March 09, 2015

Agencies Cheating Clients, Says Former Mediacom CEO. No Shit, Says Me.

Almost a year ago I wrote a piece called The Ad Industry Is The Web's Lapdog. In it I said...
"One of the important responsibilities of the advertising industry is to be an 'honest broker' between our clients and the media. We have failed miserably...The ad industry has become the web's lapdog...becoming a de facto sales arm for the online ad industry. Self-interest has come into conflict with responsibility. Guess what's winning?"
A few weeks before that I wrote...
"They (the agencies) buy online ad space at one price and then sell it to their clients at another price...As far as I can tell, this is clearly a conflict of interest. But somehow the agencies have convinced some dumbass clients that this is perfectly okay."
Well, in a huge surprise to absolutely no one with a functioning brain, The Wall Street Journal reported last week that agency media buying practices are corrupt...
"Ad agencies are facing growing scrutiny regarding the transparency of their practices and their compensation. Marketers say they’re increasingly worried agencies are allocating ad dollars in ways that best suit their own businesses, as opposed to those of their clients."
Golly gee. I am just gobsmacked.

The Journal article pays particular attention to rebates and other forms of kickbacks -- oops, sorry, I mean "arrangements" -- but former Mediacom (part of WPP) CEO Jon Mandel says...
“There are many different facets of’s not every agency, but each agency that does it does it differently.”
While I believe there's hanky-panky going on across the media industry, I suspect it's worst in digital. The bullshit machine that is the online ad industry and their cozy pals in the global agency business -- enabled by astoundingly clueless CMOs -- have been having a big ol' fiesta at the expense of dumbshit marketers who have no idea what they're buying or what they're paying.

As I wrote almost 2 years ago...
"The display ad industry is crooked. Agencies are greedy. Clients are clueless. Watching these clowns is the best show in town."
Just for the record, here is some stuff I've written about this suddenly hot topic in the past few years. The same information was available to anyone who cared enough to seek it out.

December 8, 2014
"I spent over forty years in the advertising business, and in that time I never saw anything like the corruption and double-dealing that is currently being perpetrated..."
January 14, 2015
"This type and level of corruption has never existed before in the ad business."
October 15, 2014
"This will never change as long as brain-dead advertisers keep feeding the fraud machine."
April 29, 2013
"When you take a gullible industry that has acted in an irresponsible and foolhardy manner to sell snake oil to its clients, add to that some very sophisticated crooks who are way ahead of the naive buyers and sellers of ads, and top it off with indecipherable metrics that are intentionally designed to confuse and mislead, you have yourself a very toxic blend."
September 23, 2013
"There is clearly a substantial amount of criminal and deceitful activity going on."
September 16, 2013
"When corporate management finally figures out how their money is being pissed away, CMO heads will roll and agencies will be fired."
May 6, 2014
"...they are so dumb and so mesmerized by the bullshit of their agencies and the online advertising crowd that they don't understand how deeply and vigorously they're being screwed."
November 14, 2013
"It's a rotten, dirty game and ignorant advertisers are getting skinned alive....The amazing thing is that no one's been arrested or fired."
June 7, 2103
" holding companies...'trading desks' are buying online media at one price, marking it up, and selling it to their clients at a higher price. The justification? They're 'adding value.' How's that for a laugh?... Soon enough someone big, smart and influential is going to realize what's going on and all hell will break loose."
And wouldn't that be fun to watch?

More on this here, and here.


denTarthurdent said...

November and June 2103? You don't reckon this is going to end any time soon, then? ;-)

Kate Richardson said...

This is not just the domain of digital spending, it affects all types of media buys.

bob hoffman said...

Undoubtedly, but I suspect the worst of online.

Ray said...

I thought you were going to add the word "bullshit" to every title post? This would've been appropriate.

Kate Richardson said...

and it ain't just the U.S

Charlotte said...

And WPP posted record profits in 2014. Hmm.

Brian Jacobs said...

This has been going on for years and years in all forms of media (although, yes digital is worst). The recent fuss is because Jon Mandel has pointed out it also goes on in the good old US of A. Who would have thought it? For poor sad media people like me you can read more about this latest episode here:

bob hoffman said...

Hi Brian,

Yes, I linked to your post. Check the links below my post.

macgrunt said...

"October 15, 2015" : "November 14, 2103" ?? — wow, you're quoting yourself from the future now? — cool.

bob hoffman said...

I just have a feeling I'm going to write those things. Thanks, corrected

LeShann said...

And you're probably wrong. As a matter of fact the worse issues happen with very large spend touchpoints - and right now it's still rarely digital for big spending clients. Media agencies were making a lot more (and more easily) money in the golden age of traditional media. Practices have been audited and so on, and clients have tightened the belt substantially. I'm sure there are still issues, but the only area that remains tricky is programmatic buying (which you hate I know), but this is an overall industry issue, not just a media agency issue.

The reason digital is put forward more sometimes by agencies is simply because it is suicidal to not do - the discourse on digital is so prevalent that too many clients will kill you on the spot for not bringing it. It is also because digital is invoiced at a different rate usually. And to be fair, buying in digital nowadays includes a lot more than just sending your media plan and ad copy to the publisher, it usually involves negotiation and project management on the editorial parts as well. I have seen large clients on which money is lost on the digital part, and TV remains the money maker.

I have only been in the media business for 2 years, but from what I can tell it was a lot more relaxed 15 years ago when they only need to sorted a TV and print plan than it is now...

Brian Jacobs said...

I'm afraid you're incorrect. I've worked in and run media agencies for many years (about 35, sadly!). The margins the trading desks in particular make on digital trading is far in excess of what was delivered in the 'old' days of TV, press etc.

LeShann said...

You have more experience than i do, but to clarify I'm not just talking about margins on the trading here, but of all the under the table aspects that media agencies were notorious for. And I have never had to recommend a digital channel for financial reasons or prior agreements. It is still often more profitable to book a large tv plan that requires little work and follow up vs a higher fee digital plan where you have to sink a lot of work in.

richsiegel said...

"No raises for anyone."

Brian Jacobs said...

'Margins' includes all of the under the table aspects generated by media agencies of which their clients were and are at best only partially aware. The point of time spent on (say) TV v (say) digital is sort-of true, but actually in many markets buying TV was a pretty work-intensive process undertaken by fairly few people. The programmatic processes used today reduce the human work-load in booking digital activity and thus improve efficiencies. As to you never being instructed to follow a certain path in your plan - I'm not sure where you work, and in which market but I can assure you that there are many examples of planners adjusting plans at the behest of their traders. Plus - to be clear, the un-transparent activities are not confined to the past. The details have become more sophisticated and harder to spot but the behaviours unfortunately persist.

David Rasho said...

I was new to the industry when I first encountered this
example: It was so crazy to me is that they made this
media commitment as part of their purchase agreement. Rather than throw MSFT
more cash for Razorfish and then allocate client budgets "optimally",
they pre-committed what seemingly had to be "extra" spend toward MSFT
properties. Couldn't believe clients let it fly but maybe they didn't make the
connection as to why msn partnerships were being promoted so heavily by the media agency...