September 28, 2016

Honestly: The Rebate Saga

By Jake Dubbins, Managing Director at Media Bounty

The Guardian’s disclosure of making ‘cash payments’ to media agencies is the latest revelation in the rumbling ‘rebate’ saga. It is the second major publisher after the owner of The Daily Mail, DMGT, announced that it had set aside £26 million to pay rebates in 2015.

This issue isn’t going away. What will be next? A whistleblower from big media who reveals bonus structures designed to ‘sell’ more TV, more radio, more display thereby triggering a rebate for the agency and a reward for those staff responsible? Are clients already talking to lawyers to recover years of rebates? Is this the ad industry’s PPI? Will marketing directors start receiving letters, texts and emails from ‘Rebate Recovery’ experts promising a no win, no fee approach to getting this money back?

This malaise has been eroding trust in the industry for years. A very senior marketing exec told me a couple of years ago that he knew that 80% of his media plan was already written before he even briefed. The conclusion can only be that his media agency had inventory that they had already bought and so needed to sell. Former CEO of Mediacom, Jon Mandel kicking off the rebate scandal  announced, “They recommend or implement media that is off-strategy or off-target if it works for their financial gain.”

The ramifications are far reaching. If a large proportion of the media is already bought and the majority of that media is TV, then creative agencies are forever tied to a 30 second, 20 second or ident execution.

This model dominates our industry – buy TV, make ads for TV, test TV – ad infinitum. It also utterly stifles creativity. Dave Buonaguidi, founder of Karmarama and currently Chief Creative Officer at CP&B recently announced at a conference, ‘The work is shit.’ No wonder if the brief is make me a 30 second TV ad, preferably an emotional one like the ones that Adam & Eve/DDB make for John Lewis!

Of course not all the work is shit. An increasing number of clients and agencies are committing to a consumer first, rather than platform first approach. This means that ideas can come from anywhere and escape their TV incarceration. TV may absolutely be part of the plan but only when an idea is given the chance to breathe and the media plan is independent, born from consumer insight and transparent.

This transparency is the most important ingredient to fix our ailing industry. What are we in business for? Clients want to grow their brands, agencies want to do great work. Both, whisper it, want to make money. Maybe part of the reason for the growing rebate debacle is that clients and agencies are unwilling to have the most important conversation – the commercial objectives for each business. To foster trust and work as true partners, then both parties need to win and need to feel that the other is working to that common goal. Rebates are half the story. It is no secret that the rise of procurement or ‘Commodity Buyers’ in some businesses has created another barrier to trust between clients and agencies.

In no particular order, I have come across POs arriving six weeks after work begins, 75 day payment terms, a 2.5% settlement fee upon payment of an invoice (yes you read that right!), accounts departments only sending POs by post and also only accepting invoices by post and requests to reissue an invoice if one line of an address is wrong.

This is the thin end of the wedge. It is almost as if some big businesses are set up to avoid payment to small business for as long as possible. Just as the rebate scandal has caused outrage and an erosion of trust, these practices also chip away at that common goal of both client and agency ‘winning’.

Jon Mandel, now the ‘most hated man in advertising’ or ‘total legend’, depending on how you look at it, says  “there is a difference between fucking and making love. When we get to the honesty and integrity of making love and being in a relationship, no games, no bullshit, we are going to have a healthier relationship and we are going to have a healthier community.”

It is the responsibility of both agencies and clients to have these honest conversations so we can collectively clean up this mess and get back to focusing on great work that helps grow both businesses.

So let’s get on with it.

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By Jake Dubbins, Managing Director at Media Bounty