What the ANA Transparency Report Really Tells Us

The ANA report has many virtues. There are also many provisions. We recognize that to implement all that it offers will be very costly to both sides. So neither agencies nor advertisers will execute all aspects of the findings. And they need not. What needs to be done is to acknowledge that several activities of agencies need to be corrected and that advertisers need to pay greater attention to their responsibilities and oversight of the work they expect from their agents and suppliers and the results they require for reasonable and fair compensation.

Many advertisers have not placed enough emphasis on proper governance within their organization. The ANA acknowledges this. Advertisers are not thoroughly familiar with all elements of the contractual agreement (which must be explicit in its provisions) with their agencies and the media terms and conditions. They are not thoroughly familiar with the media planning and buying process particularly as it has become increasingly complex in the digital space. They are not sufficiently knowledgeable about agency investment in staff and resources and compensation formulas. Most have not reviewed their agencies thoroughly on a regular basis and have not conducted comprehensive audits when necessary. These are just a few of the areas that need to be addressed in order to restore trust.

The issue of rebates whether in cash or inventory or third party service agreements has been the focus of attention on the subject of transparency, as well as potential conflicts of interest. But it really comes down to concealment or non-disclosure of income and profit generated by agencies, their holding companies or subsidiaries that may not be enacted in the best interests of their clients. Full disclosure is a necessary ingredient in the client/agency relationship. (Even if the agency has entered into agreements with some of their suppliers, the client has a right to know.) That doesn't necessarily mean that every client/vendor agreement will be rejected by all clients. (Barter is a good example of that.) But it does mean that when client investments are made with the media through their agency, every agency/supplier agreement must always place the advertiser first. And, if an agency is going to act as principal in the arrangement, the advertiser has a legal and moral right to know what benefits accrue and to whom.

In the final analysis, the industry needs a new model to follow. A model that is not only transparent but allows media money management to be controlled by the advertiser. A model that focuses on the work throughout the supply chain and concentrates on fulfillment of client objectives. A model that benefits both parties and engenders conversation to ensure trust. Advertiser investments must be measured, monitored and verified, and appropriately benchmarked as well.  The best phrase I heard coming out of the report is "marketing is an investment to be maximized, not an expense to be minimized." That applies to all parties on behalf of the advertiser. That's what they deserve.

A proper "code of conduct" between the advertiser and the agency as a signed addendum to the master service agreement should also help to bring all parties together. Let's get it done now.

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