The 4As recently announced that member agencies failing to adhere to their transparency guidelines could end up purged from the organization. That’s a harsh penalty that will, no doubt, make agencies think twice about opaque arrangements that allow them to earn undisclosed margins from their clients.
Yet, the guidelines, found here, still allow agencies to re-sell advertising inventory to their clients, as long as the practice is disclosed.
Many from the agency community believe that once an agency becomes a seller of ad space, it puts itself in a position in which its goals and its client goals are misaligned, and its recommendations cannot be fully trusted. After all, how can advertisers be sure that they’re seeing the best options for media success when the agency is incentivized to recommend inventory it owns? People who understand the ad agency’s role as trusted adviser to its clients also understand why the agency can’t move into the ad sales space.
Moreover, it’s difficult for agencies-turned-sellers to argue that reseller deals have anything other than the agency’s profit margins in mind when they’re brought to bear on a client campaign. There are already mechanisms for committing to purchase inventory ahead of time, locking it up for the advertiser while securing significant discounts. They’re called upfronts. In digital, private marketplaces can perform a similar function.
So if client objectives can be serviced through these established mechanisms and there’s no reason for reseller agreements to exist, one can assume the 4As adopted them as part of its transparency guidelines to preserve profit margins for member agencies. While no one would fault an agency, or any business for that matter, for trying to preserve profits, would it have been better to have guidelines that called for elimination of the practice altogether?
I think so. But it begs the question of why these arrangements were specifically allowed for in the 4As transparency guidelines at all. Isn’t it important to preserve the integrity of the agency business for all players in the space? After all, the 4As is the trade organization of record for advertising agencies. It should have a vested interest in preserving the model.
It shouldn’t escape notice that the working committee developing the guidelines comprises large holding company agencies, with one exception – an independent that also happens to be the largest of the independents in the space. No small or mid-size agencies were represented.
Perhaps if more smaller agencies were involved – agencies less likely to want to preserve a model that sets agency and client success goals at odds – we might have seen stronger guidelines that preserve the role of trusted adviser for the agency.