since the client is making a buy, not a trade, it's not a true barter. One former agency executive described it as "taking free inventory paid for by client spending, laundering it and making 100% margin."

Consulting, training and research

The agency sells research, training or consulting services to the media seller in exchange for a fee. That fee is based on the amount of money the agency spends with the media seller on a separate deal. The money earned from the "research report" is typically a lot more than it's worth, according to multiple people familiar with the practice. The funds are obscured as consulting fees or research.

Offshore and separate legal entities

A U.S. agency commits to a large volume of business globally, including the U.S., with a global media seller in exchange for a fee. A separate agency affiliate within the agency's holding company enters into a contract with the vendor to send a check to an offshore office for "consultative" services.

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