Marketers warned poor transparency is killing marketing

Arvind Hickman
By Arvind Hickman | 22 March 2017

Marketers do not have the capability to manage media budgets effectively and a lack of transparency in the digital media supply chain is leading to considerable wastage in the areas marketers are increasingly spending on.

The problem is being exacerbated by a media buying ecosystem where media agencies are sometimes acting in the interests of their holding companies, rather than their clients, and media planning decisions are being compromised by rebates and the amount of value agencies receive in deals with media owners.

Programmatic trading, where as little as 20 cents of each advertising dollar actually goes towards viewable advertising, is 'a major problem that needs addressing'.

On the client side, media agencies are being screwed over by non-media savvy procurement teams that undervalue an agency's services and create an unsustainable trading environment.

The issue is such a huge problem that in the US, sales volumes (a good proxy for marketing effectiveness) have been on the decline for several years, placing great pressure on a function that already lacks a seat at the top table of far too many businesses.

These was the damning and sobering assessment of the industry at an Australian Association of National Advertisers forum last night, which laid down the gauntlet for marketers to either take control of their media budgets and restore transparency back into the system or risk becoming redundant.

Aptly titled 'The Media Challenge', few of the media buyers, marketers and industry figures present would have felt comfortable with what unfolded.

"Marketers need to actively manage their channels now more than ever before, and particularly in media because media is the most complex and dynamic of all the channels,” Ebiquity chief strategy officer Nick Manning warned a packed auditorium in Sydney.

“But in some ways they actually manage media less than they do some of the other marketing channels. It's very important you have an active stewardship programme.”

'Take back control'

Manning said marketers need a healthy and constructive working relationships with media partners – agencies, adtech companies and media owners – particularly in digital. He urged them to take responsibility for restoring trust.

“If you want to take control, you need to know everything you need to know. You can't do that if you don't have transparency because without transparency you cannot make the best media decisions," he said.

Transparency in the media supply chain covers a wide range of problems, such as rebates, undisclosed programmatic profit margins, ad fraud, media planning decisions that benefit holding companies before clients and ad blocking, to name a few.

“Behind closed doors, when you're (agencies) not in the room sometimes, this is what clients say to us: 'we're fed up of having to spot whether there is a vested interest in the media plan'," Manning said.

“Programmatic is the biggest problem of all. Because programmatic advertising, as we've seen from most of our clients, simply isn't working. How do we know that? It's because we do an awful lot of ROI analytics work and we very rarely ever see programmatic producing a positive return on investment. It can happen, but often it doesn't.”

Check out more about how Manning's views on programmatic here: Programmatic is the biggest problem: only 20c in every dollar reach consumers

Media planning bias

Poor media transparency is a significant business issue because it jeopardises the effectiveness of advertising and stifles the return on investment of marketing and business growth. "Transparency equals growth," he says.

“It's also artificially distorting the media market," he added. "In some markets around the world, the money that goes into the market goes to the wrong place. It doesn't necessarily go to the media owners that deliver the right audience, sometimes it goes to the media owners that deliver the highest rebates and other trading centres in marketplace.

Manning believes advertisers should be encouraged and rewarded for promoting plurality and should be mindful of media planning bias towards some digital channels.

Google and Facebook, for example, now account for more than 50% of digital spend, 17% of all media spend and are consuming 95% of growth in US online spend.

He said that agency groups often cut global deals with large digital media giants and that $1 billion of spend can yield that group more than $50 million in trading incentives, which is likely to infleunce media planning for clients.

“This is very important because when the media agencies talk about Google and Facebook, they do have very, very strong vested interests in their dealing with Google and Facebook," he added.

“Sometimes it rewards the wrong behaviours because people do things they shouldn't be doing for financial reasons rather than the cause for better advertising.

"The most damaging thing is that the lack of transparency hides the misalignment of commercial interests between you, the advertisers, your partners, whether that be the agencies or adtech or outdoor specialists, and the media owners.”

Agencies are under pressure

Marketers need to recognise that media agencies are under a “huge amount of pressure” to deliver profits from parent holding companies. This requires an active strategy on fees and payment terms.

“If you want transparency, you need to encourage that by having a very constructive fee structure. An issue that cannot be ignored, particularly when pitching, is to address artificially low fees and media trading incentives," he adds.

"The way agencies make money is a mixture of those two things. In certain pitches, sometimes the headline fees are artificially low because the agency thinks it can make money in other ways after the events.

This leads to a mixed economy of headline fees and non-headline fees.

In a panel debate following Manning's presentation Omnicom Media Group AUNZ boss Peter Horgan explained that "non-media savvy procurement" teams are screwing over media agencies and creating an unsustainable media buying ecosystem.

He maintains that media agencies are transparent in the way their operational costs are disclosed to clients, such as billed hours, but there are some "rat bags" at the other extreme of the industry that acts in a non-transparent manner.

At the heart of the problem is an eroding trust between advertisers and media agencies. Unless transparency and trust is restored to the buying ecosystem, marketing investment will struggle help brands grow and deliver on ROI.

AANA CEO Sunita Gloster warned that buck starts and stops with marketers and it's now time to act.

Read the confessions of Australian marketers on what they don't know: AANA: A worrying admission of incompetence from marketers

The AANA's transparency event held in Sydney yesterday left marketers and agencies shocked at the depth of the transparency problem. AdNews has a lot more planned on this topic. If you have a view on this get in touch with ArvindHickman@yaffa.com.au or Rosiebaker@yaffa.com.au 

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