Lack of Trading Transparency Heightens Agency-Advertiser Tensions

by Steve McClellan, Apr 12, 2012, 9:00 AM

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A new study from the World Federation of Advertisers and Europe’s Festival of Media, the trade show organizer, illustrates continuing tensions within marketer-agency relationships. The study, which quizzed both advertisers and agencies, concludes that most marketers believe that agency trading desks -- used to buy various forms of digital media -- are a “threat to transparency." They make it harder for clients to understand the true cost of the media they are purchasing.

However, most of the agencies polled disagreed.

The trading desk issue is just one area of contention between the two sides. Disagreements were also shown to exist on issues related to the procurement process and rebates.

The survey polled 70 executives from multinational marketers and ad planning and buying shops. Its completion comes less than a week before the start of the Festival of Media’s Global Conference in Montreux, Switzerland, April 15-17, where additional findings from the study will be disclosed and debated.

Nearly 85% of the marketers surveyed indicated that they believed agency trading desks provided less clarity about the cost of media. But 91% of the agency respondents disagreed, signaling the disconnect that exists on the issue between the two sides.

“Advertisers want improved transparency both in existing areas of media buying and also in the new digital tools and platforms being established,” stated Stephan Loerke, WFA managing director.

Both sides, for the most part, agreed on one thing: Advertisers have the right to know the actual costs of time or space charged by media owners, either directly to clients or to agencies acting on their behalf. All of the advertisers agreed that was the case, while 91% of agencies agreed.

The procurement process remains a bone of contention between the two sides. While over 90% of the marketers surveyed said procurement helps improve transparency in media buying, only 64% of agencies agreed.

And media rebates -- kickbacks from media owners to buyers doing large volumes of business -- continue to be a sore spot, albeit outside of the U.S., where their use is not widespread.

More than three-quarters of advertisers polled cited media rebates as the biggest stumbling block to full transparency in the media-buying sector. Most clients feel that 100% of any rebate should be passed back to the advertiser. Problems arise when agencies don’t disclose and refund to clients the full value of rebates.

An earlier WFA study identified the Asia-Pacific region, as well as Germany and Spain, as markets where advertisers believe that agencies tend to pocket rebates without telling clients.

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