Advertisers must drive transparency; long-awaited guidelines revealed

Rosie Baker
By Rosie Baker | 24 October 2016
Sunita Gloster

It is primarily the responsibility of advertisers to drive the transparency agenda and make sure they know exactly what their media agency is contracted to deliver and that it's fair, according to a set of media guidelines issued today by the AANA to help members navigate the complexity of media buying and media contracts with agencies.

The long-awaited guidelines follow a similar framework published by the ANA in the US in July.

In a far-reaching, exclusive interview with AdNews back in August, AANA CEO Sunita Gloster and Matt Tapper, the chair of the board, admitted “transparency isn't where it should be”. The document published today reiterates that sentiment.

At the time the pair said the organisation would be looking at the resources and best practice coming from the US and adapt it to suit the Australian market's needs.

It has today published two documents that aim to do so; a 52-page Media Contract Template and Media Contract Guidance, an 11-page set of guidelines designed to help its members better understand media contracts, draft better contracts between them and their agencies and enable greater transparency around media investment.

Sunita Gloster today said: “Individual brand owners, as the buyers of the services, must always take primary responsibility for carrying out their own due diligence and our role [as the AANA] is to look for ways to help them by providing guidance and tools to do so.”

Transparency is never far from the headlines. AdNews recently revealed that Dentsu in Japan was in the midst of a scandal after overbilling more than 100 clients, and MediaCom was the focus for transprency issues in Australia after campaign misreporting two years ago.

Eliminate non-transparent practices

The aim of the guidelines is to point advertisers towards the areas they should consider and question to “reduce or eliminate non-transparent and non-disclosed practices” relating to media spend.

It covers aspects such as advertiser and agency responsibilities, rebates and incentives, reporting, scopes of work, third party costs, sub-contracting, tech stacks, fees and expenses and audit.

The questions it suggests clients ask their agencies go a long way to pointing out the complex areas that agencies are making money such as value banks and rebates, which may not be fully understood by clients. 

It also signals where some of the pain points are for agencies such as payment terms and ineffective briefing processes, stemming from clients.

The transparency spotlight has very much been on agencies' responsibility to be transparent so the wording of the AANA document will be welcomed for shifting the impetus back to clients.
Clients must recognise agency's need to make profit

The document outlines that as advertisers are driven to grow their businesses bottom line, the same is true of agencies and “advertisers should respect agencies are no different.

“In striving to obtain greater transparency over media dealings, it is important for advertisers to acknowledge their part in helping their media agency to meet their legitimate business and profit targets.”

Agencies have long sought to make the point clear that if clients are constantly pushing tighter budgets and demanding more for less – then something has to give.

The AANA document also acknowledges clients' responsibility in this area, stating “'Doing more with less' has been a constant refrain for both brand owners and their agencies for some time now. Those advertisers who increase their demands of agencies while pressuring agency margin structures through reduced fees and extended-term negotiations should understand the impact this subsequently places on the agency’s ability to deliver quality services. This includes developing the systems and skillsets to be truly agnostic about its media buy recommendations, which should also be considered in contract negotiations.”

The AANA also acknowledges the rationale for allocating media spend has become “unclear” to clients with programmatic trading desks “exacerbating the problem” and “commercial conflicts of interest” leading to ineffective planning.

In the document, the AANA outlines the contract law principle of 'caveat emptor', which stipulates that “the buyer alone is responsible for checking the quality and suitability of goods before a purchase is made”.

Clarify the agency position, disclose rebates and understand value banks

It advises advertisers to clarify if a media agency is taking a “principle trading” position whereby it purchases inventory from a media owner at its own risk, and where there are any conflicting relationships between the agency and vendors.

Clients are also advised to seek full disclosure on rebates “with an undertaking that your media spend does not contribute to rebates or incentives from a media owner without your consent” and disclosure on mark ups requiring the agency to “provide proof and certification that media inventory is legitimate, the price charged is mutually agreed and that your spend had no influence on the provision of its inventory”.

Disclosure around rebates should also allow clients to determine how much their spend influences “the quantum of those benefits and … stipulate how the benefit is to be allocated back to the relevant brand”.

There is a focus on value banks, which it warns could be used under an alternative name, how they are used by the agency, and for the client. It recommends clients ask how the agency financially gains from value banks, what the policies are, how volume and share commitments are constructed and how it has been factored into pricing.

It advises all revenue earned by agencies is detailed in the contract unless agreed otherwise.

Also included in the AANA guidelines to its members is a 52-page media contract document designed to offer a best practice, contract framework that refelcts the current landscape. Members and advertisers are not obligated to adopt the contract framework, but it offers a starting point.

Capability training
The AANA has also partnered with legal advisors Bird&Bird to provide training on drafting contracts for its members, and is working with Ebiquity and FirmDecisons to offer training that will help clients navigate media buying and contract negotiations.

Tapper said: “The template has been written to equip advertisers with a starting point to each element of the contract negotiation. We believe that appropriately detailed contractual agreements together with capability training are the keys to achieving transparency in media buying and ensure that media buying dollars are spent with the sole objective of securing the best outcome for the brands they are promoting.

The Media Federation of Australian, which represents agencies is currently reviewing the guidelines to “assess the implications for the Australian market”.

Sophie Madden, MFA CEO says: “The MFA has worked closely with the AANA on the issue of transparency and fairness and last year developed the MFA Transparency Framework, which was supported by the AANA. Contract transparency and fairness continues to be one of our top joint priorities. The MFA is unable to comment further until it has fully reviewed the AANA’s report.”

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