This article is from Pulse, Digiday’s quarterly print magazine about the modernization of media. This is a peek at the second issue, which focuses on the current state of programmatic advertising — and how to fix ad tech. To receive the full 80-page issue and subscribe to a year of Pulse, visit pulse.digiday.com.
The Association of National Advertisers’ report on transparency was a much-telegraphed affair. Leaks led to speculation it could result in jail time. It was to be a bombshell. Many were licking their lips for blood.
But the result was a tepid affair. No names were named. Sketchy practices were anonymously highlighted, but not tied to any specific company or individual. The transparency report wasn’t that transparent in the end. The final result was a glimpse at a media system that’s overly complex, riddled with inefficiencies, double-dipping and double-dealing. And so it goes.
Some of the issues the ANA report discussed were covered repeatedly in Digiday several years ago. We were early to sound the alarm on the clear conflict of interest of agencies funneling client money to high-margin trading desks, which were acting as vendors. We wondered how major holding companies could gain more shares in vendors based on the level of client dollars pushed into those vendors. And, most of all, we questioned how agencies could truly be agents when they were also arbitrageurs of media. At the time, we were often accused of being “haters,” even to the point of facing a lawsuit threat, and frankly nobody much cared because the money wasn’t that big, all things considered. All clients cared about was looking good to their bosses by showing they were cutting costs, especially around silly things like “non-working media,” also known as paying people to build their brands.
While much of the focus around the ANA report has centered on agencies, it takes two to tango. (Three if you include the ad tech vendors all too happy to pay to play so long as they got a cut of the action.) Clients might act scandalized by the findings of the report — gambling in Casablanca?! — but the truth comes on page 50, when an ANA investigator highlights “client pricing pressure” as a major tributary to the media cesspool. And that is, in fact, the driving factor in all this. Under fire from procurement offices, clients have focused solely on driving down agency fees to near zero margins. Is it really any surprise that agencies found other ways to make money? Everybody’s got bills to pay. Clients were at best short-sighted, incompetent and negligent. More often, they were complicit.
Years ago, during a confidential meeting in which agency double-dealing came up, a source summed it up for me: “This is a conspiracy, not fraud.” He meant that everybody was in on it. Vendors will pay rebates for business every day of the week, twice on Sunday. Agencies, which have been declared “dead” approximately 15,000 times, will find a way to make margins. And clients get to go back to their CFOs and show off how they’ve lowered agency fees. Everybody wins — well, except for those not in on the rigged game.
There’s only one obvious solution to all this, and it’s quite simple but hard: trust. That doesn’t mean blind trust — transparency is needed across the board — but that clients need to re-establish a collaborative relationship with agencies in order to make sure these agencies truly act as agents. “This never would have happened if clients didn’t clear out any way for agencies to make money,” sighed one ad tech executive after the report came out. “Maybe we can move on and build something better.”
If you enjoyed this sneak peek at the programmatic issue of Pulse Magazine, get your yearly subscription here.