Media agency rebates: What marketers need to know (and do)

© Andriy Popov – 123RF.com

It alleges that there is wide-spread occurrence of “non-transparent” practices by media-buying agencies. You may have heard of the terms used – kick-backs, volume-deals or, more euphemistically, “media rebates”.

• Are some media-buying agency groups telling clients they negotiated the client a lesser discount whilst making behind-the-scenes arrangements with media owners for better discounts in the form of media agency rebates, which they aren’t passing on to their clients?
• Are some media-buying agency groups arranging different volume deals with media owners, and are they then nudging their clients’ advertising spend towards media owners, which benefit the agency’s rebate deal rather than the clients’ objectives?

The report, released on 7 June, follows statements made by former media-buying agency executives in public forums suggesting the practice. Pretty much everyone on the media-buying side of the industry will rightly say that this is old news, however it is new to marketers and new to clients and more importantly, this report is the first objective, client-side report – it’s based on facts and not rumours. And it’s scathing.

The report suggests that it’s all around the agency holding companies, not the actual agencies that one deals with on a daily basis. Whilst the advertiser is dealing with the agency of record (the media-buying brand one sees on a weekly basis), it’s the holding group of that agency, in the particular contract reviewed by the ANA report, which is negotiating a volume deal in the background. If an astute marketer asks the agency of record for a copy of the invoices from the media owner and compares them to the media schedules they’ve been presented, the ‘discount’ reflected on their media schedule will match the invoice. What they won’t see, however, is the rebate paid from the media owner to the agency of record’s holding company (and never passed on to the client).

At this point, I might suggest that advertisers don’t usually want their suppliers to be driven so hard on price that they go out of business, so most reasonable clients are quite comfortable with the advertising agencies and media agencies making their fair share of revenue. What, I suspect, isn’t up for bargaining are two promises that every media-buying agency makes:

1. That the media choices are made completely objectively; and
2. That discounts negotiated for client are the best discounts possible.

Now, if the media-buying agency (as in ANA report) is both pushing for media choices to be made which benefit its financial arrangements with media owners and not its clients, and is not really passing over the real discount to client in the form of keeping rebates, then an advertiser has (as have the US advertisers) full right to be very alarmed.

What has emerged from the report and the ensuing discussion are some key steps every marketer should be taking, right now:

1. Have a good look at your agency contract. Does it clearly state that all discounts negotiated will be passed to client? Does it clearly state that the agency will not engage in arrangements that will lead to one medium or one media owner being favoured over another to your detriment?
2. Have a contact with the holding company of your agency. If your agency is part of a holding company and you’re pretty sure your agency is on your side but you don’t know or haven’t met the people in the holding company who really do the media deals, get to know them and contract with them.
3. Get to know your media owners. Make a list of the top 10 media owners with whom your media agency invests your advertising spend. Don’t just meet them for the next free trip to the World Cup or a photo op with a Kardashian. Get to know them. Discuss details. Discuss prices, discuss payment terms. Get your own volume rebates.

*Note that Bizcommunity staff and management do not necessarily share the views of its contributors - the opinions and statements expressed herein are solely those of the author.*