Is the 4A’s Action on “Transparency” a “Tipping Point” for Client/ Agency Relationships?

17 Feb

Tipping PointMuch has been written about the content of the American Association of Advertising Agencies (4A’s) recently released “Transparency Guidelines,” less about the potential impact of the 4A’s decision to break rank from the cross-industry task force with the Association of National Advertisers (ANA) and to act unilaterally.

For the record, from both an advertiser and agency perspective, we believe that the guidelines proposed by the 4A’s have the potential to do irreparable harm to client/ agency relationships. The guidelines appear to driven by greed and a certain naiveté about the source of agency leverage… namely their clients’ advertising budgets. Let’s face it, in the context of a principal-agent relationship there is no logical way to rationalize a guideline which states:

The agency, (agency group and holding company) may enter into commercial relationships with media vendors and other suppliers on its own account, which are separate and unrelated to the purchase of media as agent for their clients.”

One, the notion that the potential for financial gain would not introduce a level of bias that could influence an agency’s recommendations to its clients is unrealistic. Two, pooling client dollars to use as collateral in cutting side deals with media vendors and suppliers for its own benefit is inappropriate.

From our perspective, we believe that the 4A’s and any of its members that support the association’s guidelines on transparency have made a serious error in judgment. Yet, it should be noted, that not one agency has spoken out against the 4A’s action or the composition of its “Transparency Guidelines” nor has one agency seceded from the association. Thus, one might assume that all of the 4A’s members support the position taken.

At a time when issues such as transparency, trust, talent and compensation are posing serious challenges to the length and efficacy of client/ agency relationships, the 4A’s action on the topic of transparency will not serve their members well in the long-term. Why? There are, we believe two reasons.

First of all without clients, agencies have no means for existence. On the other hand, as it stands today, some may view agencies as a luxury, not a necessity for advertisers. Without agencies, clients still have a number of options for marketing their firms, brands and products. These options range from dealing direct with suppliers that are today considered “third-party vendors” such as; production companies, photographers, content developers and curators and media owners. Additionally, one must consider an advertisers option to create in-house capabilities rather than outsource all or some elements of their advertising.

The second reason is that absent an underlying level of trust, agencies can never hope to recover the coveted position of “strategic partner” that they once enjoyed. In our opinion, the 4A’s action has relegated their member agencies to “vendor” status whose goods and services an advertiser might choose to avail themselves of, without being beholden to the agency in a meaningful way.

In Malcolm Gladwell’s book; “The Tipping Point” he suggested to readers; “Look at the world around you. It may seem like an immovable, implacable place. It is not, with the slightest push – in just the right place – it can be tipped.” Think about that statement in the context of some of the trends our industry is experiencing today:

  • Growing impact of social media in shaping consumer views and behaviors
  • Rapid expansion of programmatic media buying
  • Advances in ad technology, impacting many facets of the message creation & distribution cycle
  • Increasing prevalence of advertiser/ publisher direct relationships
  • Rise of non-traditional alternatives to ad agencies (i.e. IBM, Deloitte, Accenture)

Surely the 4A’s is aware of the aforementioned trends and the moves in recent months by advertisers such as P&G, Facebook, Google, Netflix, Expedia, L’Oreal and Wal-Mart to either move certain aspects of their advertising in-house ranging from creative to programmatic media buying; or are purported to be actively investigating “alternative models.”

Do the 4A’s and their members believe that they are impervious to such trends? What were they hoping to gain by breaking ranks from the ANA and the joint transparency task force? Perhaps more importantly, are 4A’s members prepared for the potential impact of the association’s actions? According to Mr. Gladwell:

“That is the paradox of the epidemic: that in order to create one contagious movement, you often have to create many small movements first.”

For the sake of the advertising agency community, let’s hope that their recent action on the topic of transparency isn’t the “small movement” that fuels the “epidemic” which forever tips their once favored status as trusted confidants to alternative vendors of commodity like marketing services.

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