Somehow we missed that moment at ANA when former MediaCom CEO Jon Mandell startled the ad industry by calling out his industry colleagues as self-serving rogues:
“Media agencies aren’t living up to their fiduciary duties to clients and ‘cross the line of acceptable conduct in a partnership,’ Mr. Mandel said. ’They are not transparent about their actions. They recommend or implement media that is off strategy or off target if it works for their financial gain.’
Rebates,’kickbacks,’ and other incentives for agencies that are at least potentially adverse to client interests are happening virtually everywhere in the U.S. media landscape, including TV, he said. Mr. Mandel said the practice has migrated from cash incentives to free Inventory, which agencies may then deal back to clients in scatter buys or sell via ‘dark pools’ that are either traded programmatically or liquidated in barter transactions.”
No wonder the first panel at this year’s AdAge Digital Conference was titled “Elephants in the Room,” and took a frank,sometimes scathing look at the big problems in the industry, the biggest of which turns out not to be ad blocking, but conflict of interest on the part of agency trade desks.
“Have you ever wondered why fees to agencies have gone down and yet the declared profits to these agencies are up?” Mr. Mandel said. He said that advertising spending broadly has long stayed within a narrow band of 1% to 1.25% of gross domestic product globally. “So if agencies are growing at a higher-than-GDP basis, the money is coming from somewhere.”
Somewhere along the way, the trust relationship between agencies and their clients has eroded.Global brands have learned to ask the right questions of their agencies, but transparency about how trading desks make money is important if smaller advertisers are to be protected from predatory treatment by their own agencies. The two major industry associations, AAAA and ANA, can’t even agree on what constitutes transparency, but AAAA is acting guilty and taking the responsibility for creating greater visibility into kickbacks and arbitrage.
Moreover, agency trading desks are driving media prices down, to the detriment of the publishing industry, Without passing the savings on to their own clients. Once they have banked the inventory on their books, they can no longer be objective in what they tell their clients to buy; they’re guilty of conflict of interest. In this new market, in which agencies are both buyers and sellers, they seem to have lost sight of the fact that advertisers need healthy publishers, and driving ad rates to the floor helps neither side.
Not to mention the consumer, who, pummeled by cheap ads that are neither useful nor relevant, responds by downloading an ad blocker.
This lack of trust extends even beyond agencies and their clients, to consumers themselves. Consumers who have been enduring pop ups, pop unders, page takeovers and non-skippable video ads have become increasingly intolerant of an industry they see as violating their privacy for no good reason.
Most of the speakers agreed that advertising has divorced efficiency from effectiveness, sacrificing storytelling for data. As a result, marketers are not only being undermined by consumers with ad blockers, but by themselves, because bad ads mean consumers don’t feel passionate about brands anymore.
Compared to the enormity of the kickbacks and arbitrage scandals, the other issues on the table, like visibility and fraud, seemed inconsequential. Neither of them is being solved, but at least MOAT and Integral Ad Sciences are working on a metric for viewability and the Trustworthy Accountability Group has taken on fraud.