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Whose conflict is it anyway?

As featured in mediapost_logo1

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The fundamental issue which lies at the heart of the ANA’s recent Media Transparency Report is this: media agencies have failed to manage conflicts of interest which have arisen by virtue of their position in the media value chain.

From the media agency perspective, a conflict of interest arises when professional judgement or actions for a primary interest are influenced or corrupted by a secondary interest. In this instance, the primary interest is its client relationships and the secondary interest is the benefit it can derive for itself from its media supplier/technology vendor relationships.

Calls of this nature have to be made by media agencies every day; it comes with the territory. After all, it is sensible commercial logic for a media supplier to make a sales proposal to an agency to increase its clients’ media investment, irrespective of the evidence from the agency’s planning team that a different investment plan will best optimise a given client’s communication objectives.

Let’s be clear, maintaining a secondary interest is not wrong in itself and can lead to benefits for all parties; indeed, exploiting its negotiation leverage is part of a media agency’s services to its clients but the problem lies when secondary interests unduly influence guidance given to clients.

The special position of trust placed in media advisors by their clients makes it paramount that advisors are not clouded by conflicts of interest

Consider the five examples below:

  • A media agency is incentivised to spend more than its fair share of its client’s budget with a media supplier, due to a commercial mechanism it has with that supplier from which it will benefit.
  • A media trader is incentivised to spend more through an agency’s trading desk than on a publisher network because the marginal impact of doing so favours the agency bottom line.
  • A media holding company is given inventory from a media supplier at a vastly reduced cost, on the basis that their clients’ spend with that supplier will increase by an agreed amount.
  • A media agency elects to invest in a media supplier in which it has a controlling or significant interest, despite having better alternatives.- A media agency accepts a benefit in kind from a media supplier on the condition that it does not disclose the benefit to the client to whom the agency is making the recommendation.
  • A failure to manage a conflict of interest is problematic for a media agency, and this is why I believe agencies need to show leadership now as opposed to presenting group denial.

But let’s also not forget the other players in the ecosystem who also have a duty to their clients to manage conflicts of interest within their business. The media advisor community, for example, is often overlooked in this debate.

Examples here might include when:

  • A media advisor devises an analysis which creates instability in client/agency relationships and then publishes guidelines for clients from which it will make a commercial gain.
  • A pitch consultant seeks to create a climate of instability in order to increase the frequency of media pitches which it might have an opportunity to manage.
  • A media compliance auditor sees an agency’s confidential commercial information and re-purposes it to establish insights which benefit its clients’ commercial leverage with their agency.
  • A pitch consultancy is encouraged to include an agency on a shortlist because the agency pays for “services” from that pitch consultancy.

The special position of trust placed in media advisors by their clients makes it paramount that advisors are not clouded by conflicts of interest.

To end on a positive note, clients are now certainly more aware of the “interest” issues and will take their own decisions, in most cases in an objective and measured way.  We believe an industry code of practice is required that serves as a straightforward model of conduct for the entire media ecosystem – for clients, agencies, media suppliers and advisors.

By focussing specifically on the areas of conflicted interest, we are hopeful that agencies, clients and their advisors can once again re-establish trust in their relationships. After all, we all have a vested interest in that.

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