Q&A AANA chair and CEO: ‘Transparency isn’t where it should be’

Rosie Baker
By Rosie Baker | 16 August 2016

Issues of media transparency have engulfed the industry over the last 18 months both in Australia and overseas. The impact of the American Association of National Advertisers (ANA) report is still being absorbed.

The AANA chair Matt Tapper and its CEO Sunita Gloster have admitted that transparency “isn’t where it should be” in Australia, in a far reaching interview with AdNews to address what it’s doing locally to make relationships between clients and media agencies fairer and more transparent.

Despite a high profile case in MediaCom where misconduct and less than transparent practices were proven to have occurred within the Australian market, there is a view from some corners that both the AANA and the MFA have been too quiet when it comes to openly discussing the issue of transparency, and what they’re doing to improve things. The MFA has in the past been described as a “toothless tiger”.

In the UK ISBA has been vocal while in the US the much publicised report issued by the ANA and K2 addressed widespread flaws, followed up with substantial best practice guidelines for advertisers. Comparatively, earlier this year after 10 months of working with PwC, the MFA issued a simple one-page document, backed by the AANA, that briefly outlined the key problem areas. That one-page document was seen by many AdNews talked to as a flimsy response to what is a vastly complex issue. 

Trinity P3 founder and CEO Darren Woolley has been vocal in the local market in recent months raising concerns the reason for the lack of action is that there is a conflict of interest in the AANA’s membership in that it has both advertisers and media and creative agencies as members, and board members. Mike Connaghan, CEO of WPP (which owns GroupM, the largest media network in Australia) is a board member while OMD and Publicis are also members.

Outlined in a passionate opinion article on AdNews today, Woolley’s main point is that it’s impossible for the AANA to act in the interest of one group (advertisers), if it is in conflict with the interests of the other (agencies). Therefore, he believes, the conflict of interest means the organisation isn’t doing enough to tackle transparency – or the lack of it – in the relationship between advertisers and their media agencies. It is a legitimate concern to raise and he asks some good questions. The AANA is one of only a few equivalent members of the World Federation of Advertisers that have both sides represented in their membership. The rest represent either one or the other. 

The AANA has refuted this is an issue, citing strict governance and rules in its charter that mitigate any conflict. It believes that having both sides working together brings better chance of a unified and cohesive industry. (More below).

You can read Woolley’s piece in full here. It should also be included that Trinity P3’s sister organisation Calibr8or had approached both the MFA and AANA to work jointly on an initiative that would see clients and agencies ranking levels of trust in their relationships. Neither party opted to endorse it. Separately, Calibr8tor, which is a 'capabilities benchmarking' tool has in the past also been subject to questions of conflict of interest.

It’s also worth noting that in the US there is discord between both sides of the industry which has hampered some initiatives. Even before the publication of the ANA report in the US, there was a major fall out between the organisation (which represents clients) and the 4As (which represents agencies) with the 4As declining to be part of the investigation citing “profound disagreement’ in the way forward. The two struggle to find common ground. Just last week, the ANA is said to have extended “an olive branch” to its counterpart to re-open the discussion at its October meeting, but as the More About Advertising website points out “it’s a mess and unlikely to be resolved”.

AdNews recently sat down with the AANA’s CEO Sunita Gloster and board chair Matt Tapper to get to the bottom of a number of issues surrounding transparency, and the way forward.

The interview was the day after a AANA board meeting, which came just days after the ANA released its 50-page agency contract template. Tapper and Gloster reiterated to AdNews that the responsibility for ensuring strong contractual relationships “lies squarely with advertisers” and outlined its approach to improving capabilities of its members. The board has issued “immediate” plans to “tailor” the template to this market so that advertisers, small, medium and large, have a framework on which to base their own contracts if needed.

Gloster says the AANA was waiting for the US contract framework before putting anything into market here because such a large proportion of its member base has a US HQ.

Q&A
AdNews: ISBA in the UK and the ANA in the US have been active and vocal on their positions around transparency with steps being taken to address it. How has the AANA been tackling it here?

Matt Tapper: It’s a complicated, gutsy topic and this is the first time Sunita and I have talked in depth about the AANA’s position on transparency, so we want to give some concrete views on where the board is at. No one is disputing that transparency is not where we’d like it to be, and our view is that we have to take responsibility as advertisers to take this forwards. That’s consistent with the ANA (US) view and the way to do that is around contracts and ensuring advertisers have the capability to write and negotiate great contracts with agency partners.

There are a number of initiatives the AANA has been working on for some time, and giving our advertising members access to. Given the global nature of this challenge and the fact that many of our members operate internationally, the AANA has been in discussions with the ANA and ISBA for some time now so that we can help our members develop best practice solutions such a contract templates. Every advertiser’s contractual negotiation with it media agency is commercially and competitively sensitive but this template will pride another useful framework.
Now, depending on if you’re a large, medium or small advertiser, this might be helpful, or it might not. It came out last week and our commitment is to put resource behind it to make sure that it is relevant for all of our member base. Because the needs of our advertisers are different, some of our members are very happy with where they are, others are not. The level of capability within the advertiser is relative to the size and the complexity of the investment they are making. I’m not suggesting the challenge is all with the small advertisers - a lot of smaller advertisers do a great job in this space, but there are varying degrees of capability across organisations so we need to break it down a little bit and make sure the framework is relevant and appropriate tor this market.

AdNews: What are the aspects that will most likely need most focus in this market?

Matt Tapper: There are key components that we recently released alongside the MFA of what we should focus on. [Taper is referring to the points outlined in the MFA’s one-page document which singled out; Agency Commissions; Value Banks; Agency Trading Desks and Ethics training]. But what we don’t know is what our members’ contracts look like because that is their own commercially sensitive information. What we can do as the AANA is provide them with best practice, which they can then use to consider their capabilities and the quality of their contracts. It clearly comes back to these issues; is what we are paying for, what we are receiving? Is it a sound commercial relationship? Does the level of transparency exist to give us confidence that’s occurring.

AdNews: Do you have a feel for the proportion of client/agency contracts that do that sufficiently, or how many are antiquated and not fit for purpose for today’s media world? Prior to the recent update in the UK ISBA said its contract guidelines hadn’t been updated in 10 years – would the same be true here?

Sunita Gloster: I think it would be similar here. I’ve been here three years and I’m not aware of a media contract that the AANA has issued that is currently relevant. [The ANA document] is based on the ISBA contract.

Matt Tapper: We can’t be across that, but we all agree that transparency is not where it needs to be. I think the vast majority, if not everyone, would agree the advances of tech will help transparency in some cases, but the market is moving quickly, and there’s a lot of innovation that on the other side of the coin makes it more complex. Contracts need to ensure that transparency exists, and that capability is keeping pace. The point is we have to continue to be proactive. We have to commit to updating it on an ongoing basis so that best practice is fresh and relevant. We have to evolve it because the market is always evolving.

AdNews: How much resource is the AANA putting behind it and how often would the contract guidelines need to be reviewed updated?

Sunita Gloster: Everyone universally agrees that as soon as you write down something as a guideline, it almost needs to be updated yesterday. The need for advertisers to recognise that even if they have a new contract within the last two years, they need to keep on top of it, but we have always taken the approach that it’s better to have something in the market than nothing. We will share best practice with the market as soon as we can, we don’t have to have a view on it, we just have to share it. At the moment some clients are operating with nothing, with contracts that are written internally or copy pasted from roles they were in previously so whatever we do with this [contract guideline] is better in the market sooner rather than later because someone will learn something from it.

It’s important to say that we have terrifically engaged members, they are good citizens and the AANA operates voluntary positions – what our members and board do for the AANA is above and beyond everyone’s day job. There’s a group that sit in the media forum who have been waiting for this to come out, to see what’s relevant in this market, what can we add to it, and the board committee will also then look at it to make sure that it’s as relevant to this market as it can be. In terms of how often that will be reviewed – its early days on that. With our [self-regulatory] code reviews there is a formal policy in place about how often we review codes, and that’s five years. It can be reviewed at any time if there’s a specific point to address or look into, but you have to start with something.

Matt Tapper: The next step is a sub-committee that will make recommendations to us and there’s a commitment to invest the time, effort and the funds associated with that. The difference is that our code development is binding. What we’re talking about here is best practice recommendations and guidelines. I would expect it to be more fluid journey because the advertisers need to make their own choices on which media agencies they partner and what level of trust and transparency they see in their relationship

AdNews: There is an impression that very little is being done and said to explain how AANA and MFA are tackling transparency. What else is the AANA doing for advertisers?

Sunita Gloster: We have constant engagement with our members on this – but it’s not always for public reporting. A lot of the time it’s putting members in touch with each other in a confidential manner. For example we have a dinner series – ‘place at the table’ – which offers a confidential environment where our members can talk about industry issues and share insight, ideas, suggestions, grievances. You name it they talk about it. As a member base we find ways for them to engage intimately, one on one, by introduction, in committee meetings - that’s what a membership does – it brings people together to talk about issues.

AdNews: There is criticism about the AANA membership including both agencies and clients suggesting it creates a conflict in the AANA’s response to the transparency debate. Those members, WPP, OMD and Publicis, represent a significant chunk of the media agencies in Australia. How can you have a conversation about transparency of client/agency contracts when you have both sides sitting at the table and a vested interested for both sides?

Sunita Gloster: There’s a hierarchy of members and we have meetings and conversations that are advertiser-only and agencies are excluded because it would be a conflict. We have really sound governance and constitution. We’re an 85-year-old organisation, it wasn’t thought up on a whim. The role of the board, members and voting rights in an AGM is really sound. It has to be because we manage self-regulation on behalf of the industry. The government trusts us to manage it well – it’s not something any responsible advertiser would put at risk. [Gloster added that there were no plans to change this policy and stop allowing agency members.]

Matt Tapper: We have a very strong view within the AANA board that its beneficial to have both advertiser members and agency members. It’s our belief that to do a good job on behalf of all advertisers, we need to be open and inclusive and understanding of the broader industry, their needs and their role in it. As the AANA board, we’re thoughtful and considerate of everyone’s views, even those that aren’t happy with what we’re doing. We think being inclusive is more important than ‘us versus them’. Having said that, and this goes back to our constitution, 100% of the time, we make decisions and have a perspective that is in the best interest of advertisers. On the agenda for any board meeting the declaration of conflicts of interest when it comes to the agenda points, and there are all kids of governance and voting rights and mechanics that ensure that the best interest of advertisers is upheld, but that doesn’t mean that we shouldn’t be more welcoming in terms of the member base and have individuals [in media agencies] involved in those conversations. It’s classic diversity – the benefits of a diverse membership base allows us to make better quality decisions. As media agencies, you’d have to ask them why they are members, but I would assume that they get from it a better understanding of the needs and concerns of advertisers.

AdNews: If that’s the case why wouldn’t more organisations in the WFA have a combined membership?

Matt Tapper: There is no common practice worldwide, it goes back to our board, and the confidence we have in the quality of the conversations we have and the decisions we make. I’d hope that our track record on media transparency is an example of that. The other way, is that as advertisers, we point the finger at media agencies and say ‘it’s all your fault’. The AANA view is that we need to do more with our contracts and the capability within our originations so that we get the transparency that we require in our commercial relationships – as you would in any commercial relationship. We think it’s a good thing to have diverse group of members but let’s be clear about our constitution and our values – and that’s about the needs of advertisers.

Media transparency is not just the reputation of media agencies it’s the reputation of the whole marketing industry and the profession. It’s not something that will be solved by finger pointing. There’ a collective responsibility to get more transparency, and I’d rather have a membership base that can reflect the views of both sides to solve the problem. That’s the guts of it.

AdNews: A specific conflict highlighted to AdNews is Peter Horgan, CEO of Omnicom Group and MFA chair, being a member of AANA. He’s obviously a very strong proponent for the best interest of media agencies. When you see ISBA in the UK claiming media agencies don’t have client interests at heart, that seems to suggest a strong conflict with the agenda of advertisers. Do you think it’s an issue here?

Sunita Gloster: What we’re trying to focus on is how we move this issue forward. This is an ecosystem that we all have to cohabit. There are 200,000 of us in this industry and we all want to be seen as professional services. We have a pillar [in our constitution] that is to elevate the profession of marketing. The AANA believes that the best way to do that is keep talking to each other about how we achieve that and sharing where we think we are dropping the ball or not helping each other reputationally. To put someone like Peter Horgan, chair of the MFA board, out is counterproductive because we’re all in this together to improve the reputation of the industry. At one stage or another we all have to walk in to the CEO or the board and justify that marketing and advertising has a return so it’s in all of our interest to link advertising and marketing with sales otherwise the reputation and the livelihood of our business is in question. That’s what’s disappointing about the industry ripping itself apart because it doesn’t help anyone.

We also have a joint media forum with the MFA that meets monthly to openly talk about the challenges in the industry. We have a list of priorities and we tackle them. The first meeting that Horgan came to I remember him being blown away by the level of good will in the room from everybody. We have competitors in the room, two banks and competitors from media agencies, but there is good will to put the issues on the table and come away with a positive outcome. That in itself is a great example of where conflict doesn’t matter. We all want the reputation of the industry to be upheld. We tackle how we add collective intelligence to those challenges and get a better outcome for the industry.
[As a side note, the MFA declined to comment.]

AdNews: If the AANA is taking these steps to ensure that advertises improve their capabilities and are asking better and more difficult questions of their agency partners, what pressure are you putting on the MFA and its member base to make sure its member base is equipped to answer?

Matt Tapper: I think it’s a great question – it comes back to our focus being influencing the advertisers. It’s then for you to ask the MFA what their position is because they need to be thinking about recognising the capability of media agencies to make sure contracts are sustainable. We’ll focus on what we can do, and we’re going to be better arming our advertisers with better information, better contracts and better capability, and you would assume the media agencies would rise to that challenge.

AdNews: There is school of thought that clients want to brush the whole issue under the carpet because in the past they haven’t been fully across their contracts and what agencies were doing in the past. If you stand up as a marketer and admit that you have no idea what your agency contracts mean, or what you’re paying your agency for, that doesn’t reflect well in the eyes of a CEO. Is that fair?

Matt Tapper: I think that’s a glass half empty approach. I’ve been around a while and I continue to learn new things and sometimes I’m astounded about the things I didn’t know. But what I would say is that as a business leader or a marketer don’t spend time looking in the rear view mirror. If you’ve got new information and insight, the AANA can help, or ask for help via third parties, net time you have a pitch or write a contract, think about what questions you can ask and go out of your way to build your capability and do a better job for your organisation. A few people have shared that view with me, and I get frustrated by it. Everyone makes mistakes, but this should be about improvement and progress.

AdNews: Another common cry is that advertisers are complicit in the lack of transparency by putting pressure on agency margins and turning the screws through procurement. There’s a fair point that a cost driven industry where agencies cannot make a profit on their work has created some of these transparency problems, so what is the AANA doing to educate its members on this point?

Matt Tapper: I don’t take that as a criticism. I think that is a reality and it is a part of it and possibly a contributor. The ANA report in the US suggests as much. It has played a role in driving a lack of transparency in some areas. We can best influence the behaviour, capabilities and contracts of advertisers, but media owners and agencies need to work through some things themselves. They’re all trying to get a commercial outcome and we have to take responsibility for our part in that, and part of that is remunerating in a sustainable fashion.

Like any good partnership, and you’d hope [agencies and clients] are not a purely transactional relationship. If you want a genuine relationship and you want special things to happen in your marketing and media, it’s got to be a two-way street. I think the greater the levels of transparency, the greater the trust and with that comes fairer remuneration or value exchange, so it is connected. But I don’t think a lack of transparency is in any way OK. I get the fact that what might be driving agencies to be less than transparent is they don’t think they’re being fairly remunerated, but you shouldn’t then do business with that organisation. It’s a choice. Ultimately, it’s an open market and both parties have a choice about who they partner with.

AdNews: But often it’s not a choice – if you’re a multinational agency it’s very difficult to funnel back up to the global CEO that you’re backing away from a local pitch for an ‘X’ billion-dollar account because it’s putting the squeeze on margins.

Matt Tapper: It’s for organisations to determine what they think is a commercially viable relationship. That’s a classic business challenge. We are all in business to get a return, but I challenge the notion that because the remuneration isn’t fair it’s then OK to not be transparent. I don’t buy that at all. I think as advertisers we have a responsibility to make sure that our commercial arrangements are transparent and that what we are paying for is what we are getting.

If what we are paying for isn’t fair, you’d assume the agency partner has an issue with that. I’m not arguing that some of that behaviour [from advertisers] has led to that – I do buy into that, and not disputing it, but I think we need a break in the cycle. Transparency is a key pillar of trust and that will lead to fairer levels of remuneration where required.

AdNews: Are we anywhere near a turning point where things might change and transparency will become less of a heated subject?

Matt Tapper: I’m the optimistic type so I’d like to say yes. I’ve been involved in the AANA for four years and transparency has come and gone a little bit. With the work that’s been done in the US it made sense to observe how that was going to unfold instead of replicating it. For some of our members this is a significant issue and they are saying they’d like us to do more, and they need some help with it. For others – they’re thinking about other things, but we believe as the AANA board that media transparency is an ongoing journey. There is no silver bullet, we have to be on our toes and keep working at it.
I see a huge amount of good will in this industry [to make it happen]. It’s a competitive market, but I do buy into the idea tht greater transparency is better for business, and organisations that think like that will benefit, but we [the AANA] can’t tell people how to run their business.

AdNews: Another observation about the AANA membership is the representation in the market - How much of the $14bn market does the member base represent, and is there a skew towards larger international advertisers meaning smaller or local advertisers without global headquarters are underserved?

Sunita Gloster: Three quarters of our membership operate internationally and our constitution requires that the board is representative of different verticals and sizes of organisations. The AANA represents Australia's National advertisers and covers every major category. This includes Telstra, Woolworths Unilever, CBA, Toyota, CUB, Kellogg, Qantas, Foxtel, McDonald’s and Sportsbet to name a few. All members are listed on our website. The membership base has grown significantly more than 20% over the last three years with this month three new members joining (Airbnb, Target and ING Direct).

I can't tell you that figure exactly, because I don't know and it’s not disclosed publicly, but I’m confident that our members account for a high percentage of overall media spend. Advertisers membership fee is calculated on their total annual marketing budget.

 

Have something to say on this? Share your views in the comments section below. Or if you have a news story or tip-off, drop me a line at rosiebaker@yaffa.com.au

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