October 22, 2015

Dead Agencies Walking

Over 2 1/2 years ago, in a piece entitled "Time To Clean Out The Stables" I called for an investigation of the advertising industry's media buying practices.
"Not only are online advertisers getting screwed by crooks, some of them are also getting screwed by their agencies... This industry is in desperate need of investigation.
It seems that advertisers have finally woken up.

In the past week, the Association of National Advertisers (ANA) has announced an investigation into the media buying practices of ad agencies. The investigations will go beyond online practices and look at all media.

There are a number of interesting things to note about these investigations:

First, the ANA has hired two separate companies to conduct its investigation. One of which employs former FBI agents. These guys don't fuck around.

According to the Financial Times, the ANA's investigation will...
"...probe the “non-transparent behaviour” of rebates, barter, arbitrage, dark pools, inventory management, global transactions, and supply chain media management."
This is just corporate fancy talk for agency kickbacks and undisclosed fees. And believe me, the industry is drowning in them.

According to The Wall Street Journal, a study done by Forrester Research and the ANA last year that interviewed high level marketing executives found that...
 "...more than half of those polled noted a high level of concern over the possibility that agencies may receive a rebate from the media seller."
Ad Age reports that ANA President-CEO Bob Liodice said the effort will go beyond rebates and include arbitrage of digital ad inventory.

What this means, as I said in my piece 2 1/2 years ago, is that agencies...
 "...buy online ad space at one price and then resell it to their clients at another price. And guess what? The price they sell it at is higher than the price they buy it at."
Second, previously the ANA had been working with the 4A's on a "Joint Media Transparency Taskforce" to develop a set of principles for "transparency" in the agency business. Between the lines, you can only assume that the ANA has to be pretty damn pissed off with the 4A's "Taskforce" if in the middle of this they are pulling out and starting to conduct their own investigation. Sounds very troublesome for the 4A's

Third, there are some big time agency executives shitting their pants right now. Under racketeering laws, some of the stuff that has been alleged is not just sleazy, it's illegal. And Federal Country Clubs have lousy wine cellars.

If the ANA investigation finds what I thoroughly expect it to find, this could be a very rough year ahead for the agency business.

There have been three major factors in the corruption of the agency industry over the past several years.

First is the transition of the agency business passing from the hands of craftspeople (copywriters, art directors, media people, research people, and account people) who actually worked in advertising, into the sweaty hands of financial wise guys, lawyers and accountants.

Second, has been the accumulation of far too much power in too few hands by the consolidation of the industry into a handful of grotesque corporate holding companies.

And finally is the pitiful acquiescence of the client community in allowing the hideous destruction of a once vibrant and creative industry into another corporate monstrosity.

This investigation is long overdue. It would be wonderful news if it was found that our leaders did nothing irregular or illegal.

But you can put me down as officially skeptical. I foresee months of "I said, he said" which will result in some small to middle size suckers taking the fall for the big guys. The big heads will hire high priced lawyers and will negotiate fat cat exit packages We can only hope that there are a few emails floating around that implicate the Sorrells and his ilk.

I used to tell my staff that when a client has confidence in you you can do anything. But once a client loses confidence you're dead.

This could be the year of dead agencies walking.

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