ANA: Non-transparent ad production bidding is widespread and costly for advertisers

Dive Brief:

The Association of National Advertisers (ANA) found non-transparent production practices at multiple ad agencies and agency holding companies, the trade group said today in a press release provided to Marketing Dive that reveals the findings of a new study.
A key takeaway is that advertisers are not always aware when an agency is both controlling the bidding system for production services and also competing for the business, resulting in the seller of services also being the buyer. This can lead to costly and inefficient business decisions and a disruptive competitive landscape for production and editing services.
The study found that 39% of advertisers who were eligible for commercial production incentives from certain states in the past two years did not receive the benefits or didn't know about them.

Dive Insight:

The ANA's report, titled "Production Transparency in the U.S. Advertising Industry," steps up pressure on agencies and holding groups to take a closer look at their business practices. It also addresses a topic that the Department of Justice has been looking into since late last year. It has not been a good 12 months for the agency space. A year ago, the ANA released a report uncovering widespread issues around rebates and other non-transparent compensation practices. A recent follow-up found 60% of agencies are taking steps to improve these issues, though one-quarter are still unsure if they're addressing media transparency.

During the past year, the agency space has also dealt with calls for greater workforce diversity, challenges in finding the best organizational structure for a new digitally-driven marketplace and bigwig marketers like P&G's Chief Brand Officer Marc Pritchard threatening to take their dollars elsewhere if agencies and digital platforms don't become more transparent.

The ANA's latest report, which includes insight from 30 ANA member executives and 12 subject matter experts, is likely to further deteriorate relationships between agencies and brands, which are looking for more visibility into how their money is being spent.

The ANA suggests those efforts haven't gone far enough, with the trade group's CEO Bob Liodice calling on marketers to step up their supervision and understanding of the production ecosystem to ensure their investments are well managed. In fact, a survey supporting the study found fewer than half of respondents require their agency to disclose if a production job is being bid to an in-house or affiliated production company. Additionally, more than 60% do not require or otherwise don't know if production rebates and other incentives are required to be passed back to them by their contract.

The report appears to put the onus on marketers to better police agencies, but if shops don't step up and address some of these issues themselves, brands may choose to take their business elsewhere — in-house teams and consultancies are two increasingly popular options — rather than try to fix a dysfunctional relationship. The ANA recommends advertisers know the specific in-house resources for their holding companies, agencies and affiliates; that they require agency disclosure prior to bidding, when an in-house resource is being considered for a project; and that they be aware of state commercial production incentives and review their creative agency contract.