The Association of National Advertisers recently released an updated version of its template agreement intended for use by advertisers when engaging media buying agencies.
Mark Stine, Vice President of Financial Compliance at Cortex Media, a leading media auditing and consulting firm working with top tier advertisers in the US and internationally, and one of several parties with whom the ANA consulted when developing this update, offers the following comments:
We view the updated template as an important step forward in the advertising industry’s “transparency movement.” It calls for meaningful changes in the way agency holding companies manage their relationships with advertisers–setting expectations for greater transparency in many areas of the agency’s business with their advertisers.
Significant industry transformation in recent years drives the need for these changes. Vertical and horizontal acquisitions by the agency holding companies, particularly in the digital space, have added complexity to the supply chain. The lines between agency, supplier and publisher have blurred, and agencies are now often engaging affiliated companies in areas traditionally handled by third parties.
The new ANA contract template cuts through this complexity and demands agencies act like agencies in their relationships with advertisers. It is designed to overcome many of the transparency roadblocks encountered in the digital supply chain, carefully detailing the degree of transparency expected. For principal transactions, where agency affiliates purchase and resell media on their own accounts, the template provides for limitations on allowable mark-ups, and requires that agencies provide auditors with the visibility needed to verify compliance.
We would love to see all agency holding companies jump on board and commit to full transparency in all areas with all advertisers, as should be expected in true agency relationships. However, we expect there will be continuing challenges, as some agency holding companies may continue to resist transparency expectations on some transaction types and data sets during the contracting process.
Contracting Recommendations….
• When entering contract negotiations, advertisers should be wary of any changes to the contract template language. We have seen comprehensive transparency and audit provisions nullified by seemingly innocuous contract language adjustments. Adjustment to even a single phrase could impact contract effectiveness in unexpected ways.
• Keep in mind that agency holding company legal teams are armed with intricate knowledge of their inter-company contracts and have daily exposure to industry-specific contracts. They have an advantage over advertisers who may only negotiate advertising contracts every 1-3 years.
• Improve your results by engaging an industry-specific audit firm, well before your next contract review. A good audit firm should provide insights and guidance on topics impacting your business today, as well as opportunities to improve your rights and protections under the new contract.
• Partner with your legal team early in the process to raise awareness of the industry’s transparency concerns and the new template language available from the ANA. They may begin dialog with their counterparts at your current agency, perhaps proposing transparency-focused amendments to existing agreements, or preparing for your next contracting cycle.
The stakes are high in the battle for transparency. Advertisers are determined to get the transparency they require, and agencies that resist may suffer lost business and continued distrust. We believe the holding companies who fully embrace these transparency requirements will be first to regain the trust of their clients and set the stage for healthy and mutually beneficial relationships.