Dive Brief:

• The Association of National Advertisers (ANA) released a report showing one-third of advertisers have made changes in their media agency contracts in the past year due to concerns about transparency and alleged rebates in media buying, according to a press release shared with Marketing Dive.
• Over two-thirds (69%) of surveyed advertisers say they have updated their contracts in the past three years, while 60% said that rebates and discounts are not considered part of a media agency's compensation.
• The survey's responses revealed that commissions — but not hourly fees — are more likely to be employed for media buying services, especially programmatic. Twenty-four percent of respondents use commissions for digital media buying, 40% use them for programmatic media and just 12% use them for general agency services.

Dive Insight:

The report's finding of a significant reassessment by advertisers of their media agency contracts underscores how concerns over meager transparency in agency billing practices impacts industry compensation practices. The report, "Media Agency Compensation Practices," conducted in April with agency consultancy JLB + Partners, surveyed 86 companies on agency sourcing, search and selection, agency contracts and compensation, and client/agency relationship management.

"Marketers are clearly starting to look more broadly at the compensation of their media agencies — not just the fee or commission revenue, but the total of all agency costs and revenues, whether programmatic and other media technology charges or revenues earned through rebates and discounts," said David Beals, JLB + Partners president and CEO, in a statement.

The new report follows an earlier one from the ANA in 2016 that found pervasive use of non-transparent agency practices such as kickbacks and cash rebates. That report helped kick off the so-called "mediapalooza," as some have called a wave of big brands realigning their agency rosters that began in 2016.

Contract reassessments come as the in-housing of media buying ramps up, with Forrester and the In-House Agency Forum reporting last summer that in-house shops increased to 64% of advertisers, from 42% a decade ago. With access to inventory and marketplaces available through the cloud, in-housing has become technically more feasible for many advertisers. But in-housing also helps advertisers exert more control over media-buying spending amid concerns around agency billing practices.

Last September, such concerns were underscored by a Wall Street Journal report about a federal investigation into media-buying practices in the ad world. Around the same time, the ANA notified its members about the FBI and U.S. Attorney's Office investigation into possible criminal activities in agencies' media-buying practices, including possible mail and wire fraud, conspiracy and racketeering. ANA has over 1,100 company members, which own about 25,000 brands and account for about $400 billion in marketing and ad spend annually.