Is media agency transparency a global issue or a local one?

Darren Woolley

Darren Woolley is Founder and MD of TrinityP3, an independent strategic marketing management consultancy that assists marketers, advertisers and procurement with agency search and selection, agency engagement and alignment and agency monitoring and benchmarking. With his background as an analytical scientist and creative problem solver, Darren brings unique insights and learnings to the marketing process. He is considered a global thought leader on agency remuneration, search and selection and relationship optimisation.

The recent controversy around buying irregularities at MediaCom Sydney left many convinced it was a one-off incident, and that we should all get back to business as usual.

This is exactly what the media agencies and their holding company owners would have you believe. They could even go so far as to reject any suggestion that this problem is more common than we think, because they have no interest in dealing with the underlying condition that caused this mess in the first place.

In saying that, this problem is not one that can be solved by media agencies alone. Everyone involved has had a part to play in creating this problem so everybody needs to share in the responsibility of making this right.

Who controls these local entities?

Let’s face it, AVBs and rebates are a worldwide practice. MediaCom Sydney is a regional entity of a global parent company and there are more than a few of these global parents in this industry. The global and regional hubs, where P&L from local markets feed into, control these local entities so it would be a fair assumption that revenue streams and P&L structures are standardised to some degree across the board.

That said, the cultures in local markets, along with the differing degrees of standard business practices and corporate governance, may be worthy of some consideration. There is the appearance of high levels of due diligence with some and nothing at all with others.

Nonetheless, this is still a global problem. However, if we were talking about China or India, how much would this problem resonate if media agencies carried on this way?

There have already been some US heavyweights talking about this, which no doubt alarmed the largest market in the western world. Talk was such that Pivotal Research, a leading investment advisor, has seen fit to downgrade this category because of this controversy.

Who regulates the Australian market?

Certainly, regulation in the Australian market is lacking. Since this situation has surfaced, media auditors have confessed their reliance on agencies for data. There has been denials of a problem from the self-funded industry groups that manage and control self-regulation. Then there are advertisers too afraid to say anything in case their limited control over the vast amounts of money invested in media is revealed.

Unfortunately, many markets are in the same boat across the region, providing an even more fertile environment for this type of behaviour.

If it wasn’t for the procurement process of systematically driving reductions into agency compensation agreements, then this would not have been an issue. This outdated compensation structure pays for the cost of service provision, instead of the true value the media investment delivers to the advertiser. This cost, which has successfully been reduced by procurement, no longer makes up for the increasing complexity of media agency operations.

The reduction in fees has seen media agencies cutting costs by becoming increasingly reliant on their lower cost junior staff members. A media agency is often a pressurised environment. Relying on junior staff members without sufficient training can lead to careless decisions and shoddy work practices.

It’s worth remembering this entire thing happened because a few post-analysis reports were fluffed up by some buyers. All the rest – the debate about kick-backs, AVBs, value backs and so on – has been brought about by the press blow-up and John Steedman’s decision to make some more admissions.

The impact of commoditising conventional media agency services

Because the commoditisation of conventional media agency services has driven down long-established revenue streams, media agencies have had to stay ahead of the curve by diversifying. In future-proofing any business, diversifying services is natural but the commoditisation of core services has, to some extent, forced their hand.

If you think I’m suggesting that had agencies been paid better from the outset, AVBs or arbitrage wouldn’t have happened, you’d be mistaken. I am simply stating that shaping a transparent, value-based service model has not been helped by commoditisation. At the root of all of the problems that have surfaced since the MediaCom issue, is this mounting lack of transparency.

Based on my own experience, there is an increase in the number of advertisers who exhibit a lack of basic understanding around how media agencies actually operate. All things considered, this is simply not a very good place for any of us to be in.

Media industry regulation

Globally, this is a multi-billion dollar industry that deserves an appropriate level of regulation. Establishing an independent and global audit and code of ethics, something like Sarbanes-Oxley compliance, may be a step in the right direction and provide a consistent and global approach to transparency and accountability.

Of course, this would need to be enforced and regulated by an entity not funded by media agencies. It would require the setup of a global and independently funded body that would drive and oversee it to make sure media agencies, their trading entities and advertisers, deliver the required level of accountability and transparency across markets and within categories.

Marketers would be required to undertake independent and meticulous financial audits of their media agencies. And by that, we don’t mean media rate audits, which are what the industry is currently passing off as audits.

The issue of agency compensation

There also needs to be a change in the way agencies are remunerated. Advertisers should take the focus off costs and reward, and remunerate their agencies for the value of delivered media. The value might be media that is procured on behalf of the advertiser, or more importantly, it could be the value delivered by the media itself such as revenue, market share or sales.

At the end of the day, media agency staff and their clients must improve their understanding of the media value chain and also receive training on how value is created, delivered and lost.

And for advertisers, it is not enough to expect media agencies to make these changes. In a lot of ways, media agencies have basically conformed to the cost demands of advertisers. In the process, they have progressively gained more value from media owners.

Is it such a big ask that an appropriate level of regulation be put in place? After all, this is a multi-billion dollar global industry.

Tags: mediacom, agency relationships, media agency

Show Comments

Featured Whitepapers

State of the CMO 2019

CMO’s State of the CMO is an annual industry research initiative aimed at understanding how ...

More whitepapers

Blog Posts

Kindness matters in business: why the nice guys finish first

A recent 1000-page Royal Commission report on misconduct in Australia’s financial sector revealed hair-raising stories of excessive commissions, rampant mis-selling and charges levied on the dead. So how do you stop a bank from misleading its customers?

Nick Liddell

Director of Consulting, The Clearing

Myer vs. David Jones: Do cyborgs win?

As two of Australia’s stalwart brands in Myer and David Jones continue their respective journeys through troubled waters, it heralds yet another sign of the shifting business environment and shift towards an experience economy.

Tom Uhlhorn

Founder and strategy director, Tiny CX

Cannes Part 2: How Adidas is maximising digital while articulating culture

“Retail is not dead”. This was the bold statement made by, Michael Treff, president of Adidas’ digital creative agency, Code and Theory, at this year’s Cannes Lion festival of creativity.

Nickie Scriven

CEO, Zenith

Back in 1968 Holden began an appeal to customers who have an interest in competition. It did this with the introduction of the HK GTS 32...

Ben Tate

Marketing professor: For Holden, brand nostalgia ain’t what it used to be

Read more

Your blog post is really good and informative. Thanks for taking time to provide us this useful information with us.Auto wrapping uaeADF ...

Yes Machinery

Image intelligence:10 must-see infographics for marketers

Read more

A debt of gratitude is in order for sharing this marvelous information.I have taken in numerous things from your post

digitech Classes

Lumen CMO strives to make the brand synonymous with anti-ageism

Read more


Djordje Milutinovich

​Understanding customer experience from the inside out

Read more


Ian Charles Carter

4 creative skills that will be useful forever - Business leadership - CMO Australia

Read more

Latest Podcast

More podcasts

Sign in