Two Indie Agencies Part Ways With The 4As

indie-agencies-leave-4asAside from some fiery rhetoric in the immediate aftermath of the Association of National Advertisers’ (ANA) transparency report, the overall response of agencies to the trade group's findings has been fairly muted.

But independent agencies Mediasmith and Empower MediaMarketing have taken a stand by ending their memberships with the American Association of Advertising Agencies (4As) due to what they view as an overly passive approach to solving the issue.

The 4As’ Transparency Guiding Principles of Conduct are meant to allow each agency to take its own approach to transparency, and compliance with them is a mandatory condition of membership, said CEO Nancy Hill.

“We continue to believe that as a trade association, we can only go so far in our transparency mandates and that the rest is up to each agency and each client to determine how they work together,” she said.

But those principles don't go far enough in requiring agencies to solve for transparency, argues David L. Smith, founder and CEO of Mediasmith, which ended its membership on Sept. 14.

“[The 4As is] basically saying that there’s no problem with transparency or kickbacks,” he said. “We felt it best to distance ourselves.”

Empower, on the other hand, was bothered by how the 4As handled the transparency investigation.

“The problem I had from the beginning was the 4As’ inability to work collaboratively with the ANA and that they took a back seat to the investigation,” said Jim Price, CEO of Empower MediaMarketing, which suspended its membership on June 10. “I thought it was inappropriate for us to be in that grouping.”

Mediasmith took issue with the 4As’ definition of the agency-client relationship, which condones agencies acting as principal as long as the client opts in. Its own Client Bill of Rights disputes that definition.

“We believe in the agency concept,” Smith said. “We’re an agent for our clients.”

Price agreed. “The definition of an agent is you operate on behalf of the client; you’re an extension of the client,” he said. “If you’re a principle, you are your own business.”

When an agency acts as principal, it should be subject to the sequential liability terms set out by the 4As and the Interactive Advertising Bureau, Smith said. These terms state that the agency is only liable to make payments on proceeds that have cleared from the advertiser.

“I believe the media company should be extending clients credit,” Smith said. “If [the agency is] going to be a principal, then it has to accept liability for the media bills.”

Smith and Price also disagreed with the 4As’ stance on audit rights, which has been a major sticking point in discussions between the associations. Earlier this year, the ANA withdrew its support for the 4As' guiding principles after the latter refused to allow advertisers to audit its members at the holding company level, according to AdExchanger sources.

“Any entity spending the client’s money should be subject to an audit,” Smith said. “Fees being negotiated at the holding company level would be a factor.”

He added, “I think the 4As is speaking for the larger holding company agencies."

But the two agencies diverge from each other on the question of data ownership.

Price said Empower is keen to follow the ANA’s guidelines because it is “the one with the budgets.”

Smith, on the other hand, agrees with the ANA’s position that clients should own their proprietary data, but he doesn’t think it’s possible without significant changes to software design.

“[The DSP and] third-party ad server are set up that if an agency is fired, the client can’t take its data and move it to the next agency, because it was set up from an agency account,” he said.

There are also security issues involved. “If the client wants visibility into our DSP dashboard, they would see other clients’ data, too,” Smith said.

Until vendors rethink their software, Mediasmith says agencies should share data with clients around media performance and where advertising runs.

“Sharing data is the most practical thing we can do today,” he said.

Brands who bring technology contracts in-house should prepare to pay their agency more, as the agency may accumulate more billable hours as a result of losing single-dashboard access to the client's marketing tools.

“When a client has a contract with a direct tech provider, there are sometimes access issues in the way its set up so it’s harder for agencies to administer,” Smith added.

Brands are already reluctant to pay agencies sufficiently, he acknowledged. But that’s not an excuse for nontransparent behavior.

“If you’re not paid enough, talk about it with your client rather than do something they don’t know about,” Smith said. “I don’t think it has to be confrontational. It’s just business.”

 

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