Agencies push back by delaying rebate returns and pressing harder for markups on principal deals

Relations between marketers and agencies were already contentious, but they’re getting worse as the pandemic drags on. Even well-heeled marketers are pushing for longer payment terms, and some agencies are pushing the transparency envelope to hold on to cash or make money outside normal fees.

Media consultants, meanwhile, report agencies are pushing harder to do controversial principal deals to resell at substantial markups media inventory whose value has been depressed by the crisis. And some agencies outside the U.S. are holding on tight to money they owe clients, they say.

Now, nearly six months into 2020, it’s common for agencies holding rebate or “agency volume bonus” (AVB) money they’re required to pass through to marketers, to still not have not paid money not only from 2019 but even back to 2018, consultants say.

That’s happening almost entirely outside the U.S. But it’s a big enough pool of money, Stephen Broderick has suggested marketers that need quick cash to offset budget cuts consider offering to take less than they’re owed in return for immediate payment.

Ebiquity clients on a webinar last month reported hearing a lot of offers for such deals since the pandemic. Stephens says ‘the problem is that these deals probably aren’t as attractive as they look.’ He’s recommending clients demand full transparency about how the media was acquired and at what price, but that agencies routinely resist such disclosures. There’s considerable complexity, he says, given that agencies are acquiring the media based on collective buying power across clients, but only some clients may benefit, and even those may not know by how much. Most principal deals are for instant resale, says Stephen, so he doesn’t buy the argument that agencies deserve big margins because they’re taking risk.

Such deals can be transparent, provided marketers opt in. The reality is that they often don’t do so knowingly, the consultants say. Even in cases where master contracts between agencies and clients prohibit principal deals, Stephen says they’re seeing cases where junior marketers unaware of contract details sign off on individual media plans where the fine print allows them to.

To read the full article in AdAge, click here.