Commentary

With Frenemies Like These, Who Needs Auditors?

The backlash to Accenture’s announcement that it’s getting into the programmatic media-buying business surprised me. Not because Accenture is diversifying, but because some pundits see a problem with that.

The chief argument seems to be the most classic one: that you don’t want a fox counting the chickens in the henhouse. Or, as MediaCom Worldwide Chairman-CEO Stephen Allan posited in a post on LinkedIn: “They can’t police transparency and measure performance for clients while also competing with those of us who provide media services.”

Allan’s argument is that auditing is one of the services Accenture provides as a classic management consultant. I suppose that’s a valid argument if Accenture were retained to audit its own programmatic media buys, but I have a feeling that’s not what it or its clients have in mind. It’s simply a diversification play, because it has the expertise to diversify, and it’s no more of a conflict than a company like MediaCom sister unit Xaxis buying programmatic media and reselling it for a profit to its clients.

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The key with all of these relationships is that they are fully disclosed, not that a single entity can't provide a variety of services representing a variety of interests. And it’s only logical that consultants diversify into programmatic.

In his note downgrading WPP’s stock to “hold” this morning, Pivotal Research Group analyst Brian Wieser cites Accenture’s move -- along with an even more pervasive shift, client’s “in-housing” their own programmatic media-buying capabilities -- as one of the major threats potentially facing big agency holding companies like WPP.

A more pressing concern, he cites, is the kind of conflict of interest for agencies arbitraging, taking kickbacks or taking positions in the media they buy for their clients -- highlighted by this week’s launch of journalist and author Ken Auletta’s new book, “Frenemies.”  The book opens with former MediaCom chief Jon Mandel’s whistleblowing at an Association of National Advertisers’ conference, and examines the issue of media-buying and fee “transparency” in depth.

2 comments about "With Frenemies Like These, Who Needs Auditors?".
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  1. Alvin Silk from Harvard Business School, June 4, 2018 at 12:03 p.m.

    Questions for Mr. Allen: Does MediaCom serve "competing" clients? If so, what safeguards ("Chinese walls," etc.) do they employ against what kinds of conflicts of interests?

  2. Ed Papazian from Media Dynamics Inc, June 5, 2018 at 2:49 a.m.

    Joe, just to be clear, I believe that the "profit margins" referred to of 18% or slightly higher, are pre-tax profits. Also, I assume that they refer to the amount the agency gets to handle the buys not the total client spending. So, if an agency charges 1%for buying network TV, its agreed upon profit margin on that work might be 18-20% of 1%. Some people may think that the agencies are earning 18-20% of their billings as profits---they should be so lucky.

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