Transparency at a premium in the digital age
Dominic Mills lit the flame and then VivaKi’s Marco Bertozzi threw petrol on it; now, ISBA’s Bob Wootton speaks up for advertisers over the thorny issue of trading desks and transparency…
Come closer to your screen dear reader, for today I’m going to talk dirty. Real dirty. You know – the ‘T word’. Yep, transparency. The very mention of which gets people very twitchy, as we saw last week.
It’s on the rise in many advertisers’ minds right now. Why? A combination of a lot of different factors; almost a perfect storm, you might say.
Over the past year or so, an increasing number of the big brand owners ISBA represents and speaks for have been seeking our advice on how to respond to their agencies’ requests for variations to their contract. These include:
– Proscribing which auditors the client can use to evaluate their media buying performance (media auditing to you and me) and their financial compliance with their contract (compliance auditing).
– Withdrawing the advertiser’s rights to certain kinds of data, which in turn splits two ways – data thrown up as a consequence of a typically digital media buy, and data relating to the evaluation of an agency’s media buying performance.
– And a third, closely related, seeks to ringfence what’s being termed ‘inventory media’ (that’s any media bought speculatively by the agency on its own account as opposed to being bought on behalf of clients) from scrutiny.
Ever since agencies started to do umbrella deals with media owners across all their clients and then charging the media out differentially so as to meet, but not exceed, their contracted obligation to each, they have effectively been broking. Clients have, by and large, gone along with it because it’s delivered the results. But where does broking end and arbitrage begin?
As media channels proliferate, so deals become more complex and sources of normative pricing and value evaporate.”
Then there’s what’s becoming known as ‘digital shrinkage’. Digital media are usually billed on serving, not on viewing. And according to sources like Meetrics or comScore who, amongst others, offer tools in this space, only about 50% of ads appear in view. The rest are partly or completely out of view until the user scrolls to them, which they often don’t.
Media and compliance auditors are also claiming that of every pound spent in digital media, the agency retains 50p, give or take. I use the term ‘agency’ here to include its trading desk, demand side platform, adserving, data management platform, and so on.
We’ve all dined out on the fantastically complicated LUMA/Improve Digital charts which show all the different types of digital company in the food chain. What isn’t mentioned so often is the amount of cross-ownership between many of those companies.
Whatever happened to digital – the ultimately accountable, and therefore transparent, medium? It even makes out-of-home, long held under suspicion for its multiple commissions and volume overrider deals, look pretty clean. Ouch!
Some advertisers are reacting by going it alone with their own trading desk, some via a ringfenced unit within their agencies, some with a third party. But the jury’s out on whether the benefits of greater visibility, transparency and control outweigh the downside of not being able to access all relevant inventory. I confess I haven’t fully grasped this last bit. At least not yet.
Agency consolidation and the rise of holding group trading companies adds to the pressure. It’s emerging that agency groups like to keep their agency and trading group people at some distance because it enables ‘plausible deniability’ on the part of the agency’s client business directors.
There’s a growing concern amongst advertisers that media agencies now ‘plan the buy’ to meet their deals, which include all kinds of ways to conceal incremental remuneration, instead of buying the most optimal media & communications plan for the brand.
Meanwhile, agencies are getting behind ‘storytelling’ across multiple channels, which plays well to their clients who are seeking better integrated execution of their brands’ communications. As media channels proliferate – for example, new non-spot uses of TV – so deals become more complex and sources of normative pricing and value evaporate.
The whole business world is on a downward ratchet, so it’s maybe naïve to expect advertisers to pay more.”
But the pricing of a schedule of spots can easily be ‘sweetened’ to pass an audit with flying colours by loading the cost onto a sponsorship, product placement or a piece of advertiser-funded content. This raises significant challenges for media auditors.
Northern & Shell/Five proprietor Richard Desmond broke the industry code of omerta at the Cambridge TV convention a few weeks ago when he alleged that Five was over a barrel to carry content produced by Group M’s entertainment arm, lest it was taken off the spot advertising schedule.
Beyond it being their money at risk, advertisers also have a key stake in this muddle. It might still have happened, but it wouldn’t be nearly so widespread or run so deep had their procurement people not driven right into the ground the visible remuneration available to the agency.
Granted, agencies didn’t have to keep shaving their rates to win new business at pitch. Or did they? So many of their business models are scale-based; the mantra being ‘acquire volume at any cost and worry later’. The advent of dynamic, atomised media trading, real time bidding and, latterly, the need for the scale to work with data further exacerbate this.
To be fair, agencies are businesses too, particularly those in public ownership, and they exist to make money and turn profit. They’re also populated by very bright, motivated and flexible people. No wonder a growing number have sought and found many ways of bolstering income invisibly – 21 at the last count, according to Anteus consulting.
The whole business world is on a downward ratchet, so it’s maybe naïve to expect advertisers to pay more. But it’s not too late for more collegiate conversations between clients and agencies as to each other’s business needs from a relationship, and in turn a more sensible conversation about the proportionate distribution of the spoils – few of which would exist without the client having provided the ‘risk capital’ through their adspend.
There are some potentially positive developments.
IPA President Ian Priest’s ADAPT agenda for his two-year term aims to create a more sensible conversation between advertisers and agencies. It’s a laudable plan, though it seems a bit one-sided, at least at the moment.
There’s a strong argument that advertising has never been that transparent. Indeed, back in the day, my agency was as culpable as the next in the field of production markups. But a lot has changed since then. The very term ‘agency’ is increasingly misleading – it implies that the client’s best interests are paramount, when this is no longer necessarily the case.
So, if we’re going to have a mature conversation around the IPA’s call for a ‘relationship contract’, we’d better get all the issues on the table. Agencies may not make much progress while they are in denial about how they earn most of their money nowadays.
Meanwhile, WARC reports that a number of US agencies are now declining RFP’s, which they consider uneconomic. The US Association of National Advertisers (ANA) is reported as welcoming this move – perhaps surprising, but in truth close to the money.
Following the success of the ANA model, which attracts several hundred delegates each year, ISBA ran its first Advertiser Commercial Issues conference recently and these issues were firmly on the table throughout. It certainly doesn’t look like they’re going away – quite the contrary in fact.
Bob Wootton is director of media & advertising at ISBA.