On June 7, 2016, K2 Intelligence released An Independent Study of Media Transparency in the U.S. Advertising Industry on behalf of The Association of National Advertisers (ANA), and it is scary.
If you think that the antics of the Mad Men and the mis-leading management consultants in the House of Lies are bad, if only it was as bad as seen on TV. And by that the doctor means that if that was as bad as it gets, it wouldn’t be so bad. The truth is, as bad as you can imagine the situation is when it comes to agencies handling, or more accurately, mishandling your money, it is much, much worse.
Just like financial analysts, financial consultants, wealth management advisors, and other non-financiers don’t have to advise you on what’s best for them (and, in fact, usually advise you on what will add the most cash to their compensation, see this great expose by the one and only John Oliver), your agency has no legal authority to advise you on what’s best for you or spend your money in the best way possible. The most they have to do is deliver the artifacts in the contract and do so in a manner that can be reasonably justified as meeting the requirements (or at least in a manner that a lawyer can argue meets the requirements).
They don’t have to tell you that they get rebates for volume business to their suppliers that they don’t pass on, financial incentives in the form of free media or cash, and that they sometimes take on transactions as principal transactions, outsource all the work, and sell it back to you at markup. The talent they offered up might not even touch your work! Many agency principles hold equity stakes in the media suppliers they use and so profit twice off of your work. Some respondents to the survey also noted that their obligations to their respective Agency Holding Companies were in conflict with the interests of their clients (and had no problem with this). They had no duties beyond the contract. WOW!
This is a rather intensive report at 60 pages, but the summary speaks for itself. Procurement needs to take heed of what happens when agency relationships are not vetted, very well defined, carefully managed, and fully transparent — especially with respect to the cashflow.
And it needs to make sure the organization has Agency Management solution, and that both Procurement and Marketing make use of it.
To understand why, read the free report that is An Independent Study of Media Transparency in the U.S. Advertising Industry.