K2 Intelligence spent eight months investigating questionable agency business practices for the Association of National Advertisers (ANA), culminating in a critical, groundbreaking report.
Now the firm will help advertisers enforce and monitor transparency with their media-buying agencies through a new business unit. The practice, first reported by The Wall Street Journal on Wednesday, will use a multidisciplinary fact-finding approach to identify and improve nontransparent business practices.
“It could be investigative research, investigative interviews, forensic accounting, cyber investigations and a whole host of other skill sets that we employ on behalf of clients across the spectrum every day,” said Richard Plansky, EVP of complex investigations at K2 Intelligence.
A proper investigation delves deeper into agency practices than a media audit, which is often limited by the scope of a contract.
“There’s nothing wrong with what a media audit is,” Plansky said. “The problem is what it isn’t. It’s not an investigation.”
K2 Intelligence’s media practice consists of five employees with varied backgrounds, including former federal and state prosecutors, an inspector general’s office veteran, an investigative journalist and others with private and public investigative experience.
The practice will expand as it takes on more clients. K2 Intelligence was mum on which advertisers have retained its services but The Wall Street Journal reported that J.P. Morgan has hired the firm to investigate its media buyer, Publicis Groupe’s Zenith.
Investigations are customized to specific client needs. Each will follow a similar approach: “gathering intelligence, assessing it and then building on that intelligence,” Plansky said.
In the first phase, K2 examines the relationship between advertiser and agency by reviewing contract terms and interviewing key sources, including media buyers and suppliers. The team tries to determine if the client knowingly opted in to a principal transaction, analyzes agency documentation and assesses how the relationship runs day to day.
The team then conducts targeted research to identify additional sources with specific information on the agency’s business practices. Source interviews are corroborated with emails, spreadsheets, PowerPoint presentations or internal documents.
“It will be a combination of first understanding in granular detail how the advertiser agency relationship works,” Plansky said, “and second relying on traditional investigation techniques like human source interviews, forensic accounting and public records and open-source research to determine whether or not the client has been exposed to nontransparent practices.”
After the investigation is complete, K2 Intelligence will “work hand-in-glove with a qualified law firm” to help advertisers recover any money they lost if they so choose, Plansky said. It will also assist the client in creating and enforce compliance controls to maintain transparency.
“The knowledge that we have gained in the ANA study about how these practices are structured, executed and concealed will be extremely helpful in helping clients design those controls,” Plansky said.
The practice will work to solve core issues outlined in the ANA report: the gap between advertisers’ and agencies’ understanding of their relationship, a lack of advertiser education in digital media buying and the conflict of interest when holding companies operate principal-based buying and invest in technology platforms.
“Clients don’t always know what they’re opting in to,” Plansky said. “When you pull back the curtain, you find that it’s not the principal transactions themselves. It’s the nontransparency that hides the conflicts of interest those principal transactions create.”
The firm will not address, however, how agencies will be able to make enough revenue to continue providing services to their clients in a transparent way.
“[That’s] completely legitimate and important for the industry to address, but the first step in solving these key issues is helping clients find out what actually happened,” Plansky said. “If you don’t diagnose the problem correctly, you can’t fix it.”
