OPT-IN MEDIA BUYS – BETWEEN A ROCK AND A HARD PLACE

An Issue in TWO PARTS…. Part 2: CONSIDERATIONS FOR ADVERTISERS ON OPT-IN ISSUES: What should advertisers consider as they approach opt-in transactions: Make sure they are truly opt-in.  Agency contracts should not include a contractual obligation requiring advertisers to “approve” these transactions if the agency says the media being proposed is “equivalent” to what they would buy …

An Issue in TWO PARTS….

Part 2: CONSIDERATIONS FOR ADVERTISERS ON OPT-IN ISSUES:

What should advertisers consider as they approach opt-in transactions:

  • Make sure they are truly opt-in.  Agency contracts should not include a contractual obligation requiring advertisers to “approve” these transactions if the agency says the media being proposed is “equivalent” to what they would buy as agentand/or supposed savings will be delivered.
  • When negotiating savings guarantees, ensure these are not contingent on opting-in.  Any additional “savings” from opt-in transactions should be on top.  During agency pitches, agencies should be made aware from the start that any savings guarantees should not be tied to opt-in requirements.
  • Set up clear internal procedures on how opt-in approvals should work.  An agency should be required to provide a recommendation in advance with a clear rationale supporting the media being proposed, as well as an outline of savings against the same media being purchased through regular, disclosed, “agent” transactions.  Advertisers should also limit approval authority to senior management who have a clear understanding of what is being approved and the issues involved with opt-in transactions.  Training should also be provided to marketing, media and procurement personnel who have anything to do with these transactions.
  • Understand the media agency landscape.  Some agencies are very aggressive in pushing opt-in transactions.  Other agencies also offer savings and efficiencies, but do not engage in this practice.  There is choice in the market regarding this.
  • Negotiate directly with key media vendors.  Many large advertisers are doing direct deals with large media vendors such as Facebook and Google.  In some cases, these deals are global.  Direct deals give advertisers full transparency to what was negotiated and reduce the risk of agency rebates and other leaks in the system.
  • Inhouse.  Many advertisers are taking their media buying in-house, particularly programmatic buys.  This allows advertisers to take full control of these buys but require investment in technology and specialized personnel.
  • Unbundle media planning from buying.  Agencies should not be recommending what to buy and be your exclusive sellers of the same media.  Opt-in media purchases should be arms-length transactions.  In order to do this, advertisers should consider assigning planning and buying duties to different companies. Advertisers could have a planning agency and several buying agencies to whom they could bid out the plan.  If agencies want to be media vendors, they should be subject to the same rules as other vendors. 
  • Ensure you negotiate maximum audit rights regarding these transactions.  At a minimum, the agency should report what they are charging you on a unit-by-unit basis, so you can evaluate if opt-in buys deliver savings vs. regular buys.  Some advertisers are asking for caps on margins for these transactions with audit rights that allow them to verify this. 

With everything going on, we agree with Reed Smith, General Counsel to the ANA, that 2019 should be The Year of the Audit.