Back in 1992 the phrase "It's the economy, stupid!" became a slogan for Bill Clinton's successful presidential campaign against incumbent President George H.W. Bush. The advertising industry was in a simpler place in 1992; most advertisers paid their agencies by commission, the Internet was not yet mainstream, media unbundling was in its infancy, agency relationships were less complicated and terms like AI, programmatic and RMNs were not in everyday ad industry conversations.
But times have changed. In 2016, K2 Intelligence issued their report, commissioned by ANA titled, "An Independent Study of Media Transparency in the U.S. Advertising Industry." A key finding was that there is a fundamental disconnect in the industry about the basic nature of the advertiser/agency relationship. In general, advertisers expressed a belief that their agencies were duty-bound to act in their best interests. They also believed that this obligation, essentially a fiduciary duty, extends beyond the stated terms in their agency contracts. While some agency executives expressed similar beliefs, others told K2 that their relationship to advertisers was solely defined by the contract between the two parties.
As a direct result of the K2 report, the ANA, in conjunction with our General Counsel, Reed Smith LLP, developed a Master Media Buying Services Agreement Template to be adapted by advertisers in developing their own media agency agreements. The template was updated in 2016 and has once again been updated in 2023. The new version addresses key developments in the ever-evolving media industry over the past five years, with transparency and accountability remaining as its foundation.
For most companies, advertising is their second or third largest spend following people and real estate. Therefore, an advertiser’s contract with its media agency must be detailed and precise given the amount of money flowing through the agency and the complexity of the media ecosystem.
The revised template includes the following broad updates, among others:
- An overall reorganization and streamlining of provisions to remove redundancies and improve clarity and organization.
- The removal of outdated concepts that are no longer applicable.
- Updated audit definitions and provisions.
- The addition of robust terms addressing and clarifying non-transparent services.
Key specific updates include:
- Audits: Definitions of compliance audits and performance audits were added because many advertisers perform audits in these two distinct silos. Despite the new definitions, the same overall audit rights in the 2018 version remain in the updated draft. These include no limit on the number of audits that may be performed and flexibility to have additional types of audits performed, or to perform audits together.
- Non-Transparent Services: This section replaces concepts from the previous version relating to principal or inventory sale and principal or inventory mark-up. ANA members had indicated that they had often agreed to non-transparent services without fully understanding exactly what they were agreeing to, or the nature of such services. If a topic is not properly addressed in the contract, then it can end up as a line item on a SOW or media plan, or as a separate opt-in agreement without those responsible for compliance knowing about it. To address these concerns, the template includes a robust approvals process with information that the agency must provide in their approval request, as well as reporting requirements for non-transparent services by media channel.
- Artificial Intelligence: In this new provision, an agency must obtain the advertiser’s prior consent to use any artificial intelligence (AI) applications in the delivery of services.
- ESG and DEI: ESG and DEI are important topics for many advertisers. The updated template includes placeholders for both ESG and DEI as reminders to consider the roles both play in their agency relationships. Advertisers should work with their legal counsel to determine the best placement for any ESG or DEI requirements, e.g., in general terms, a SOW, or KPIs.
The updated template is a starting point for the development of a customized contract for use with media agencies performing work in the U.S. It does not represent the only method by which a contractual relationship between an advertiser and its media buying agency can be addressed. Each negotiation is different, and changes in template provisions should be expected as negotiations ensue.
"It's the contract, stupid!," as it was in 2016 and again in 2018 -– and now in 2023. Advertisers are strongly encouraged to review and update their existing contracts with agencies and consider the advice provided by the ANA and Reed Smith. Thanks to the Reed Smith team: Keri Bruce, Doug Wood, Nick Swimer and Erika Auger.
The template can be found here.
Posted at MediaVillage through the Thought Leadership self-publishing platform.
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