A little more light has been shining on the murky world of media buying, this time from Australia.
Dentsu Aegis Network there has admitted that it negotiates ‘value banks’ (annual volume bonuses) with media companies, something that has attracted the attention of its clients. Aegis is big in Australia with about 25 per cent of the media market through Carat, Mitchell & Partners, Vizeum and its various digital agencies headed by Isobar. Owner Dentsu bought 51 per cent of creative agency BWM last week.
Aegis’s admission follows revelations of an audit into WPP’s GroupM, the market leader, which appears to show that flagship agency MediaCom billed some of its clients for inventory it had actually received free as part of its ‘value bank’ arrangements. Sometimes these rebates take the form of free time and space, sometimes cash.
In reality everyone in the media business has known these deals have been going on for ever. They’re the only way media agencies can make money when clients grind down commission rates to ridiculously low levels on the biggest accounts. They have long been the norm in out of home, where the commission rates are spectacularly high in comparison. Which is why out of home is so profitable for agencies.
Many clients seem blissfully ignorant of such dealings, bizarrely. One reason may be that contracts these days are usually negotiated by procurement teams (who don’t know much about how the business really works) and all they want is the lowest possible headline fee or commission rate. Rebates don’t come into the equation.