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Malpractice and conflicts of interest common in programmatic, claims ex agency tech head

Hughes: Agencies have 'orchestrated' clients' expectations

Hughes: Agencies have ‘orchestrated’ clients’ expectations

Media agencies are committing “malpractice” in how they manage their clients’ digital advertising budgets, and have undeclared financial conflicts of interest in the technology solutions they recommend, the former head of technology for one of Australia’s biggest media buying companies has claimed.

Andrew Hughes, who was head of technology for IPG Mediabrands until two years ago, has also claimed that agencies deliberately talk down the potential effectiveness of digital campaigns in order to manage client expectations.

His comments came as he announced the launch of a “full transparency and disclosure” business model for his consultancy Louder, which has clients across Asia Pacific. The transparency will cover full disclosure of technology, media and services costs, fees and rebates.

Hughes pointed to whistleblowing around the world of media agency groups making profits of 60-70% on their programmatic practices.

In a statement, Hughes wrote:

“Scrutiny needs extending to in-agency or in-vendor trading solutions, or performance publishers owned by agency groups that effectively operate without declaring media cost or margin to clients.

“It is time for this malpractice to end by only delivering fully accountable solutions to clients.”

With procurement teams and auditors now wise to most techniques used by agencies to bring in additional revenues in traditional media channels, recent years have seen global groups keen to insert themselves into the programmatic buying chain, which effectively allows them to buy online ads from publishers at one price and pass them along to clients at another.

Hughes also claims that where brands use their agencies for advice on the best technology solution, they are incentivised to recommend certain options.

Louder has clients in Singapore, Hong Kong, Japan, Malaysia, South Korea and India as well as Australia. Hughes noted that while market maturity of programmatic varies by market, with mobile programmatic networks rapidly expanding advertisers are exposed to similar issues across the region – and agencies have conflicts of interest everywhere.

He commented: “On the technology front for both advertisers and publishers, it’s not much different, with specialists and consultants having alternative financial agendas for pushing particular solutions which cumulate in revenue share or financial incentives for recommending a vendor.

“All this hardly comes as a surprise with the same advisory firms being paid by the client for the strategy, and the subsequent delivery of services to put the recommended solutions live.

“Surprising is, if anything, the extent by which marketers underestimate their brand’s potential to deliver in digital – their expectations being carefully orchestrated by those advisors and agencies.”

In his comments, Hughes did not suggest he had seen such practices during his time at IPG Mediabrands.

Tim Burrowes

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