Malpractice and conflicts of interest common in programmatic, claims ex agency tech head
Media agencies are committing "malpractice" in how they manage their clients' advertising budgets and deliberately talking down the ability of digital campaigns to deliver, the former head of technology for IPG Mediabrands has claimed.
Hughes: Agencies have ‘orchestrated’ clients’ expectations
Media agencies are committing “malpractice” in how they manage their clients’ digital advertising budgets, and have undeclared financial conflicts of interest in the technology solutions they recommend, the former head of technology for one of Australia’s biggest media buying companies has claimed.
Andrew Hughes, who was head of technology for IPG Mediabrands until two years ago, has also claimed that agencies deliberately talk down the potential effectiveness of digital campaigns in order to manage client expectations.
His comments came as he announced the launch of a “full transparency and disclosure” business model for his consultancy Louder. The transparency will cover full disclosure of technology, media and services costs, fees and rebates.
Hughes pointed to whistleblowing around the world of media agency groups making profits of 60-70% on their programmatic practices.
Related: Mumbrella Podcast: How advertisers in the UK are cracking down on transparency issues
In a statement, Hughes wrote:
“Scrutiny needs extending to in-agency or in-vendor trading solutions, or performance publishers owned by agency groups that effectively operate without declaring media cost or margin to clients.
“It is time for this malpractice to end by only delivering fully accountable solutions to clients.”
With procurement teams and auditors now wise to most techniques used by agencies to bring in additional revenues in traditional media channels, recent years have seen global groups keen to insert themselves into the programmatic buying chain, which effectively allows them to buy online ads from publishers at one price and pass them along to clients at another.
Hughes also claims that where brands use their agencies for advice on the best technology solution, they are incentivised to recommend certain options.
He said: “On the technology front for both advertisers and publishers, it’s not much different, with specialists and consultants having alternative financial agendas for pushing particular solutions which cumulate in revenue share or financial incentives for recommending a vendor.
“All this hardly comes as a surprise with the same advisory firms being paid by the client for the strategy, and the subsequent delivery of services to put the recommended solutions live.
“Surprising is, if anything, the extent by which marketers underestimate their brand’s potential to deliver in digital – their expectations being carefully orchestrated by those advisors and agencies.”
In his comments, Hughes did not suggest he had seen such practices during his time at IPG Mediabrands.
Tim Burrowes
Linkedin
We all live in glass houses. It’s a bit rich of Louder to making these statements when they benefit from the largess provided by vendors like Adobe.
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@Richard Dirth,
Interesting point, unlike most other consulting businesses, Louder provide full transparency – in that if we receive ANY rebates from any vendor or supplier. It goes back to our clients as credit.
Part of our announcement actually mentions this if you are interested in reading more;
http://louder.com.au/about-us/news/transparency/
Thanks,
The Louder Team
When you say “We all live in glass houses.” you mean it’s all true?
Not all of us do it.
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In my experience Andrew knows more about this space than almost anyone else in this market. So his point of view will always be valid and informed.
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Be careful on that high horse Hughes, its a long way down.
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Excellent article Mr Hughes.
Very interesting read.
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@Harry, that comes across as a veiled threat to me – why are you so negative on a topic that, surely you as an advertising industry member, can agree is extremely rife with rip-offs, incompetency and misdirection?
It seems you may have something to gain by trying to silence the topic, would be very interested to know if you posted that comment with your IP address in mind.
@Andrew – I applaud you helping move us out of the dark ages of programmatic, one industry article at a time.
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Great to read Andrew’s interesting article, also great to see someone with talent not held back any longer by the lack of vision and leadership at Mediabrands.
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I remember Mr Hughes pushing Cadreon until the cows came home and had no issues with rebates. Interesting to see such a shift and positioning of agency model huh?
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I have not changed my position on transparency in 15 years. Transparency brings trust, with trust, comes action, with action one gets results.
My track record proves that I set up the first comprehensive digital measurement team to prove performance and accountability of digital channels when there was none. Including recruiting a team of experts, creating a robust product and gaining recognition from technology partners for that unrivalled capability. That team went on to deploy globally leading solutions and integrations oriented around measurement and accountability including; https://www.thinkwithgoogle.com/case-studies/au-kia-cross-channel-case-study.html which won an AMES award in 2014; http://www.ames.asia/winner/20.....-shortlist
On rebates – they are something that I have advocated being passed back to clients since my business in the UK – as far as 2001 when I ran one of the first Google’s UK approved search agencies where rebates went straight back to our clients. I did revenue share and pay per performance at the same time with other clients – providing value to enterprise clients who’s confidence was low in the emerging digital space.
I see a future in trading desks, as I always have, as programmatic is the future, but with a revised model of transparent trading – hence why we have created the trading frameworks that we announced yesterday.
So no. I don’t think a significant shift.
/y0z (responding from my personal account)
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I have worked under Andrew’s leadership and cannot question his passion for visibility and clarity around this subject.
However, I applaud the bravery in this strategy but not for trying to clean up the industry or giving back to brands, but for creating buzz about Andrew’s agency LOUDER. Bravo sir!
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Sour grapes eh? As an ex brand manager I am astounded at how ad agencies had little accountability for the budgets they gleefully ‘invested’ on my behalf. Which I was in turn accountable for. I’m looking forward to the industry being shaken up by this company!
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