In the latest Mad Reality Check column, Mark Leone, partner at MadClarity, argues that while the NSW Government’s move to ban principal media deals might look like a win for transparency, it leaves a much bigger loophole wide open – and one that agencies have every incentive to exploit.
Recent news about the upcoming NSW Government’s $82 million Media Agency Review has stirred the pot again. As with all stories related to principal media, much has been said in a short period of time… and then things will all go back to normal in a few days. Everyone will carry on as though it never happened.
For the few who haven’t heard about it yet, the NSW Government is taking a strong stance on forbidding the successful agency to partake in principal media arrangements on their behalf. Much to the surprise of some commentators, many advertisers already have similar clauses in their own agency contracts.
There is one problem… that doesn’t protect marketers as much as you would hope.
Principal media is lucrative for agencies. An agency’s earning potential is capped only by their ability to acquire the inventory and finding someone to buy it. How much they make on the deal is up to them.
The big guys don’t have a problem with either side of this equation.
There is always a naive advertiser to buy the media, or one with a nose for a deal. They will see it as win-win, even if they have already lost in the long run. When the stakes are this high, agencies will find a way.
Acquiring the inventory is no problem either. Given the market dynamics at play, the big agencies get what they want, even if they would like a little more. Ask any media vendor what happens when you suggest you won’t comply.
Big spending advertisers are used as the carrot. They may not be the end target for the sale, but they are central to acquiring the inventory to on-sell – not reaping the benefits of their hefty media spend, but a source of leverage for the agency.
That’s the problem… you are damned if you do and damned if you don’t.
Clauses forbidding the agency to make a margin on media sold to them, do not prevent the agency using the clout from large spending advertisers in acquiring the inventory to on-sell to others. And even if they did, it would be impossible to police. The good ones won’t leave the crumbs anywhere you can see.
Don’t take this the wrong way, the NSW Government is right to take this stance. But it won’t solve the problem. It is not as hardline a stance as some will suggest. Unless all advertisers take this stance – and they won’t – the benefits continue to be there. Agencies will find someone to buy the benefits of an advertiser’s deal – with the proceeds, of course, going to the agency.
Like any good scandal, the outrage will last a few days. It will be front page news. And then when the dust settles, we are left with the same few wielding power.
Without industry wide acceptance or even legislation forbidding the on-selling of media by agencies, where they run the risk of losing accreditation or worse, this circus will continue. There will be no shortage of clowns.
