Backwards Through The Glass

Remember all that fuss about media rebates and transparency? How naughty old network agencies were guilty of hanging on to benefits negotiated with their clients’ money? And how, no doubt following a charabanc ride to Damascus every one of them swore blind that they had put the bad old days behind them and were now focussed on charging their clients open and honest fees just like their role models the management consultancies?

Well, so much for all of that.

Last week, The Telegraph Media Group published its results for the year 2018.

As ‘Campaign’ reported: “Telegraph Media Group has disclosed for the first time in its annual accounts that it pays rebates to media agencies and clients.

“These rebates can take the form of cash payments, free advertising space or a mixture of both,” the accounts said.

“The company enters into agreements with advertising agencies and certain clients, which are subject to a minimum spend and typically include a commitment to deliver rebates to the agency or client based on the level and share of the spend over the contract period.”

The amount concerned? ‘Campaign’ don’t quote a number, but they previously reported that at The Mail £22m was set aside, so it seems likely that the Telegraph number is of the same order of magnitude.

And where did that money go? It would of course be truly scandalous, in the light of the agencies’ newly converted status to dealing transparently to suggest that it wasn’t returned to those whose volumes made the rebates possible – the clients.

No doubt major ‘Telegraph’ advertisers are checking even as I write to ensure that they got their fair share of the booty.

Meanwhile, in the land of the free, the transparent and the honest deal, AdAge reports from the frontline of the global Disney pitch, won by a combination of Publicis Media and Omnicom.

The suggestion within the story is that Disney were demanding / expecting what is coyly described as a ‘share shift’ from the winning agencies.

Here’s how this works. The prospect, as a media vendor calculates that a pitching agency generally commits a certain % of its clients’ budget to him, the prospect.

As a part of the pitch conversation, the prospect makes it clear that should the pitching agency win, the vendor will expect that % to increase by a certain number of share points.

Helpfully someone in the AdAge story suggested this was quite normal business practice: “..much like someone who has AT&T as a key client might use the company as his mobile provider even if Verizon provides better service in his neighborhood.”

Except of course it’s absolutely nothing like this at all.

The agency’s phone contract is negotiated by, and paid by the agency, with the agency’s own money. Spending with a certain vendor is negotiated by the agency using the clients’ money.

It may be contractually transparent for the agency to shift a % of funds towards the vendor, as long as the discount accruing was returned to all of those clients participating, all of whom would be in full knowledge of the arrangement.

But there are several points. First it is unlikely that any client would be asked if they favoured such a shift, which presumably would go against the agency’s well-worked planning considerations (if this was not the case then why would the agency be underspending with the vendor in the first place?).

Secondly, the odds on the client being rebated would be on the low side.

Third, if the agency’s prime role is to plan, and then buy the plan, the agency is acting in an opaque fashion by negotiating first, then shaping the plan around the deal.

But let’s look on the bright side. Maybe this was all a ploy by Disney, trying it on as a way to increase ad revenue through their properties by leveraging a pitch for their business. In other words, a crude attempt resisted by the pitching agencies.

Or maybe at least one of the winning agencies really wanted to win.

Who knows?

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