Advertisers’ Report Puts Extra Scrutiny on Transparency Issues

A new report released this week by the Association of National Advertisers makes some bombshell claims about how agencies and media buyers are using rebates and other means to receive kickbacks. Ad agencies, along with the group that represents them, responded fiercely.

According to a new report released by the Association of National Advertisers (ANA) this week, the digital advertising space has a major problem.

That problem? Ad agencies and publishers aren’t being nearly as transparent as they should be, particularly regarding the use of rebates—the promise of discounts from media firms in exchange for certain levels of ad buys. ANA, which represents large companies that purchase advertising, launched a probe into the practice back in October, and worked with K2 Intelligence and Ebiquity/FirmDecisions in putting together the report.

K2 Intelligence, which interviewed approximately 150 sources, found that nontransparent advertising practices—such as rebates—were widespread, affecting every major kind of media, including digital, print, and television. Rebates were a particularly significant problem, with more than 30 sources telling the researchers that rebates were given to agencies without the advertisers’ knowledge. The study notes that these rebates took a variety of forms:

K2 identified evidence of several methods by which rebate deals are structured, including financial incentives in the form of cash or free media. Other sources noted that rebates are often structured as service agreements whereby the fees for the services—usually described as consulting or research – are tied to the volume of agency spend. Moreover, these services were either of minimal utility, significantly overpriced, or not provided at all.

The report also highlighted that nontransparent practices resulted from ad agencies holding equity investments in media companies.

ANA President and CEO Bob Liodice suggested that the study offers an opportunity to clear the air and move forward with greater transparency.

“Advertisers and their agencies are lacking ‘full disclosure’ as the cornerstone principle of their media management practices,” Liodice said in a news release. “Such disclosure is absolutely essential if they are to build trust as the foundation of their relationships with their long-term business partners.”

Tough Reactions

The response to the report has been mixed, according to Bloomberg, with major agency firms such as Publicis and media buyers like GroupM questioning the objectivity of the results as well as ANA’s decision to withhold names of companies and rely on unproved allegations.

The American Association of Advertising Agencies (4A’s), meanwhile, encouraged ANA to share its findings with specific agencies, so that the issues raised could directly be responded to.

“We call upon the ANA in the strongest terms to make available to specific agencies on a confidential basis all of the materials related to them,” 4A’s said in a response to the report. “Without an opportunity for agencies to assess and address the veracity of information provided to K2, sweeping allegations will continue to drive attention-grabbing headlines; this does nothing to foster a productive conversation or to move our industry forward.”

The group also questioned the tactic used by ANA, which it noted could cause harm to the collaborative relationships the ad industry has had around the transparency issue in recent months.

“When the involvement of third parties in tackling this challenge was suggested by ANA, the 4A’s was supportive, even offering to be a partner in the RFP process,” the group added. “The entire industry is harmed and at risk of further damage as a result of the path the ANA has chosen.”

Meanwhile, advertisers who might be directly affected by the report are taking a more measured, supportive approach to the issue.

“Trust and transparency are critical to any relationship, so we take the ANA’s findings very seriously,” Luis Di Como, senior vice president of global media at Unilever, said in a statement, according to AdAge. “At Unilever, we are actively engaged with our agencies and the industry at large to exert greater control and responsibility around media transparency.”

ANA’s full report is available to download at this link.

According to the study, ad-transparency issues affected every major kind of ad, including billboards. (iStock/Thinkstock)

Ernie Smith

By Ernie Smith

Ernie Smith is a former senior editor for Associations Now. MORE

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