Happy Anniversary, ANA Transparency Report (With an Assist from Gary Vaynerchuk)

June 7, 2019

By Bill Duggan

Today, June 7, marks the three year anniversary of the release of the ANA-commissioned report from K2 Intelligence, "An Independent Study of Media Transparency in the U.S. Advertising Industry."

One of the most important findings in that report was "evidence of a fundamental disconnect in the advertising industry regarding the basic nature of the advertiser-agency relationship." In general, advertisers expressed a belief that their agencies were duty-bound to act in their best interests. They also believed that this obligation, essentially a fiduciary duty, extends beyond the stated terms in their agency contracts. While some agency executives expressed similar beliefs, others told K2 that their relationship to advertisers was solely defined by the contract between the two parties.

K2 Intelligence found evidence of situations where media agencies sought to avoid explicit contract language in order to preserve their ability to retain various types of incentives. The K2 report also showed that many advertisers have contracts that are unsigned by the parties, contain ambiguous or "gray" areas and have not been adapted relative to the rapidly changing media landscape. Other findings revealed that many contracts contain opt-in agreements that limit advertisers' rights and have inadequate audit/review rights as well as inadequate enforcement of audit/review rights.

Candidly, marketers are overmatched by agencies in contract negotiations. A large holding company has visibility into literally hundreds of client/agency contracts. The average client knows their contract only (unless there is experience from a prior company). Agencies have client/agency contract specialists. Marketers have contract generalists. The agencies have the knowledge and the power in contract negotiations.

Earlier this year at the ANA Media Conference Gary Vaynerchuk voiced his opinion on client/agency contracts: "Holding companies were disproportionately smarter than brands over the last 30 years and it's not even close." Hear Vaynerchuk’s full remarks below (spoiler alert – the language is a bit salty).

The K2 report recommended that advertisers immediately and consistently re-examine all existing media agency contracts and meticulously review all terms and conditions. Some advertisers have heeded that advice but others haven't. We are in the process of finalizing a report on media agency compensation and one of the questions asked was, "Have you updated your media agency contract to address transparency issues around media rebates, discounts, AVBs, and other cost benefits the agency might receive from media sellers?" Sixty-nine percent have; amazingly, 31 percent have not. What are those guys thinking?

We've made it easy as Reed Smith, ANA's outside general counsel, has developed a media agency Master Media Planning and Buying Services Agreement which can be used by advertisers in developing their own agency agreement.

Advertisers are strongly encouraged to consider the guidance from K2 Intelligence, Reed Smith and Gary Vaynerchuk and review and update their agency contracts on a regular basis. Otherwise, run the risk of being outgunned by the "disproportionately smarter" holding companies.