ZO director refutes alleged fraudulent tactics

By Jonathan Betts, grp business director at ZO
By By Jonathan Betts, grp business director at ZO | 23 February 2015
Jonathan Betts

This opinion piece is in response to an article by AdNews entitled “Ad fraud uncovered – what and how it happens”. The article, based on documents/evidence seen by AdNews, as well as several sources, alleged that some media agencies and media owners carry out questionable and fraudulent activity relating to their clients.

 

 

It was with a sinking feeling that I first read AdNews’ article titled “Ad fraud uncovered – what and how it happens”. On first glance the article seems like a fearless exposé of an industry where unscrupulous organisations are busy siphoning funds from advertisers to make themselves rich at their clients’ expense. To think that this is what media agencies have become today makes me both sad and angry.

Apart from the fact that this article is not even close to a fair representation of media agencies today, I am angry because this misinformed and biased view of media agencies, is in danger of becoming received wisdom.

I am in danger of playing the man not the ball, but I object to the use of the phrase “while a majority of businesses may be clean”, when the intention of the article is to imply that all the practices they allege are widespread. Furthermore, the un-sourced (and unverifiable) claim that “false bookings are common” is bordering on libelling every media agency in Australia.

I feel compelled to write this piece because I passionately believe in both the importance of the relationship and trust between advertisers and their media agencies and also the amazing job the people in media agencies do for their clients every day.

Having spent nearly 15 years in media agencies I can personally attest to the fact that the most senior leaders in these organisations understand that their businesses depend on doing the right thing by their clients.

The global exec teams of the largest media agencies have impressed upon me and my colleagues that the recommendations we make now will be reviewed in six and 12 and 24 months and they all need to be demonstrably the right thing for our clients. Recommendations to clients must always be made for the long term.

As I look at the discourse around the advertiser and media agency relationship, my greatest regret is that we are discussing price and not value. Yes, media agencies can secure better media pricing than advertisers can on their own, but it is the expertise within these businesses that brings as much benefit to advertisers. Media agencies have an understanding of how all the different media types can work for a client.

When using a media agency advertisers are making investments based on the learnings from not just their campaigns and experience, but the aggregated investment and the aggregated experience of the overall agency.

Advertisers using a media agency will find they have more flexibility to move and change their campaigns based on their business needs – and good media agencies take responsibility for the outcomes from an advertiser’s investment in a way that I rarely see from a media owner.

The article contains five areas that it alleges represent common malpractice within media agencies: mark-ups, kickbacks and bribes, misusing a client's money, and buyers/false booking. How fair a representation of each of these did the article provide?

Mark-ups

This section seems to take issue with the fact that agency trading desks are generating a margin for the businesses that own them. However, the article itself acknowledges that the functions provided by these teams were previously being delivered through online ad networks or other suppliers. I do not recall anyone objecting to these businesses generating a margin on the service they provided.

Every agency group is transparent with their clients that the trading desk and the agency are owned by the same organisation, and acknowledges the price they pay is not the cost at which media is sourced. There is an investment being made by the agency group into data, technology and resource to create value on top of the price of the media on its own. However, it is that fundamental need to do the right thing by their clients to be doing the right thing by their business that will ensure that agencies apply the solutions of their trading desk when it is best for their clients and not when it is best for them.

Kickbacks and cash incentives
I feel that this section of the article fundamentally misunderstands the value that an agency deal can provide to clients. The article suggests that these agreements end with advertisers being pressured into accepting inventory that is not right for their audience and brand. If your agency deal looks like this then you’re doing it wrong.

When negotiations are done at the agency or group level the total investment being used in the negotiation is often at least 10 times that of an individual advertiser, leading to significant price improvements. When advertisers are using an agency with deals in place they have the freedom to place their investment with a large number of suppliers, all at market leading pricing, but have no commitments to any individual supplier.
An agency deal arrangement provides advertisers with the flexibility to change their investment approach due to business needs with no impact on supplier relationships or future pricing.

Agencies who can successfully negotiate and deliver these agreements create advantage for their clients and also for media owners who value the security of expected revenue to be able to manage their business. When media owners provide recognition of this value to agencies it can be in the form of media space that agencies can use to grow their relationships with new and existing clients. I am concerned about a scenario where we characterise successful portfolio management of investments as sharp practice.

Misusing a client’s money

The first example the article includes is when a media owner, due to their own process, invoices the agency for less than the full value of the booking. The article itself acknowledges that this is a standard industry practice and, in fact, is something that is often addressed in contracts between clients and agencies. To define this example of normal client-agency relationships as “ad fraud” seems designed to denigrate the integrity of media agencies and undermine the trust within the industry.

The second example, where compensation is due to a client but is retained by the agency, is a more straightforward case. I have never seen this happen and feel strongly that any compensation due to a client due to issues with their campaigns should be returned to that client.

Buyers/false bookings

The final element highlighted. That of charging a client for more activity than has been booked is straight forward. This is fraud. It’s not “ad-fraud” – a term whose meaning seems to change constantly – but is actual fraud. A criminal act. Again, I object to the article’s claim that “false bookings are common”. There is no buyer, account manager or director I know that would risk the criminal prosecution associated with actively billing clients for media they had not booked.

Now I am not deaf to the discussion around the role of media agencies and their relationships with their clients. I want individual agencies and the MFA to further build the trust between agencies and clients. However, I believe this will be best done by an acknowledgement of the fact that media agencies are staffed by people working every day to do the right thing by and for their clients.

 

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