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“The Worst Thing That Can Happen for Ad Agencies is that Marketers Trust Them Less”

The AICP’s Matt Miller on why the ANA’s report into commercial production is important – but transparency isn’t enough

“The Worst Thing That Can Happen for Ad Agencies is that Marketers Trust Them Less”

Last week’s report from the Association of National Advertisers into commercial production practices – particularly those surrounding inhouse agency production and the bid process – may not have been terribly surprising, but according to Matt Miller, it was a timely and important report nonetheless.

“I don’t know if a lot of it is news, per se, but having pulled together so many points of view into one report, it certainly is sensational and definitely focuses many issues that marketers are thinking about right now,” says the CEO and President of the Association of Independent Commercial Producers (AICP).

The report highlighted several areas in which the commercial production process as mediated by agencies was not putting marketers’ interests first. The ANA’s key concern that the process was not suitably transparent and that members were not getting the full picture around, for example, conflicts of interest in agency-owned production units being included on bids or the existence of production rebates.

“It’s fairly unanimous in its thinking, particularly stepping back and looking at the issues at hand, that there is an inherent conflict of interest when an advertising agency is playing two roles within the process, particularly when one is that of the buyers and one is that of the seller. I think that’s become very apparent.”

However, according to Mr. Miller, the report’s focus on transparency does not go far enough. Making the client more aware of the bidding and production process does not, he argues, negate the conflict of interest that arises when an agency or holding company is both overseeing the pitch process on a production and bidding for that production.

“ANA’s concern is, ‘is the marketer aware’? To me the bigger question is long term: what happens when the agency continues to play that role [of both ‘buyer’ and ‘seller’ of production]?” explains Mr. Miller. “Does the marketer have the ability to weigh out the pros and cons of the agency playing both of those roles, even when they are aware and it is a transparent piece of their process?”
Another element of the report that raised an eyebrow was the emphasis on cost consultants as a solution for marketers

“One of the issues I have with the report is that five out of the 12 interviewees that were interviewed to get this report were cost consultants. So when you look at the conclusions that the ANA have drawn out of this, a lot of the recommendations and, in some cases, silver bullets to fix this are indeed cost consultants. There are certainly places where consultants can help marketers through the process but a lot of it feels self-serving from the cost consultants’ perspective. ‘How do you solve this? Hire me!’”

Mr Miller suggested that marketers would benefit not simply from a more transparent system but a better understanding of the capabilities and expertise of different kinds of production entities – as well as a keener sense of why they should care about conflicts of interest that arise with inhouse production. He acknowledged that many inhouse production units had originally been set up to create the kind of immediate, disposable content that talent-based independents were not built around. The problem, he suggested, has arisen since they had moved into the more crafted content that requires specific talent, expertise and triple-bids.

“The question is whether or not marketers have the ability to see through, manage and compare that value proposition and see what it is they are buying, even when the agency can deliver a lower cost – and of course that’s where we fall into the conflict of interest. Are they [the agencies] truly advising their client? Rule number one is that they have to deliver value to the clients. In these scenarios, are they delivering on their number one goal, which is to put the clients’ interest before their own? Therein lies the large-scale problem.”

The report follows the launch of a wide-ranging Department of Justice investigation into bid-rigging by inhouse production units, which was revealed in December. “I do think agencies have taken this investigation very seriously as they should, as they need to do,” says Mr Miller. “When you’re talking about marketers questioning how things are done, that’s fine, that’s part of the business and marketers making sure they’re getting the best value with all of those pieces. When you talk about the Department of Justice and the US government involved in investigating systemic bid rigging, collusive activity meant to mislead marketers you’re in a whole different world. While the DOJ has gone a little bit quiet in the past few weeks, it doesn’t mean they’re not working. They’re certainly out there assembling information. The agencies are, I’m sure, looking at their internal processes and making sure they are complying more with what they believe is needed.”

Despite one or two reservations about the details of the ANA report, Mr Miller believes the fact that the document lays out the inherent conflict of interest in straightforward terms for marketers to be ‘absolutely important’. Whether the report has an effect on practices is now in the hands of ANA members and other marketers. 
“The word is certainly out there with the marketeers, now it’s what they do with it… They’re certainly looking at their internal procedures and we’re now in a time where the worst thing that can happen for ad agencies is that marketers trust them less.”