Media agencies: fraud, concealment and lack of transparency

The list of misconduct found in the ANA report reads like an audit nightmare. Fraud is part of daily business: embezzled free media, misappropriated discounts and sales bonuses disguised as consideration for dubious services. These services, which are of little or no benefit to the media companies and are usually massively overpriced or not provided at all, are intended to conceal the kickbacks.Agencies become marketersMarketing your own agency or holding products is an extremely lucrative field of activity. According to the K2 report, the return on media investment increases to between 30 percent and 90 percent (instead of the usual two to three percent fee). This explains, on the one hand, the high returns that advertising holding companies report every year and, on the other hand, the insistence with which such agency/holding products are pushed into client media plans by agencies, turning the consultant into a marketer and the client media budget into a self-service counter. The latest variant: the agency holding company buys stakes in media companies such as an online provider or a demand-side platform (DSP) and forces its subsidiary agencies to divert as many client budgets as possible to them.Different perceptions of customer serviceSurveys of agency employees and bosses show that the understanding of roles in agencies is very different. While some feel committed to the client and want to fully represent their interests, many see their role as respecting what has been contractually agreed, but also pursuing their own or the agency owners' profit targets. The fact that this often conflicts with the client's interests is accepted, and no significant difference between network and independent agencies was found. Even independent and owner-managed agencies sometimes act in a non-transparent manner. Lucrative business models spread quickly across national borders.A systematic approach to higher returns - also in SwitzerlandIt would be naïve to assume that the kickback practices uncovered are only used in the USA. The same agencies and networks are also active in Switzerland and are adapting successful concepts locally, and in Germany, the specialist magazine Werbung & Verkaufen ran a cover story (W&V No. 30/2015) almost exactly a year ago on the machinations of media agencies and identified similar practices. Complaints from advertising clients and information from the ranks of Swiss media and marketers also confirm this situation in Switzerland, where the SWA has been calling for more transparency in the media business for years and supports its members in agency management. With the "SWA Code of Conduct" published two years ago, a clear position reference was also made to media agencies and providers.Advertising clients need more media know-howMedia management is becoming increasingly complex for advertising clients and is subject to constant change. The SWA therefore advises its members:- To continuously strengthen and expand their own company's media know-how.- To periodically review and adapt media agency contracts, if necessary with the involvement of specialists.- To introduce media controlling for media plans, with an internal dual-control principle or an independent media consultant.- To regularly demand transparency from your agencies regarding their participations in the media business. Do you demand regular transparency from your agencies about their media business investments, the declaration of all reimbursements, freespaces, etc.- Does Switzerland now also need a report on transparency in the media business? The SWA believes that this is not urgent at present and recommends that all clients use the SWA Code of Conduct. The SWA will also examine whether a report on transparency in the media business should be commissioned at a later date.Authors: Sandro Prezzi, Media Expert (Prezzimedia.ch) and Roland Ehrler, Director SWA