Agencies Continue to Receive Perks From Media Owners That Aren't Disclosed to Clients

Incentive programs between large media companies and agencies continue to lead to poor advertising decisions and less transparency for smaller clients, 10 sources from agencies, brands, and publishers told ADWEEK. In these programs, the buyer gets perks like discounts or cash back in exchange for agreeing to invest in a particular media product. There is room for bad behavior if agencies don’t tell clients they were paid or incentivized to make a media recommendation. Not only that, two buyers said that as recently as last year, some agencies have continued to keep the cash returned by the media owner rather than giving it back to the client. For years an open secret in the advertising industry, incentive programs have been thrust into the spotlight again. Documents filed in August ahead of Google’s upcoming adtech antitrust trial revealed the programs Google used to incentivize agencies to spend hundreds of millions of dollars on certain media in 2018. However, Google is far from the only media owner that runs incentive programs. A 2016 Association of National Advertisers study found that rebates and non-transparent media ad-buying practices were “pervasive.” In 2018, federal prosecutors opened an investigation into these practices, and specifically looked into Havas, The Wall Street Journal reported at the time. Sources spoke on the condition of anonymity to discuss sensitive business relations, but their identities are known to ADWEEK. “There was always a risk, but it was more of, do we hit our numbers or not? Not if it was ethical, or if it was within compliance training,” said one media buying source, who has worked at several holding companies and was involved in the incentive programs as recently as last year. The source added that only around half of clients are getting money back when agencies cut rebate deals with media firms, meaning that half the time the agencies are pocketing money and not returning it to their clients. “Incentive programs are commonplace in the industry and support testing and feedback for new products and services," a Google spokesperson told ADWEEK. "When marketers choose to participate in Google programs, the terms are transparent and consistent across partners." Buying against clients’ interest In the past two years, one agency negotiated discounts on transaction fees on Google’s demand-side platform, Display & Video 360 and Campaign Manager 360, but could only maintain these lower take rates if the agency spent a certain amount on YouTube, a second buyer who worked at the agency said. That included recommending YouTube for clients that wouldn’t normally be a fit for YouTube (and clients never learned about the agreement, the buyer said). The buyer recommended one of these clients spend $10,000 to test a campaign on YouTube, which didn't perform well. Another of the agency's clients from a sector that sometimes has trouble advertising on YouTube had a $10,000 "use or lose it" test budget that they had a month to use. The agency persuaded the brand to spend the budget on YouTube, but the ad was ultimately denied by YouTube policies. “The client was super pissed,” the buyer said. “[The client said] ‘This was a waste of time and money,’ and it kind of soured our relationship.” Justin Scarborough, group director for adtech and programmatic at franchise marketing agency Moroch, worked at a holding company several years ago and said the agency was a few million dollars short of what it had committed to spend on DV360 via Google's Display & Video Incentive Program (DVIP). To make up for this shortfall, the agency reallocated funds from other DSPs into Google DV360 to meet its incentive goal, he said. “That was without regard for the best interest of the client, or sometimes not even with client approval,” said Scarborough. Agencies didn’t just spend clients’ budgets differently due to incentive programs but also gave recommendations they would not have normally been comfortable with. As recently as last year, as part of an incentive deal that would net cash payments of nearly $250,000, an agency hosted training sessions for clients recommending Google’s suite of cookieless solutions, said a fourth media buyer source who worked at the agency. As part of another agreement in which the agency received about $150,000 from Google, the agency hosted a session that lauded the brand safety credentials of YouTube, even if the agency did not personally believe in these statements. A Google spokesperson said that training sessions are intended to help marketers use Google tools or respond to upcoming market changes, and do not require agency endorsement on the topic. Buyers didn’t only describe carrots from Google but also sticks. If agencies didn’t spend enough and were unable to honor the agreements, clients could lose basic account support, two buyers said. “To really have access to human beings at Google [is] based on how much you're spending,” a fifth buyer source said. A Google spokesperson countered that access to representatives and standard media services is not tied to buyers participating in incentive programs or how agencies are performing under such deals. Not all buyers said they felt so strong-armed by Google. A sixth agency source said that in the last few years, Google started crafting DVIP agreements directly with advertisers rather than agencies to increase transparency. A Google spokesperson said that contracts between Google and agencies for incentive programs require the agencies to comply with all obligations to their advertiser clients, and Google brokering incentive deals directly with advertisers is not new. The source added that while their agency has an agreement with Google that lets them receive discounts on media if they meet certain spend targets, the agreement is non-binding, meaning the agency won't be penalized if it doesn't hit their target. “[Google has] done a good job at making sure that the DVIP program is communicated to the advertiser themselves,” the sixth source said. Bigger is better? Small and medium-sized clients were less likely to have stipulations in their contracts with agencies to ensure incentive programs are disclosed, the first buyer source said. Medium-sized buyers would spend more with Google, "and then the rebates would come and they would typically go back to the agency or go back to the bigger clients,” the first buyer said. The fourth buyer source also said that the cash agencies got as part of incentive deals with media firms was often pocketed by the agency and not returned to clients. A seventh buy-side source, who used to work at brands and now consults, said that small and medium-sized brands typically get very little information in their post-campaign reports from agencies, especially compared to information given to the 50 largest advertising spenders. “The majority of spending that happens in the ad space is probably not the top 50 advertisers. It's probably the 5,000 medium to small advertisers," the source said. “They don't have the sophistication in-house. They're just cranking campaigns out the door, they're not watching what the agency's doing.”

Programmatic

Agencies Continue to Receive Perks From Media Owners That Aren't Disclosed to Clients

Misaligned incentives can lead to wasted media spend

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Catherine Perloff

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