How to be risk aware with your media contracts

In a year that looks set to be pitch heavy, anyone working in media and marketing may find themselves dealing with more new contracts than usual as business changes hands, writes Stewart Morrison. 

While some speculate clients are more likely to be reviewing their media activities due to changing consumer habits, media channels, geographic footprints and budget cuts over the past year, others point to CMOs' new focus on media strategies and targeting market share growth. Either way, 30% of brands say Covid-19 has accelerated their media transformations.

So new contracts are inevitable, and while there's much negotiation involved for agencies and advertisers in reaching those agreements, the work doesn't stop there. Put simply, are all your agencies charging you and buying media according to the contract's agreed terms after signing?

For example, in Africa it's rare for all the media to be bought locally, instead being centralised in key hubs: South Africa; Nigeria and Kenya. Thus media or creative work beyond those locations will likely be bought via a subcontracted partner or lead agency affiliate. And when an extra supplier layer is added, inevitably there are extra costs, which has a negative impact on transparency and must be mitigated in the contract. 

Each year FirmDecisions in MEA audits media and creative agencies across every agency holding group as well as numerous independents in the POSM and merchandising space, on behalf of approximately 50 of the largest advertisers. All advertisers have three common contract questions: who are the agencies in my supply chain (particularly in digital); what does each agency really cost me; and are they operating as expected?

Looking at digital specifically, as this is the medium with the most complex costs and supply chain, in southern Africa, digital advertising is growing - GroupM points to digital ad spend having grown 4% in 2020, with another 4.2% rise so far in 2021 - to reach a market share of 37% in South Africa. To put this in real numbers, Statista's Digital Advertising report 2020 suggests that digital ad spend in South Africa was $738-million and will grow to an estimated $858-million in 2021. Of that, 81 % of digital ads were bought via programmatic platforms in southern Africa.

However, as stated, digital ad buying often lacks transparency. Programmatic ads are bought via agencies' own trading desks, which in turn buy from demand-side platforms such as AppNexus, Display & Video 360 and The Trade Desk - that's three sets of fees already. Informing the target media decisions and verification are a myriad of data management platforms, verifications tools as well as the exchange itself - all also taking fees.

But it is becoming even more complex: GroupM is now doing deals with supply-side platforms (SSPs) such as PubMatic. While this may mean advertisers can more easily win and place impressions, and perhaps offers more transparency in publisher income, nothing is free. Programmatic auctions for the most part provide balance in demand and price; however, when agencies are now doing non-transparent deals with SSPs to achieve impressions, market forces are removed.

This will ultimately lead to questions around what the real impression prices are and who is really being paid. Advertisers need to be vigilant and have the power
of enforcing full disclosure. 

Performance

From a performance perspective, advertisers can find it challenging to connect digital media investment with tangible improvements in business performance. Opaque media trading and poor measurement practices have damaged effectiveness. Improving digital marketing investment performance is thus key for clients, and there are several ways to do this. Ads perform best in high-quality contexts such as trusted editorial sites. Ensuring the right inventory means regularly reviewing media inclusion and exclusion lists to mitigate risks.

When it comes to viewability KPls, advertisers may need to look beyond the standard ratings (the Media Rating Council defines viewability as one second for display and two seconds for video) and use their own, more realistic definitions instead - for example 100% of the ad in-view for three seconds. Brands should also move toward an outcomes-based KPI measuring short- and long-term effectiveness of digital media spend. 

In addition, there's the issue of attribution. For instance, an ad may appear on a site - so is technically classed as viewable - but can only be seen if the visitor scrolls to the bottom. So good practice eliminates last-touch (or multi-touch) attribution credit for impressions that were never viewed. If a conversion occurs and the last ad was not viewable, this should be counted not as a 'paid' media conversion, but rather as an organic one. Besides the issues of value for money and effectiveness in contracts, in emerging markets such as Africa, brands should remain alert to risks such as child labour, money laundering, bad corporate governance, working conditions, taxes being paid and so forth.

One source for judging this risk is the Country Risk Rating by Euler Hermes Economic Research, which measures the risk of non-payment by companies in each country due to conditions or events outside the company's control. A country's overall evaluation is made up of macroeconomic, political, structural business environment, commercial and financing risks. For 01 2021, most countries in Africa ranked sensitive or high risk. We are working in an environment where agencies are under increasing pressure from budget cuts, in-housing and new competitors. Inevitably, marketing services agencies will look to protect and increase their revenue. In some cases, this could be entirely legal and possible because a contract is out of date or its scope has changed, but in the worse cases it could involve media and creative fraud.

In all scenarios, the best practice for brands is being alert to all risks - keep them front of mind, keep a close eye on what's written into the contract compared with what's being delivered on the ground, and audit agencies.

Featured in TheMediaOnline.