FirmDecisions warns two thirds of advertisers are not getting their share of ‘value banks’
Brocklehurst: “There are media credits being held in the millions of dollars”
A review of more 300 global clients has shown two out of three advertisers surveyed did not have contracts in place to get their full entitlement of media rebates, often referred to as ‘value banks’.
While the FirmDecisions review of 300 advertisers focused on contracts across Western Europe, the USA and the Middle East the company’s Australian managing director David Brocklehurst told Mumbrella he expected the results to be mirrored here among major global brands.
“We would expect it to be echoed in what we are seeing in Asia-Pacific, particularly with the lack of transparency in the financial records,” said Brocklehurst.
The findings come at a time of increased global attention on media rebates, credits free space, and Agency Volume Bonuses (AVBs). Last year the US the advertiser’s association the ANA hired FirmDecisions and K2 Intelligence, a firm which uses former FBI agents as investigators, to examine allegations that undisclosed rebates are influencing media agencies and not being paid back to marketers.
FirmDecisions noted in its survey results that in 59% of audits the full bonuses and rebates, typically referred to in this market as value banks, were not being paid back due to insufficient or incomplete clauses in the agency-client contract.
The analysis also showed that in 73% of cases the audit identified rebates which the agency had not returned to the client.
The Advertiser/Media Agency Contract Gap Click to enlarge
Brocklehurst noted that part of the problem was marketers were unaware that they were entitled to the value bank credits/inventory and in many cases even if they were aware of it they were unable to demonstrate their contractual right to receive them.
“There are media credits being held in the millions of dollars,” said Brocklehurst. “I think knowledge is a big factor in this. A lot of clients don’t know about this or if they do they struggle to get their entitlements. A lot of marketers and even media agency people don’t know about this because it happens down in the engine room.”
The FirmDecisions analysis added that 29% of advertisers do not have a signed contract with their media agencies, while among those who do have a signed contract 32% had what the firm deemed “insufficient audit rights” meaning the marketing team would often struggle to verify if their media agencies had bought inventory as reported.
In Australia, value banks hit the headlines last year after GroupM became the first media agency group locally to admit to the practice of running value banks in the wake of the wider misreporting scandal which hit Mediacom last year.
Dentsu Aegis, IPG Mediabrands, Omnicom and Publicis Media have all refused to publicly comment on whether they have value banks and what their policies are in this area.
Related content:
- What your media agency might not be telling you
- Mediacom audit: Media agency ‘value banks’ move into the spotlight
- MFA launches ‘transparency framework’ on rebates, value banks and agency trading desks
- The questions clients & agencies should ask about the MFA transparency framework
Despite this ongoing refusal to comment locally, the industry body representing media agencies, the Media Federation of Australia (MFA), last year quietly issued a new “transparency framework” which was designed to govern how industry interacts with clients on hot-button issues such as agency rebates and commissions.
Those guidelines for the first time addressed the issue of value banks stating: “Where value banks exist they are used at the discretion of the agency or the agency holding company and in accordance with the clients’ contract. Value banks are defined as space, time, impressions, awarded free of charge by media owners to agencies as a reward for volume commitments”.
The issue of transparency in agency and client relationships will come under the microscope in coming days as the ANA holds an Advertising Financial Management conference in Boca Raton, Florida. Mumbrella will covering relevant sessions from the event.
Nic Christensen
No surprises here…..
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Oh dear, you don’t need FBI agents to work out that high double digit growth in Facebook adspend (and in years past, triple digital growth in Google adspend) is directly correlated with double digit growth in agency rebates. Local publishers can’t compete. A correction is imminent.
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Its interesting that apart from GroupM,
“Dentsu Aegis, IPG Mediabrands, Omnicom and Publicis Media have all refused to publicly comment on whether they have value banks and what their policies are in this area”
hmm
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I wonder what happens to all of the ‘value’ earned by an advertiser when they leave an agency with a value bank?
I can’t imagine that Mediacom would have packaged up the many millions earned by a big account like the State Government of NSW and forwarded it on to the client’s new agency can you?
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