The topic has really blown up this week on both sides of the Atlantic. MediaPost has warned that kickback trickery could lead to jail time, and in the UK Marketing Weekpointed out that it's a grubby secret the advertising industry would rather not see aired.
For me, the real issue isn't just the money itself, it's about how decisions made on behalf of an advertisers are impacted by decisions that could be based around an agency's best interests, not theirs.
In other words, there is nothing inherently wrong in a media agency getting a rebate or a kickback for putting a load of business in the hands of a big media owner. Advertisers use buyers for their buying and planning brains, but also the fact that they buy in volume and so can get discounts. The murky water we then enter is how much the kickback is and whether the brand gets any of the equivalent of cash back. It's unlikely this happens in most cases, so brands may feel that media agencies are a bit like the guy at work who puts loads of huge expenses on a personal credit card to bag the air miles himself, rather than letting the company accrue them.
The truly muddy waters we then enter are a situation that all insiders are very accustomed to but rarely talk about. The rebates are built into contracts and are volume-dependent. So, you can clearly see what happens when a brand signs up for a campaign. The agency may need to put another million pounds through one media owner to earn the low rate and kick back it had previously negotiated. It's very tempting for them to use the new client's money to do this but, what if the media owner isn't the best fit for the advertiser?
We all come across this with financial advisers. Is the pension he or she is suggesting good for me, or them? Will I be their tenth sale this month that earns them a bonus with that supplier?
Advertisers have to ask themselves this when they look at their media agency. Have tv spots been chosen because they aid my agency, is most of my display going with one news group because of a deal I'm not aware of and am I favouring certain digital channels because that's where my agency gets the biggest kickback?
At some stage the rebate system will tempt any media agency to do what is right for its shareholders rather than the advertiser's best interests. Advertisers need to be on their guard and ask the very simple question of why a media owners seems to be favoured in a plan and whether the agency makes more money from that course of action than following another plan.
To give an example, one insider confided in me, the huge agency where they worked had a health client on board at the same time the agency had a massive deal with ITV. The health client was looking to explore Channel 4 opportunities around health programming, which seemed an obvious fit. They ended up advertising on ITV next to a talent show. Say no more!