As a senior decision maker and someone responsible for your business’s overall performance, you may be worried that your media investments aren’t getting the results you expected.
And you might have a suspicion that your return on investment does not justify increasing your budget – or even maintaining it at its current level. But you may also be struggling to rationalise this with clear evidence or data.
This is very common.
Without expertise and insight, navigating the increasingly complex world of media buying can feel more like a hunch than a provable reality. And it is difficult to change things based on hunches. That’s why you must be able to understand where and how your media investment is being spent.
In this blog, we’ll outline the complications that are making media transparency such a pressing issue, and examine how and why a media performance review might be the single most effective step you can take towards getting the transparency you need to make valuable and well-timed decisions.
What is media transparency and why is it an issue?
Media transparency is the ability to see what media was bought on your behalf and how much it was bought for.
When you work with an agency to buy media on your behalf, the agency will negotiate an advertising rate with each media owner. As the advertiser, that rate should be fully disclosed to your business. The agency will add their remuneration on top of that advertising rate to arrive at your final bill. That total is the price you will pay your media agency for their management services and your media placements.
The problem, however, is that there is now an increasing lack of transparency coming from media agencies. But why is this happening?
In the old, transparent model, media agencies used to have just one source of income – the revenue they received from advertisers. To win advertisers’ business, agencies had to propose as low a price as possible.
Over time, media agency fees got incrementally smaller until there was no longer any profit in the agreement. This is obviously not sustainable, so agencies adopted two responses: the consolidation of agency buying power, and the creation of undisclosed agency revenue streams.
1. Consolidation of buying power
In a bid to find new revenue streams, media agencies created buying groups to consolidate their buying power. Instead of each agency buying individually for their client, a new entity was created that negotiated with media owners on behalf of all those agencies.
2. Undisclosed agency revenue streams
As time progressed, media agencies also became adept at generating additional income from media owners that wasn’t disclosed to the advertisers. They did this through several different methods, including:
- Pushing media owners to give agencies cash rebates (agency volume bonuses / AVBs), which they kept for themselves and did not disclose to the advertisers. It is important to note, however, that independent media agencies tend not to receive AVBs and some are actively rejecting compromising trading practices as standard. The issue of undeclared AVBs is, instead, normally an issue associated with group media agencies.
- Securing free airtime from media owners, which the agency then sold to their clients (advertisers) at a standard rate.
- Using opaque service agreements, between a media owner and an affiliate entity linked to an agency holding company, facilitated the discrete transfer of monies due from the cash rebates.
- Buying airtime as the principal buyer, before subsequently choosing to sell it on to their clients (an advertiser). This put the agency under no obligation to tell its clients at what price the airtime was bought. It also gave the clients no right to audit those purchases.
- Introducing dual rate cards. By asking media owners to create a rate card for agencies, and a separate rate card for an agency’s clients (advertisers), the exact same inventories were listed at two different prices.
- Masking real-time programmatic buying mark-ups, which could account for up to 70% of the price an advertiser pays. Intermediaries such as the supply side platform, demand side platform, agency trading desk, and agency of record each took their own mark-up, which were undisclosed to the advertiser.
How can you best manage media transparency and assess media performance?
Technological advances mean media buying today is fragmenting at speed. It is becoming harder than ever to understand precisely where media budgets are spent. By 2022, for example, programmatic display ad spend will reach almost $95 billion. But for advertisers, how much of that spend is fully accounted for?
If you’re spending significant sums with your media agency, the only way to guarantee it is making the best decisions on your behalf is to have a full understanding of what is being done. And the only way to achieve that is with complete transparency.
Only then can you make accurate assessments on everything from strategy through to performance and ROI.
However, most companies today do not have the internal resources and expertise to accurately track and understand every area of their media agency’s performance. Instead, an external media performance review enables a trusted third party to accurately assess a range of different criteria. It involves applying advanced analytical techniques to attribute and forecast the impact of media investments on business performance.
A good media performance review ensures your media agency is compliant with media transparency best practices. Normally, this includes:
Reviewing your media agency contract T&Cs to check they contain all necessary provisions.
- Detailed and transparent reporting clauses
- Clear details about the processing of AVBs
- Clear definitions of media transparency terms
- Details as to whether your agency is acting as an agent or principal
- The treatment of proprietary/inventory media
- AVB commitments as a percentage of your spend per media channel
How does a media performance review improve media transparency?
A thorough, professional, and extensive review of media performance helps to quickly improve media transparency by shining a light on any potential media price disparities. Media performance reviews also enable an advertiser to understand exactly when intermediaries are used, and at what cost.
This gives the advertiser the information and insight they need in order to maximise their budget aimed at working media.
Finally, a media performance review enables an advertiser to track and analyse the performance of its advertising. In turn, this can lead to the identification and eradication of any wasteful spending, as well as an improvement in an advertiser’s return on advertising spend (ROAS).
What are the benefits of improved media transparency?
Securing significant improvements in a media agency’s transparency allows an advertiser to answer the fundamental question: “Are my media prices competitive?”
Media transparency helps an advertiser to improve its overall media quality by ensuring adverts are placed on trusted channels that deliver quality data and maximise ROI.
It also provides the opportunity for the advertiser to reduce its overall spend by identifying up to 70% cost differences in the media pricing it is offered compared to its competitors.
Finally, and perhaps most importantly, media transparency creates the situation in which a media agency is forced to become media neutral. This neutrality ensures all proposed media plans best serve the interests of the advertiser, not the agency.
In contrast, media agencies that are first offered AVBs by media owners, and subsequently do not disclose those rebates to their advertisers, are incentivised to sell more media inventory to the media owners offering those rebates. This, however, may not be an approach that is in the best interests of the advertiser.
Why now is the right time to book your media performance review
For too long, bad practices have been allowed to flourish unchecked. Across all sectors of business, it is now crucial for advertisers to start demanding full media transparency from their media agencies.
Whether you are struggling to understand why your media investments aren’t getting the results you expect, or you simply have a feeling something isn’t right, a full media performance review will help you to identify and understand the root causes of any challenges you face.
Since 2018, our strategic and systematic approach to media transformation has helped some of the world’s most ambitious brands to improve their media performance and ROI.
If you are looking for a financial media audit partner, you can book a free consultation today to speak directly to one of our specialists.
Share
