Media Agency Compensation Practices: New ANA Report

By Bill Duggan

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This week ANA released a new report, "Media Agency Compensation Practices." Throughout my tenure at ANA (now more than 19 years!), agency compensation has always been an issue of high interest among our client-side marketer members. We are well known for our triennial reports on agency comp, which cover all types of agencies. Our last such report was in 2017. This year, given a number of member requests to our Marketing Knowledge Center, we conducted a deep dive specifically on media agency compensation. Here are the report highlights:

• More than two-thirds of advertisers (69 percent) have updated their media agency contracts within the past three years, and one third have made updates in the past year alone in response to concerns about transparency and alleged rebates in the media buying ecosystem.
• Conversely, 31 percent of the respondents have either not updated their media agency contracts (17 percent), have not updated them in the past three years (10 percent), or don't know whether they have updated their contracts (4 percent).
• According to 60 percent of respondents, rebates, discounts, and their variations are not considered part of a media agency's compensation and the marketer receives their fair share return of any rebates.
• Consistent with the compensation practices for other agency services, the majority of ANA members employ fee-based methods of compensation for media agency services.
• Media agency compensation practices differ from other agency compensation practices in only one notable regard — media commissions (as opposed to fees) are more likely to be employed for media buying services, and particularly for programmatic media services. For example, 24 percent of the respondents use commissions for digital media buying services, while 40 percent use them for programmatic media services. Those figures compare to only 12 percent who reported using commissions for agency services in general in the 2017 triennial Trends in Agency Compensation survey.
• Nearly half of the respondents include performance incentives as part of their media agency compensation, and marketers with larger budgets are more likely to employ them.
• Over 80 percent of members use an annual performance evaluation as a key criterion for media agency performance. Sixty-seven percent use media savings, with 58 percent using a business performance metric (e.g., sales, market share, profitability).
• The use of programmatic media is now nearly universal, with 91 percent of respondents reporting they employ it. Although 84 percent of the respondents use their media agency for some or all of their programmatic buying, 35 percent use another third party or handle it in-house (either exclusively or in addition to their media agency).
• Over 40 percent of the respondents indicated they want their media agency to act as an agent in a neutral and objective manner on their behalf and are philosophically opposed to their agency buying and re-selling media to them. Another 27 percent of the respondents reported that they were generally opposed to the practice but would consider agency-purchased inventory on a case-by-case basis.

In June 2016 we released the ANA/K2 Intelligence report, "An Independent Study of Media Transparency in the U.S. Advertising Industry," which concluded that numerous non-transparent business practices, including cash rebates to media agencies, were pervasive in the U.S. media ad buying ecosystem.

Now, "Media Agency Compensation Practices" shows that the K2 report has had a significant and increasing influence on media agency contracting and cost governance. But at the same time there is still room for improvement. For example, how is it even possible that almost one-third of marketers have not updated their media agency contracts since that report was issued?

Thanks to our long-time partner on our agency compensation work, David Beals, partner/CEO of JLB + Partners, for his significant contribution on this new report. Also, thanks to Brittany Elliott, vice president of digital media at ami+partners, a division of Advantage Media Management, Inc.

This report is available to ANA members only and can be accessed here.