Commentary

Publicis, Omnicom Downplay the Whole Agency Rebate Thing

by Richard Whitman , Columnist, April 21, 2015

The notion (accusation?) that ad agencies take kickbacks in the form of lower ad rates, cash or free ad space in exchange for more media budget is not a new thing. And it's not just a few weeks old, either, when former MediaCom exec Jon Mandel made news telling a seemingly shocked world that, OMG, media sellers reward media buyers for increased spending. This practice has been going on since before anyone had heard of Madonna.

Anyway, the topic arose again Tuesday during a Publicis Groupe earnings call during which Maurice Levy said: “We are not suffering at all from this kickback situation. Most of our clients know exactly what our practices are. They know that we are extremely rigorous and that we are playing by the rules. So we are suffering as an industry because there has been a lot of noise which has been made by a former media commentary.”

In an Omnicom earnings call earlier that day, Omnicom Media Group CEO Daryl Simm said: “Our media agencies in the U.S. don’t seek rebates, and the U.S. of course is not a rebate-based marketplace from a negotiation standpoint. So in terms of our media agency clients in the U.S., they receive all the value that gets negotiated on their behalf.”

Pivotal Research Analyst Brian Wieser isn't buying the defensive statements and said: “There remains some inconsistencies as to what marketers perceive and what vendors know about the nature of rebates. The statements today and what we’ll hear from WPP and Interpublic won’t cause this issue to go away anytime soon.”

And, you know what -- he's probably right. Because anytime there are negotiations, there's bound to be a little grease applied to the situation in order to make everything move smoothly across the two sides of the table

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2 comments about "Publicis, Omnicom Downplay the Whole Agency Rebate Thing".

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Andrew Walmsley from Various, April 22, 2015 at 9:33 a.m.
The reality is that the 'poor exploited client' story doesn't stand up. If I bought a 40in TV in the pub for £50, the police would justly accuse me of knowingly receiving stolen goods, and I find it hard to believe that those clients with rock-bottom fees believe that's how the agency earns its money. Five minutes with the back of a fag packet should suffice....

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Ed Papazian from Media Dynamics Inc, April 22, 2015 at 10:49 a.m.

Many clients love to berate their agencies when being wined and dined by media reps for not being innovative or willing to try new media----especially the rep's medium. This creates the impression that the client is some kind of innocent, unwitting dupe who is led into decisions---such as using a lot of TV----by agencies who have ulterior motives ( that old canard, TV is less costly to buy, hence more profitable to handle ) when, in fact, the client dictates almost all of these decisions and the agency mainly executes---except in the "creative" area, of course. In reality, the client signs off on everything of any consequence that an agency does in its behalf. This includes any "special" fees the agency earns for administrating ----some might say "brokering" ----some of the big agency-media deals that are so widely publicized. In theory, these pacts enable the individual client to share in the extra "volume discounts" that are negotiated by the agency. It's hard to believe that all of this isn't explained by an honest agency to the appropriate parties at their clients and approval obtained. Whether others in the client organization----such as brand managers, for example--- are informed or understand the workings of the "deal" is another matter.