Non-Transparent Business Practices In U.S. Ad-Buying Revealed In Study

A study released today by the Association of National Advertisers (ANA) points to non-transparent business practices, including cash rebates to media agencies, being commonplace in the U.S. media ad-buying ecosystem.

“Advertisers and their agencies are lacking full disclosure as the cornerstone principle of their media management practices,” says Bob Liodice, president and CEO of the ANA. “Such disclosure is absolutely essential if they are to build trust as the foundation of their relationships with their long-term business partners.”

ANA’s study, conducted from October 2015 to May 2016 in conjunction with investigative, compliance and cyber defense services firm K2 Intelligence, reports evidence of a “fundamental disconnect in the advertising industry regarding the basic nature of the advertiser-agency relationship.” The association found that advertisers expressed a belief that their agencies were duty-bound to act in their best interest, and that many agency executives said their relationship to advertisers was solely defined by the contract between the two parties.

Key findings of the report highlight rebates from media companies to agencies, with payments based on the amount spent on media, in the form of cash or free media inventory credits; “service agreements” in which media suppliers paid agencies for non-media services but often tied to the volume of agency spend to “obscure what was essentially a rebate;” and media buyers pressured or incentivized to direct client spend to media marked up 30 to 90 percent, regardless of whether the purchases were in the clients’ best interests; among other issues.

“From the beginning, this has been a study designed to shed light on certain non-transparent practices in the media-buying landscape—not an investigation or an audit,” says Richard Plansky, executive managing director of K2 Intelligence. “At the ANA's insistence, this has never been about pointing a finger at any individual or company.”

Liodice adds, "Whether acting as agency or principal, vast changes in technology, the complex digital supply chain and the proliferation of media outlets provided agencies with additional opportunities to increase their profit margins beyond agency fees. This has led to disconcerting conflicts of interest and a lack of transparency."

The ANA’s full report and related documents can be found at www.ana.net/transparency.

filed under industry-news | june-2016
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