McKinsey & Co. recently asserted that not much has changed three years after the ad-industry uproar over undisclosed media rebates, as Ad Age reported April 30.
I want to thank Ad Age for its continuing coverage of the media transparency issue. As its article pointed out, despite the ongoing efforts of marketers and the ANA, rebates and related non-transparent business practices by media agencies apparently still exist.
However, I take exception to the notion that "Not much has changed" almost two years after we released our landmark report on media transparency in conjunction with K2 Intelligence. I would respectfully suggest that, in fact, a great deal has changed throughout the advertising, marketing and media industries to address this vexing problem.
For example, over the past two years, scores of clients have updated their media agency contracts, which serve as the foundation for transparency. Much of the revisions in those contracts came from a template the ANA issued in July 2016. The template includes a requirement that revenue earned by the media agency and agency-related parties should solely be the fees and commissions set out in the contract, unless otherwise expressly agreed upon by the advertiser. The template stipulates that all financial and other benefits should be fully transparent and returned to the advertiser unless expressly agreed otherwise by the advertiser. In addition, many clients have incorporated more comprehensive audit rights into their conducts in an attempt to "follow the money."
As further evidence, even the Ad Age article states that the McKinsey study "found that 500 media accounts have been reviewed by advertisers in the past three years, contracts have been widely rewritten and audits of media agencies have skyrocketed." The article continued to point out that another sign of the K2 Intelligence report's influence was the stock prices of the four biggest holding companies: "All are down double digits since the K2 Intelligence report came out in mid-2016, McKinsey notes."
Also, since the K2 Intelligence report was released clients have been increasingly taking back control of their media investments via greater supervision of their agencies and by moving certain types of work in-house – programmatic, social media, and influencer marketing among them. In fact, at the recent ANA Masters of Media Conference, "in-housing" was a key theme and was clearly identified as an increasingly accelerating trend among ANA members. And regarding programmatic buying, there is evidence that a growing number of clients have rejected nondisclosed programmatic buying agreements, in which agencies resold procured inventory to clients at undisclosed prices.
At the ANA, we believe that all amounts to solid proof that a great deal has changed.
The McKinsey report's perspective is that while progress has been made "more work needs to be done" and that is certainly a fair assessment. I also believe the report is entirely consistent with the longstanding ANA point of view, which adheres to the four recommendations McKinsey offered marketers:
- Build accountability by engaging senior leaders
- Embed transparency in contracts and pay fair compensation to agencies
- Institute an annual governance process
- Bring in the right auditors for both financial and performance audits when needed.
The ANA will continue to drive awareness/understanding of the transparency issue among our membership, but we also hope that the agency community will do its part to solve the problem. Publicly acknowledging that widespread, non-transparent business practices exist and engaging in an honest dialogue about how to eliminate them would be an excellent start.