Transparency in media is about more than just digital
Another senior figure from the media agency world has taken up the mantle of whistleblower on a very public stage. At the very end of last month Martin Cass, the boss of Carat in North America until 2013, told a panel at the high-profile New York Advertising Week that media agencies have been engaging in arbitrage on digital media deals without their clients knowing about it. Cass was named media executive of the year by MediaPost in 2016 and now runs independent MDC Media Partners.
In arbitrage, agencies buy ad slots at one price and their sell them on to their clients at a higher price. This is possible – Cass claims – because of the complexity and lack of transparency in the complex digital media ecosystem and the fact that many advertisers don’t understand how it operates. “It’s so utterly bewildering and confusing,” he said. The fact that non-transparent deals are happening to agencies’ advantage is eroding trust in the media industry, he concluded.
Cass is not the first, very public whistleblower. Back in March 2015, Jon Mandel, the former CEO of Mediacom, told the U.S. Association of National Advertisers (ANA) leadership conference that media agency rebates and kickbacks were prevalent in the U.S. market. Mandel said that he left the agency world because of such practices.
The ANA went on to commission K2 Intelligence to conduct a comprehensive study of the U.S. market, and their 2016 report confirmed that hidden incentives are indeed prevalent. This – together with the set of practical recommendations we produced with our colleagues at Ebiquity – has helped to turn questions about transparency into a full-blown movement, led by both leading advertisers and advertiser associations. This has been spearheaded by Marc Pritchard, chief brand officer at P&G.
It is true that whistleblowers play a vital role in shining a light on shady practice, bringing about change, and cleaning up industries. They bring an invaluable insider’s perspective and let everyone to see behind the curtain. For that reason, we welcome Cass’ intervention at New York Ad Week.
In the case of the media industry, it’s entirely understandable why whistleblowers are so focused on digital. It’s new, it’s complex, and there are more links in the transactional chain for digital than for traditional media. DSPs, SSPs, DMPs, ad servers, ad networks, ad exchanges. Every link in the chain takes their slice of the budget, eroding value and reducing the proportion of investment that reaches publishers and then customers. World Federation of Advertisers’ data suggests just 40c in the dollar reaches publishers. Our own research with AD/FIN of actual programmatic trades suggests the best case is about 58c in the dollar. And analysis down to a target customer level shows that perhaps as little as 5-7c in the dollar generates on-target, viewable ads.
But the continued focus of media agency whistleblowers on the murkier side of digital and programmatic media trading is only part of the story. Our experience and our informed overview of the market shows us that there are transparency issues affecting every aspect of advertisers’ media investment, not just digital. And we say this for three reasons.
- Holding companies are buying or building non-digital media platforms to make media more addressable. This enables them to have ownership of more data and mask the net cost of inventory, so arbitrage will be possible on non-digital media buys, too.
- More than ever before, holding companies are investing in the supply side through the acquisition of content businesses. Holding companies hold minority stakes in these businesses and so don’t need to declare an interest. They are therefore potentially making decisions on vendors to use without clients knowing the full extent of the relationships or how it might benefit the holding company to use these vendors.
- Agency investment arms buy more than just digital inventory nowadays, and we are also starting to see new, inter-agency units popping up that secure ‘late deals’ at a ‘discount’ in TV and print. But the client never gets to see what the inventory was actually bought for, just the price it was sold for by the agency-owned entity.
It’s not just digital media that’s becoming increasingly complex and difficult for advertisers to understand – it’s the entire media and media inventory ecosystem. That’s why it’s never been more important for advertisers to demand complete transparency on media and data from their agency partners. And it’s why they need commitments to transparency enshrined in contracts that are regularly reviewed and updated to reflect new trading practices.
Note: Cass’ comments at New York Advertising Week has not been widely reported in North America, even though that’s where they were made. A full report and film can be found on Mumbrella from Australia, here, and Mark Ritson’s commentary in Marketing Week in the U.K. here.
