Posts Tagged ‘Advertising Age’

In March of 2015, Jon Mandel, an experienced c-level executive on Madison Avenue, declared in a keynote speech at the ANA annual conference that “kick-backs” at the advertising agency level and/or at the conglomerate holding companies who control close to 80% ownership of the world’s largest advertising agencies were pervasive, totaling in the hundreds of millions of dollars.  Mandel’s speech sent shockwaves through every side of the business associated with advertising, most prominently the top advertising brands who were allegedly being left in the dark.

When the ANA announced that it had hired two outside consultants, one with cyber security experience, to advise the ANA, the advertising industry’s largest trade organization representing brands like P&G, Unilever, AT&T and hundred more, I published a blog post on the advertising industry scandal. that Jon Mandel brought to the forefront at the ANA’s annual convention.

In my three decades working for Hollywood Studios, the largest broadcast television groups and working on Madison Avenue can I recall a more explosive event triggered by one very brave and bold individual, Jon Mandel.  Some credit has to go to the ANA board who had to have approved the content of the speech as Mandel was serving as a paid consultant at the time.

After that, the ANA went through a vetting process for consultants to investigate and recommend potential fixes to the board.  Having been a part of one of the finalist groups presenting to the ANA’s executive committee, I can attest to firsthand experience that the ANA with Jon Mandel still participating as a consultant were serious and on a timeline to advance the discussion.  The only exception I took to the ultimate approach that was being taken was making the broad discussion more open to the community who had a vested interest in findings and the outcome.

Maybe suggesting the use of social media was too progressive for this group, but I pointed out that it was the only way to let all stakeholders have a voice in the process.  So now trade journalists and industry experts are left wondering what, if anything, is going on as both the WSJ.com and Jack Meyers, industry expert, did in published stories where the headlines were:

“Seven Months Later: Smoke But No Fire”  Media Village.

After over three hundred hours of research preparing for the presentation to the ANA executive committee and Jon Mandel, I felt like I had a good understanding of the critical issues which required infographics to explain.  Without having some public debate, the industry may not hear a word from the ANA on the so called “transparency” issues, or “kick-backs”, “fraud” for years because it is complicated, heated, and almost impossible for two organizations that have so much at stake, ANA and AAAA’s, to reach consensus.ANA_Blog

Case and point where the AAAA’s, Agency’s trade group, feeling pressure made a public announcement, prematurely in my view, without the support of the ANA.  I believe I said this was the advertising industry’s version of the “Watergate Scandal.”   Because of that, I think Jon Mandel should get the book rights and play himself in the movie to a story that is destined to get published.

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ANA_BlogThe AAAA’s released guidelines for a select set of issues in response to allegations of Kickbacks, transparency, ethical issues raised initially by a speech made by agency veteran Jon Mandel at the ANA’s annual conventionANA Feud Over Transparency.  The ANA was quick to make it clear that his organization’s members were not endorsing the AAA’s guidelines.   In full disclosure, I spent several months researching the “transparency” issues in response to the ANA’s RFP for consultants to investigate the transparency allegations.  While my team didn’t win the bid, I learned a great deal about what is a list of real issues.  There are four players in this discussion divided into two teams: 1) ANA and the world’s largest advertisers and 2) AAAA’s and the world’s largest advertising agencies and the holding companies that own blocks of agencies.

The ANA exists because of its clients who represent the world’s biggest brands.  While I believe the ANA has taken a very professional approach to a very complicated list of transparency issues, they are paid by the advertisers and are therefore conflicted because of that relationship.   The AAAA’s represent the advertising agencies and holding companies and they are also conflicted and bias towards the interests of their advertising agency clients.  The result is that you have two conflicted trade organizations who have limited authority trying to negotiate what is the equivalent of “Watergate” for the advertising industry.  There are “smoking guns” which Jon Mandel pointed to a few of the most serious issues.  Some will deflect this assertion by pointing to the fact that advertising agencies exist because of the world’s largest advertisers who pay fees to agencies, yet are on the opposite side of this debate.  Global companies like P&G, Unilever, GM, McDonald’s outsource advertising to agencies to fulfill specific marketing services.  Unlike the advertisers who depend on innovation to remain competitive, the advertising agency sector has used scale as a dominant strategy to compete.  Advertising agencies are not value creators, nor are they innovators.  Agencies are moving towards programmatic as a method to increase operating efficiencies.  Programmatic has focused solely on speed and now have been caught flat footed over use of “bots” and “viewability” or the critical component of any buy/sell transaction, common currency.  The transparency debate points fingers at whether practices might be legal, but not ethical.  Audit rights stopping at the agency level when it is very clear that the biggest deals are made at the “holding company” level where multiple owned agencies are bundled from operating units all over the world.

If you have ever worked for a global company, you are aware of the evolution of the procurement department as a strategic arm of large corporations pursuing efficiencies, process innovation, effectiveness and leverage.  Procurement specialists can find gaping opportunities to improve the deals between the company and the advertising agencies it hires to spend billions in advertising dollars, tradition, digital and social media.  AAAA’s wanted to rush guidelines to the market which is an indication of the problem.  The type of business model innovation that the advertisers seeks will require myriad approaches that a recent McKinsey article described as “reframing beliefs.(McKinsey)”   

Big corporations have resolved similar issues in supply chain transparency issuesHBR-The Transparent Supply Chain.  The HBR article published in 2010 illuminates how complicated, “opaque”, issues can get when their are multiple stakeholders who have differing views on transparency.  Like in the case of Ad agencies handling of billions of dollars in clients’ money and whether shifts in technology and global deal making are just smart or whether words like “murky” and “opaque” seem to be the only descriptives that can explain lists of transactions that should have been disclosed and possibly shared in the spirit of fairness, ethics, GAAP and IFRS, barter, and revenue consideration.  For those individuals who try to isolate the discussion to only US transactions, those may be the very people to investigate first because this is clearly a global discussion.

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