Media transparency cuts both ways - it's not just agencies that must clean up their act

Arvind Hickman
By Arvind Hickman | 22 March 2017
Arvind Hickman

Restoring trust and transparency in the media buying ecosystem is where all media and marketing players should strive, but it cannot be a one-way conversation that marketers demand from everyone else.

At the AANA forum on Tuesday night, there was a strong sense that current levels of transparency in the sometimes murky digital media buying ecosystem is no longer acceptable.

But transparency must also extend from the client side into fee structures and media pitches that are often designed to drive down costs to unsustainable levels. It must also extend to high volume deals and sweeteners offered by media owners and global digital media giants that artificially distort the system.

For transparency to truly exist, it will take systemic change to a fragile ecosystem where agendas pulling in opposite directions have been ripping apart the seams of transparency for several years now.

This has been an ongoing issue for a while, but there are a couple of fundamental differences this time around.

Firstly, the world’s largest advertiser is not happy and is calling bullshit on the “murky at best”, “fraudulent at worst” digital media supply chain.

When P&G’s chief brand officer Marc Pritchard talks, the marketing world listens, and it now feels that the status quo is no longer fit for purpose. This lit a fire under other marketers to actually chase change rather than sitting back passively and regarding it as something that's just too hard to fix. 

Secondly, the AANA has gathered evidence that clearly exposes a lack of trust and capability to police transparency in Australia. Marketing heads from clients, media agencies and media owners gathered in one room to listen and engage with the issue, something that has been previously lacking. 

Thirdly, declining sales volumes in the US were used to highlight the dire state marketing (and advertising) finds itself in. Although an Australian context would have been nice, it’s clear that marketers around the world are starting to question the value that is being returned on digital and media investment models that have heavily favoured "shiny" new media channels and social in recent years.

There's a problem, we know

Ebiquity’s Nick Manning delivered a warts and all presentation on how each part of the media buying ecosystem is contributing to the malaise.

While he saved rather pointed criticism for programmatic and suggested it rarely delivers ROI, I’d reserve judgement on trading desk effectiveness until we see more evidence that shows how it performs compared to other channels, particularly in an Australian context.

However, it always bemuses me how much digital has been growing at the expense of other channels, almost with blind acceptance by folks who appear to know little about these new, shiny mediums.

One aspect that is clearly a problem is misperceptions about how hard marketing dollars are working in programmatically traded advertising.

Marketers perceive that 80 cents of every dollar poured​ into programmatic trading ends up in the form of viewable advertising when in reality it’s less than half this figure.

That doesn’t mean the rest is going to waste – it may help produce better targeting and other efficiencies – but clearly marketers don’t know how their money is being spent, and that in itself is a problem.

The digital media industry needs to get better at explaining how it spends ad money and the value that is derived from it. And success needs to be measured in a consistent fashion with third-party verification as a bare minimum.

It is no longer acceptable to mark your own homework and use different measures of success that best suit your agenda. This isn't just a digital problem but the IAB is well aware of what needs to be done and will be working on measurement and standardisation this year.

The other part of programmatic that cops a bad rap is how media agencies make money from it.

I hear reports that margins of anywhere between 30-90% can be achieved when media agency holding groups buy and trade inventory in bulk.

Pritchard is of the view that all of this margin should be returned to companies and the whole digital media buying ecosystem needs cleaning up – "removing the weeds", as he describes it.

In principle, Pritchard is right. Fairness in any buying ecosystem is an honourable ideal, in theory, but in practice it is rarely ever achieved.

The reason for this is that in many supplier-client relations, one party ultimately wields power and will try to squeeze the weaker party to meet their own business goals.

In 2013, it was reported that P&G tightened the screws on its suppliers by extending payment terms in order to bolster its cash flow. This hurts small-to medium-sized businesses operating on slim margins.

Sure, it was transparent, but was it fair?

In the world of media agency-client relations, it is ultimately large corporates that wield the power and some agencies, under pressure to deliver their own margins, will take on business with unsustainable fees with the hope of building value in down the track.

If media transparency should become the baseline, then it cuts both ways. Transparency in remuneration is as important as transparency in buying.

Frankly, I’m not convinced the current remuneration model is ideal and a move towards more performance-based fee structures should be explored.

But companies that care more about driving down costs rather than looking for real value in a relationship, and there are many of them, often end up with the transparency and results they deserve.

It may suit an accountant’s quarterly P&L statement or marketing budget to drive down agency fees to unsustainable levels, but less cost doesn’t equal better value and this relentless pressure on agencies to do more with less puts a huge amount of strain on a fragile media buying ecosystem.

And let’s be clear about this - it’s not just agencies being screwed, it’s also media owners and, ultimately, clients.

If an agency is screwed down on cost, it incentivises them to find creative ways to build their value back into the client-agency relationship or the agency-media owner relationship. This happens in many areas of business, not just media and marketing.

This becomes shady and somewhat conflicted when media agencies make disingenuous planning decisions to their own benefit and the client is none the wiser.

Add to the mix media owners currying media agency favour by striking large volume deals, then you’ve got a lot of conflict in a system where far too many backs are being scratched.

Marketers need to regain control of their budgets and the industry should come together to find solutions to the media buying ecosystem.

The question is will CMOs and marketers in Australia rise to the challenge of regaining control of media budgets and work with agencies and media owners to clean up the media buying ecosystem? Will they have the courage to speak out boldly about their own difficulties and desire to improve as Pritchard has?

Hopefully, but it will require an industry-wide solution and every element has to come to the party.

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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