A(nother) Guide to Ad Transparency

Transparency in advertising has been a very hot topic for the last few years, encompassing both financial and operational transparency. However, with many overlapping principals it can be difficult to understand the differences between the two, and more importantly, how they could impact the ad transaction process in the months ahead.

In an effort to demystify the meaning of ad transparency, The American Association of Advertising Agencies (4As) and the Association of National Advertisers (ANA) formed the “Media Transparency Taskforce” with the goal of creating a set of recommended ad transaction practices for agencies and advertisers. While the two groups have not settled on a final set of guidelines, the 4As has issued their own set of recommendations. The following highlights what could be the most impactful of the 4As’ recommendations:

Sections 1, 2 & 3 – Address client/agency retained relationships for U.S. media planning and buying services:

The default principle in all client/agency relationships where the agency is agent and the client is principal is full disclosure and full transparency in media planning and buying, unless there is an exception that the client has agreed to in advance and is covered by a separate agreement. Further, the client/agency agreement should specify that the client is the principal and the agency is the agent.
The agency and the client can agree to a fixed price or other pricing arrangements for the agency's other products and services through open and arms-length negotiations. These might include proprietary media (including pre-owned inventory) trading desks, barter, programmatic buying and other future models.
The agency business is governed by contracts with clients. All terms of business between the agency and the client should be documented in a formal written agreement(s), and both parties should comply with the obligations to the other party that are noted in the respective agreement.

Sections 4 & 5 – Address separate commercial relationships between agencies and media vendors and other suppliers:

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.
The agency should disclose and seek the client's acknowledgement of any agency's ownership interest in any entity and details of any of its employees who are directors of any entity that the agency recommends or uses as a provider of products or services to the client.

To capture the opportunities of ad transparency, a thorough understanding of how ad spots are trafficked to media destinations is essential – especially for advertisers. Advertisers should be aware of the choices their agencies are making in ad distribution and the costs associated. Sometimes trafficking of spots gets bundled with other services. However, many advertisers save money when agency costs are itemized and service partner choice is transparent.

To help facilitate the transparency of their ad distribution, advertisers should consider using an ad delivery service that has a deep understanding of the new transparency rules and can provide a second set of eyes on an ad spot’s journey. Having this extra guidance can help advertisers save resources and ensure that their ads arrive on time and generate revenue. If you could use some extra help in understanding the new ad transparency guidelines and how they may affect your ad distribution, please call our Ad Suite team at 646-230-8556.