Advertising is the lifeblood of many of the largest and most dynamic American companies. Yet, despite this enormous investment, advertisers typically enjoy precious little transparency into the business practices of the media agencies that they entrust with this critical function.
In today’s increasingly interconnected world, no decision is more critical to the success of advertising than the choice of which media to use to connect with the best possible audience. In the U.S. market alone, advertisers spent nearly $200 billion last year on media of all varieties, including television, print, radio, out-of-home, and, increasingly, digital advertising.
In June 2016, K2 Intelligence comprehensively exposed industrywide nontransparent business practices, including cash rebates to media agencies, throughout the U.S. media ad-buying ecosystem. This ground-breaking study was conducted on behalf of the Association of National Advertisers (ANA). Certain agency practices were found to be particularly problematic and pervasive:
- Media agencies soliciting and accepting rebates from media suppliers without passing them back—or even disclosing them—to their clients.
- Media agencies using principal transactions to conceal egregious conflicts of interest.
- Media agencies holding equity interests in their own media suppliers.
The most obvious impact of these practices is the diversion of millions of dollars away from advertisers and into the pockets of their media agencies. Instead of receiving the benefit of their own buying power, advertisers are often deprived of rebates—in the form of cash, free media space, or service agreements—that should rightfully belong to them under the terms of their agency contracts.
Just as important, the conflicts of interest that these practices create inevitably corrupt media buying decisions. Whether it’s mandating the purchase of the highest-margin media without regard to its quality, favoring the media suppliers that provide the biggest rebates, or directing client spend to suppliers in which they hold an equity stake, many media agencies have pursued their own financial interests at the expense of what’s best for their clients.
The inherently nontransparent nature of these practices has, by design, made them difficult—if not impossible—for advertisers to detect using standard auditing techniques.
Detecting, preventing, and remediating the damage caused by these schemes requires a dramatically different approach. K2 Intelligence helps advertisers crack the code.
As the first to expose these practices, we know more about how these schemes are structured, executed, and concealed than any other firm in the world. By bringing to bear the best fact-finding team in the industry—the same team that was so successful for the ANA—we can help companies protect their critical media investments more effectively than ever before. Far beyond auditing, K2 Intelligence uses a unique combination of professional investigators, forensic accountants, cyber professionals, investigative researchers, and a powerful network of industry sources to uncover key facts for our clients.
Specific services include the following:
- Determining whether and to what extent an advertiser’s media agency has engaged in the kinds of nontransparent business practices detailed in the K2 Intelligence report.
- Working with a qualified law firm to recover funds that should rightfully be returned to an advertiser.
- Developing controls to prevent the recurrence of damaging nontransparent business practices.
- Monitoring a media agency’s compliance with controls on an ongoing basis.