Four ways clients are being gouged by agencies and digital: Mark Ritson

Rosie Baker
By Rosie Baker | 6 February 2017

Procter & Gamble CMO Marc Pritchard last week made one of the most important marketing speeches in years, calling out poor standards, fraud and misconduct across the industry, but it will have zero impact in this market, unless Australian marketers heed the warnings and calls to action, according to professor Mark Ritson. 

In his weekly column for The Australian, published in today's paper and in full online here, Ritson outlines why the P&G marketing boss' speech was so important, highlighting four areas that should be particularly pressing to Aussie marketers: ad fraud; agency misconduct; viewability standards and the lack of independent verification in digital.

"Taken together these four topics provide a depressing but essential overview of the state of digital media and present remarkably clear and practical action items to deal with them. There is no doubt that Prichard’s speech represents a watermark in assessing the state of digital media and will be discussed as such for years to come. Whether his suggestions will gain traction and facilitate change in the digital marketing industry is another matter entirely," he writes in the paper.

Speaking last week at the IAB conference in the US, Pritchard made some huge admissions about P&G's own failings, including that it had forced margins so low that its agency partners could only make money through selling on rebate inventory, and also that it wasn't aware its own agency clients did not prohibit the practice.

He called out poor standards, ad fraud and a fraudulent media supply chain, marketers' “delusions” about digital's performance and non-transparent practices.

He also made some tough calls requiring all its agency partners to comply with a number of viewability standards by the end of this year, and outlining reviews of all partners and contracts.

“The common denominator in ad fraud, media agency malfeasance, viewability standards and third-party verification is the ignorance and inaction of most CMOs and senior marketers to either know, care or act in their own interests. Not only are senior advertisers not challenging Facebook and Google on these issues they are inviting them in to help them plan their communication strategy for the year ahead,” he wrote.

Digital tail will keep wagging the client dog

In recent years, going back way before the MediaCom misreporting scandal in 2014 and Facebook's admissions of major misreporting last year, observers have noted that nothing will change unless clients educate themselves, improve their own behaviour and put pressure on the digital players to lift their game. The US report from the Association of National Advertisers (ANA) also pointed to clients' responsibility in this area. Pritchard is taking a stand to do just that and rally for other clients to do the same.

In his column, Ritson says without widespread support from other big advertisers “the digital tail is likely to wag the client dog for years to come” but his hopes are not high for marketer response in Australia.

Ritson commended Pritchard's “bravery and foresight” but doesn't believe there is a marketer in Australia that can do the equivalent in this market – a damning assessment of the credibility of senior marketers here, and the need for clients to have a stronger voice to fix the problems.

While touching on crucial issues for the industry, Ritson tells AdNews he doesn't believe Pritchard's words will have any impact in Australia.

Speaking to AdNews today, he added: “It definitely won't,” he says. “It will have absolutely zero impact on the industry here. We don't have a Marc Pritchard in Australia. There's no one with a broad enough view or power. But even with the power that Pritchard has, it won't make any difference … he's saying all this because he knows he can't do it himself. He needs other clients to join him.”

Clients are victims and complicit

Pritchard's admission that P&G was complicit in the issue by forcing margins so low its partners couldn’t make any money any other way, is a big one. In his column in The Australian, Ritson says:

“Pritchard continues with a conciliatory tone admitting that P&G and other clients need to accept some of the responsibility for the situation. In a startling admission, he said P&G had uncovered one of its media agencies selling rebated media to them for an additional fee after it was received as a bonus for buying media on behalf of P&G.

“Understandably the P&G team were incensed but then humbled to discover that their contract with the agency did not prohibit this practice and that the reason the agency was profiting in such a manner was because P&G’s media commission meant that this was the only way its agency could achieve profitability from doing business with them.

“It’s a stunning and admirable admission from P&G and it has massive implications for Australian advertisers. If the world’s largest and most stringent advertiser can find itself an unknowing agent and victim in the media agency scandals that bedevil the industry then, in all likelihood, most Australian clients are similarly vulnerable and complicit.”

If clients can't get a handle on the complexity, an inevitable outcome will be the increasing use of auditors in the process – which no-one wants, he tells AdNews.

Last year the AANA introduced a set of guidelines and a template contract to help its members navigate the complexity of media buying and media contracts with agencies. It also admitted that it is a client’s responsibility to understand its contract and what that entails. But there is a long way to go.

“Sunita [Gloster – AANA CEO] has done a smashing job with the code for agency contracts, it's world class, but now she has to educate clients who don’t know what's going on, or facilitate the introduction of PwC or Accenture into the process. No one wants that, but it might have to happen, he tells AdNews.

“Two in 100 marketers here know what's going on. And if P&G don't know what's going on, what does that tell you about what's going on inside the average Australian marketing department?”

Ratings, metrics and measurement

Speaking about digital players Facebook and Google's lack of independent audited figures, Pritchard said it's akin to letting “the fox guard the hen house”. It falls in beside WPP's Sir Martin Sorrell's line about allowing digital players to mark their own homework.

Pritchard has called for all P&G's agency partners to be compliant with Media Ratings Council standards by the end of this year, which would offer an independent, standardised and comparable metric for digital viewability and free marketers up to look to other measures that better assess advertising impact.

This forward step, while welcome, would be still be “significantly less stringent and rigorous” than the ratings measurements used by TV and radio, according to Ritson who believes it will be “widely contested” because it would reduce the viewability reported for many digital platforms by requiring two-second view to count – not the one-second that Facebook currently counts.

On the flip side, Ritson recognises that those in the digital space have been quick to highlight failings and limitations of existing ratings councils such as TV's OzTam and radio's Gfk reports,
but calls these claims “breathtaking”.

“Yes there are limitations, there always will be with media measures. But they fundamentally work. A third party organisation … is independent, transparent and comparable,” he says in The Australian, while Facebook and Google report their own audience sizes “uncontested”. What Pritchard is calling for, says Ritson, is not even “a unified measurement system,” but an “independent overview”.

Ritson tells AdNews today: “You have to look back into the ancient history of the formulation of ratings, but [TV, radio, print] were all forced into independent ratings. The ABC, Channel Seven and everyone else would much prefer to make up their own numbers but were forced to do it but it's too late for that to happen in digital. What Pritchard is asking for is what is practically possible to achieve in 2017. He's not asking for the walled gardens to be pulled down, just that someone independent can pop round and look at the numbers – that's the best we can ask for,” he tells AdNews.

Ad Fraud and bot traffic

Ad fraud and agency misconduct have often been rolled up as one issue in the industry. They are two separate issues but ad fraud is one that Australian advertisers have shown an “inexcusable” and “extraordinary level of complacency” towards, considering the vast budgets that are swallowed up by fraudulent traffic and bots.

Ritson says in The Australian: “The sheer criminality of ad fraud in digital media is mind boggling,” particularly around bots. Recent World Federation of Advertisers figures put fraudulent clicks as high as 88% of digital.

Production contracts
Another area that will undoubtedly rear its ugly head in Australia, according to Ritson, is production contracts.

The allegedly common practice of creative agencies securing better margins by ensuring the production contract is awarded to their own in-house agency rather than an independent. It's a conversation that has long bubbled under the surface and one of the pain points in the industry that “no one is talking about here openly but it's happening,” he says.

You can read Ritson's full column here on The Australian.

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