The US Association of National Advertisers has offered an olive branch, of sorts, to the 4A’s agency body in the ongoing row over media rebates and other vexed issues, offering to meet the 4A’s at its October Masters of Marketing conference to “have an open dialogue and create a pathway that will lead to industry consensus and collaboration.”
The ANA commissioned a report by K2 intelligence and Ebiquity to look into these matters but the big media agencies refused to participate leaving a stand-off between advertisers and agencies – “profound disagreement” in the words of ANA CEO Bob Liodice (left). The ANA wants a standard contract which prevents agencies making money over and above the fees clients pay while the 4A’s says agency contracts should be the result of individual negotiations.
It’s hard to see how this can be resolved. Media agencies are the biggest profit centres for the major marcoms groups like WPP, Omnicom and Dentsu; all of which are aiming for a margin of around 15 per cent. Very large advertisers, like the ANA’s members, don’t pay commission or fee equivalents of anything like this so clearly the money is coming from somewhere else. That somewhere else is media owners.
It suits many media owners to offer rebates to agencies, often in the form of free airtime or space. They can’t sell it all anyway. Media agencies then trade with this; sometimes to allow them to keep prices down so they win pitches, in other cases as inventory they sell on. In the past many advertisers – and so-called ‘media auditors’ – have been prepared to turn a blind eye to such doings but not any more it seems.
Advertisers have made a rod for their own back by giving all their business to the big marcoms-owned media operators like WPP’s GroupM and Omnicom’s OMG while allowing their procurement people to grind down payments to unrealistic levels. Media agencies then have the option of telling clients to get lost – which they won’t do for supposedly competitive reasons – or finding alternative ways to make money out of what is, ultimately, client money.
It’s a mess and unlikely to be resolved at the October ANA meeting.