Agency Transparency and Evolved Partnerships -- Steve Grubbs

We need the ref to blow the whistle and call no more piling on the media agencies over business practices and cost transparency. Our industry loves a good public flogging every now and then, but enough already. You’d think that marketers were helpless little old ladies being swindled out of their life savings by those evil, conniving media agencies. Media rebates, media kickbacks, arbitraging inventory … those agency scoundrels are at it again. Shame on them!

Let’s back this up a bit. Yes, the agencies walk a fine line sometimes, and they may operate in the grey areas of the white to black spectrum of what has been acceptable industry practice ... this being no different than many of their clients. However, this presumption that agencies are shirking their fiduciary responsibilities... I don’t buy it. The legal and financial leaders at the major holding companies tread very, very carefully when it comes to both creating and honoring client contracts. There may have been some bad behavior in the past, but they are very diligent in the observance of their contracts.

Regarding media rebates and arbitraging inventory, my point of view, as our political leaders say, has “evolved” because the advertiser/agency relationship has evolved. The job of the media agency is to create value for their clients and their shareholders. In this new era of procurement-led agency reviews, marketers have negotiated significant fee reductions for their media services. They are also requiring media cost-savings guarantees in their agency contracts. At the same time client marketing teams are demanding more and better agency services.

So, one of the unintended consequences of the new, evolved advertiser/agency relationship is that now agencies are forced to devote time, energy and manpower to seek out other forms of revenue (which of course detract from client attention). This revenue is necessary to meet not only increased client resource expectations, but also to fulfill their obligation to company shareholders.

My evolved point of view is that a) agencies must not violate any laws, b) they must be honest in their contracts and transparent in their fees and c) they must be very clear about conflicts of interest. All else should be fair game. If agencies make money using their clients’ money … so what? If they act as media principals to arbitrage inventory or extract incremental value from media suppliers for agency use … ok, fine. What matters is that agencies are providing quality media services to their clients for a fair price.

I listen to marketers protest that agencies are using their money. “I don’t want the agency to make money off my money,” they say. Okay, if you don’t like your agency making money off your money, then take your money elsewhere or buy your media in-house. Marketers changed the rules of the game and accepted industry practice through the tactics of their procurement arms (some of whom walk in the grey areas themselves). Now that media agencies have adapted and made their own changes, suddenly everyone cries foul?

There is obviously more tension today between some marketers and their agencies, and much of this is tied to a breakdown in trust. They need to revisit and re-build their partnerships. So here’s a thought for both parties. Agencies should make their clients business partners in various projects and endeavors. Let them participate in both the investment and the profits of projects. Create a program development partnership between client, agency and cable network. Make them business partners in a Trading Desk. Create any new agency business unit with clients as business partners rather than just … clients. That would be a far different kind of relationship, and in success, a far stronger one. It would be more … evolved.

Steve Grubbs is President and founder of Second Act Media consultancy. Second Act Media is anadvisor to companies working in the media, marketing, entertainment and sports industries. Steve can be reached at steve.grubbs@secondactmedia.com.

Read all Steve’s MediaBizBloggers commentaries at My Second Act.

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