Expertise Beyond the Numbers

Major Brands Aggressively Pursuing Audits of Adverting Agency Contracts [Blog Post]

In the wake of a probe regarding opaque media buying practices, SC&H Group’s Contract Compliance Audit Services (CCAS) team shines a light on how major brands are seeking transparency from their advertising agency partners.

Earlier this summer, the Association of National Advertisers (ANA) published an in-depth probe of the advertising industry, which found that media buying rebates and other nontransparent practices are “pervasive” in the U.S.

The probe uncovered how advertising agencies are being rewarded with cash rebates from media companies for spending a certain amount on behalf of clients –but not passing on the savings to clients.

As a result, major brands such as J.P. Morgan, General Electric, Sears Holdings Corp., and Nationwide Mutual Insurance are launching audits to determine if their agencies followed the same practice. The brands also plan to investigate potential holes in their third-party contracts with these partners.

For many marketers, this is a major issue highlighting the complexities of media buying, especially for major brands that have inherited large umbrella agency agreements after decades of mergers and acquisitions.

Recently the Wall Street Journal highlighted how the revelations from the ANA report have eroded the trust between marketers and agencies in the nearly $540 billion global ad marketplace.

While on the surface, it seems that contract audits could negatively impact client-agency relationships, the reality is quite the opposite. Well-executed contract audits can create a “safe zone” for issues to be evaluated in a thoughtful manner.  In addition, contract audits can increase transparency, enhance accountability, and improve ROI on overall outcomes in the long-term.

These practices have been in question within the advertising industry for years. But the right audit approach can serve as a catalyst for change in a historically complex purchasing environment. This is an opportunity for involved parties to deepen trust and transparency, and strengthen long-term relationships.

Interested in exploring this topic in more detail? Listen to Patrick Gahagan, a Director in the CCAS practice, discuss the true value of agency contract compliance audits in the following SC&H Group podcast. In addition, this SC&H Group white paper reveals the six key traits to look for when hiring an independent agency contract auditor.

If you would like speak with Patrick about how to best implement contract compliance audits with your advertising agency partners, please contact him here.