Hack Attack

19 March 2015

Sometimes the last people to realise that something is going on are the very people to whom the thing in question is happening. Or to put it another way, no amount of sticking your fingers in your ears and running around singing a merry tune to drown out the unpleasant news can make the unpleasant news go away.

So it was and is with the US ad industry’s denial that anything untoward is happening (and has ever happened) between the media agencies and the media vendors that could possibly lead to the agencies using client budgets to benefit them (the agencies) as opposed to the advertiser. And then up popped Jon Mandel, ex CEO of Mediacom in the USA.

Mandel’s comments at the ANA event a couple of weeks ago have put the cat amongst the pigeons. The flapping has indeed generated something of a mighty wind, and you suspect that no amount of ‘move along, there’s nothing to see here’ will work. Simply, now that one of America’s own has stood up and said ‘here’s what’s been going on’ things will never be the same again.

To make the point, this week ‘AdAge’ ran an online poll on Mandel’s claims. 84% answered ‘yes’ to the question: “Do you believe that U.S. media agencies are receiving rebates from media sellers and vendors that they don’t disclose or pass on to clients?” 74% said they considered this to be unethical.

There are a few questions that the ‘nothing to see here’ brigade need to consider.

First, no-one questions that these practices happen in many, many non-US markets. No-one questions that the agencies have been the beneficiaries. Now, if a tactic works well for you in countries A, B and C wouldn’t you be tempted to try it in the biggest ad market of them all? Especially if someone at your holding company HQ is asking you why you can’t do what those smart people in countries A, B, and C do.

Next, US agencies have always been focussed more on the buy than the plan. Look at the upfront system, pretty well unique to the US which was designed to allow agencies to acquire limited premium TV inventory on what was originally three networks, and which inevitably involved agencies perming two from three. TV buys drove that system, not TV plans. The buy came first, which when you consider the complexity of the US TV market was not altogether surprising.

It’s a short step from there to making money on the buys.

Finally, why on earth would Jon Mandel make this up, and not just him but the people in agencies that he claims to have interviewed? And if what he had to say was so transparently rubbish why would the ANA give him a platform to say it? Never mind that the ANA has rowed back from suggesting that ‘every’ agency is up to no good (which is not what Jon said in the first place); never mind that Procter and Gamble said ‘we trust our agencies’ (subtext: if anyone tries this stuff with us, they’re toast); and never mind that GroupM came barrelling in to deny everything (no-one to my knowledge has accused them specifically of anything). The evidence points towards the fact that it is certainly not unknown for agencies to put buys that benefit them before plans designed to benefit their clients, and they shouldn’t do it.

In Nick Davies’ brilliant account of the News International (as then was) phone hacking scandal, ‘Hack Attack’, he tracks how the practice of phone hacking became endemic at ‘The News of the World’. There were many fine journalists there, but this underhand behaviour took hold and simply became the norm.

I was reminded of this when reading Mumbrella’s account of how the media agencies resell free spots via their value banks in Australia. Mediacom and Aegis were caught doing this, people lost their jobs and GroupM (to their credit) is investigating Mediacom. All that Mediacom’s, and Aegis’ staff were doing was something that has become the norm throughout much of the industry – and by no means just in Australia.

Those who followed the phone hacking scandal will recall that ‘The News of the World’s initial defence was that hacking was a tactic used only by a rogue journalist, Clive Goodman and that it was not common-place within the newsroom. Except it turns out that it was. Eventually ‘The News of the World’ closed; James Murdoch and (it seems likely) Rebekah Brooks were hauled off to the USA, whilst Andy Coulson (who had moved from being Editor at ‘The News of the World’ to a role as David Cameron’s media spokesman) amongst others went to prison. News International’s bid for control of BSkyB (which would have been amongst the biggest media deals of all time) collapsed in the wake of the scandal.

The agencies need to clean up their act and fast to stop all the good work done by the majority being undermined by the greed of the few. As Warren Buffett said: “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently”.