McKinsey claims not much has changed since the 2016 release of the Association of National Advertiser’s (ANA’s) report on Media Transparency. McKinsey says the practice of media rebates and kickbacks is still widespread. While some agency contracts have been renegotiated, and the ANA’s template agreement is helpful, most agencies still redline out the language on preventing “co-mingled” buys or buying for the agency account at a discount and reselling to the client at a markup. The McKinsey report quotes a former media-agency executive as saying, “Most media-agency profitability is driven by non-client revenue. We would not have a business if we didn’t have rebates.”
McKinsey: Not much has changed three years after media rebate uproar (subscription required)
In defense of the McKinsey assertions, ANA Chief, Bob Liodice, takes exception to McKinsey’s findings that not much has changed. The ANA asserts that many client contracts have indeed been renegotiated with their agencies, and many are using the ANA’s recommended contract template. They also cite the pain the stock prices of the major agency holding companies have faced since the ANA report was made public, as well as, saying many clients are taking more control of their media and in-sourcing.
ANA chief: Media-rebate uproar made change, whatever McKinsey says (subscription required)
I think we can all agree that more needs to be done and that trust, once broken, is very hard to restore. Meanwhile, agency numbers continue to show the pain they are feeling due to this, and other disruptive forces on the advertising agency business model. If we score based on revenue and headcount, it would appear that the consultants seem to be winning. Agency revenues are down while consultancies are up, agencies are firing staffers while consultancies are hiring.
Agency Report: Digital rules, growth slows, consultant surge (subscription required)