The overdue debate the media industry needs to have

tim burrowes landscapeThe whole agency world can learn from Mediacom’s embarrassment over misreporting of campaign performance to clients, argues Mumbrella’s Tim Burrowes   

I’d only been editor for about four months when we were leaked a copy of a letter to the boss of a media agency.

“I want to make you a wealthy man,” wrote the managing director of a major newspaper group.

The letter confirmed what had been a long running industry rumour – media agencies who spent enough of their clients’ money in a particular direction were getting under-the-table payouts to do so.   

MediaWeek expressAfter a few days of legal tussles while they threatened to go to court to try to prevent us publishing, we splashed it across three pages. The boss argued in the story that the payment was simply to recognise that his agency was a prompt payer.

At the time (magazines were still a thing, back in 2003), it went off like a bomb across the British media agency community. People told me anecdotes of groups of colleagues standing in clusters sharing a copy of Media Week when it arrived that morning.

A decade on, the news that Mediacom had seen a dozen staff departures after misreporting campaign performances to clients, detonated a similar bomb. Only this time we were able to watch in real time as our breaking news email was opened and forwarded around the world.

The issues in both cases were different. But what the two cases have in common is that the three-way relationship between client, media agency and media owner went awry, and the problem went public.

So what was the long-term impact of that embarrassing story about that agency boss? I’ve just looked him up on LinkedIn. I see that his career has thrived in the years since.

And what will be the long term impact for those involved in the Mediacom saga? Not too much, I suspect. Acute embarrassment for a few more weeks, then we’ll all move on.

Not least because it looks very much like the misbehaviour at Mediacom was apparently motivated by something closer to laziness, not corruption.

And there are more lessons for the media agency world as a whole than there are for Mediacom in particular. I suspect that they were simply the unlucky ones who found their activities in the public domain.

A little credit, by the way: Mediacom could have tried to sweep this under the carpet. This only leaked out when the agency management became aware of a problem and staff were ousted. If they hadn’t been moved on, I doubt the story would have got out there.

And the agency has also shown a fair degree of transparency in briefing the trade press in what has happened in the audit since. Today’s brutal headlines ( “Media con” in the AFR among them) are as a result of the agency’s cooperation with the media.

At the same time though, the unpleasant facts remain that some clients were systematically misled about campaign performance, and Mediacom onsold cheap or free bonus inventory.

If something good comes out of this, it will be to start a genuine and wider debate in the industry about transparency, and the rules of engagement between client, agency and media owner. The debate needs to be about more than reporting protocols or value banks.

That may require the media agencies’ trade body the Media Federation – which has said almost nothing of substance about the whole issue thus far – to actually finally state a point of view or even set out some detailed standards.

There are two major, and related, problems currently faced by the industry.

First, it’s very hard for media agencies to be profitable simply by working to the ever-diminishing fee provided by clients. So that revenue has to come from somewhere else.

Second, too many agencies are closer to the media owners than they are to their own clients.

Agency bosses are routinely flown around the world by media companies to the big sporting events. Agency staff enjoy all sorts of hospitality from media owners – from lunch deliveries to booze to trips to concerts, to pinball machines and fridges full of booze. I know of at least one big media agency (not Mediacom) whose staff Christmas party took place on the rooftop terrace of a large radio group.

These are the same media agency bosses who are duty bound to make impartial decisions about where their clients’ media budgets are spent.

What is normal for the media agency world is completely outlawed in many other industries.

Back in the day, you can see why Naked found a niche by offering media neutral planning with those conflicts removed.

Yet it’s not always as cynical as it may sound. For many agency staff, they probably have more dealings with media owners than they do their own clients. So relationships get built up organically.

And those relationships are necessary. As a client, if your agency doesn’t have a good relationship with the big media owners, then you probably won’t get the best prices, or the premium adslots. It would take an exceptionally pious agency boss to turn down a junket with a TV network if they knew that their rival was going to be spending a couple of days bonding over cocktails.

With all of that, it’s easy enough to visualise how a junior staffer – not wishing to rock the boat and trigger an angry call from client to media owner demanding makegoods for a target not hit – might rewrite the target instead.

And the agency – media owner trading relationship will last for decades. The agency – client relationship usually won’t.

The issue of value banks has come up as part of the audit. It appears to be relatively common practice in the industry that media owners give free advertising inventory based on getting a certain volume of business.

At least this is finally in the public domain.

Where it becomes problematic is the question of whether that value bank should belong to the agency which has aggregated a number of clients to deliver the volume, or to the clients.

Yet these are the same clients who, when they shift business, often go to the agency which offers the best deal. And sometimes that includes promises that can only be kept if an agency has a value bank to dip into.

Back in 2003, I found myself writing this in a Media Week editorial: “There are also questions that advertisers must ask themselves. One reason agencies find themselves having to make secret arrangements is that the economics of the industry just do not work. If advertisers do not start paying a realistic amount for the top notch insight that good media planning and strategy provides, then agencies will be forced to go on seeking other revenue streams.”

Over the weekend, the former CEO of Mediacom in the US launched into a blistering critique of the media agency – media owner relationship. According to AdAge, Jon Mandel asked: “”Have you ever wondered why fees to agencies have gone down and yet the declared profits to these agencies are up?”

It’s a good question.

And it needs to be one answered by the whole industry.

Over to you, Media Federation.

  • Tim Burrowes is content director of Mumbrella

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