Influential advertiser group alleges media companies give rebates for ad dollars

LOS ANGELES (Variety.com): One of Madison Avenue’s most influential organisations has prepared a report alleging that various media companies offer rebates to big media-buying firms in exchange for a greater amount of ad dollars – a prospect that suggests the potential allocation of billions of dollars in advertising may be influenced by a desire for a sort of kickback, rather than being done in the interests of big-spending clients.

The Wall Street Journal previously reported the details of the investigation by the Association of National Advertisers, a trade group that represents the interests of hundreds of companies and the 15,000 brands they market with about $ 300 billion in spending. A spokesman for the organisation declined to offer details of the report, noting it had yet to be issued.

But the group mounted what the Journal reported was an eight-month investigation into whether big media-buying firms were accepting rebates from media companies in exchange for committing a greater volume of ad dollars. The practice is longstanding in Europe, Asia and Latin America, but has not been embraced in the United States, though allegations have surfaced in the past from time to time. Under such an arrangement, media outlets could use money, free ad inventory or other goods as a sop to media agencies that earmark client ad dollars.

The ANA interviewed approximately 150 people, according to the Journal report, and tapped K2 Intelligence, described as a ‘corporate investigations firm’, to conduct confidential interviews.

The Journal did not say whether the allegations were aimed at a particular kind of advertising: TV, digital, print, radio, or outdoor, and it did not name companies that might be involved.

What could be at issue, according to several media executives, is transactions involving the sale of new kinds of ad inventory that have gained new allure as technology makes the sales process easier. More advertisers have shown an interest in so-called ‘programmatic’ inventory, which is purchased according to a predefined set of data put in place through software. One of these executives suggested some agencies may be buying up digital and programmatic inventory at one price, then selling it to clients at another price, making a profit in the process.

The allegations surface just as US media companies are in the midst of trying to sell the bulk of their TV-ad inventory in the annual ‘upfront’ market, when Madison Avenue commits billions of dollars in advance to support the next cycle of TV shows.

The practice of buying media time is dominated in the United States by five large holding companies that also own the world’s biggest ad agencies. 

Omnicom Group of the United States oversees buying firms like OMD and PHD. Interpublic Group, also of the US, owns ad-buying shops like Universal McCann and Initiative. WPP of the UK controls the large GroupM media-buying operation. 

Havas and Publicis Groupe, both of France, operate Havas Media and Publicis Media, respectively. Japan’s Dentsu, meanwhile, controls the Dentsu Aegis Network, which also operates in the United States.