WPP’s media buying arm, GroupM, has been revising the majority of its contracts with UK-based media owners, in an apparent attempt to shore up any transparency concerns.
Several sources at UK media companies – across TV, to newspapers, to digital businesses – said their contracts had recently been changed by GroupM.
Sources disagree on the importance of the changes. One described them as “not material” while another said the new contracts bear “no resemblance” to the old ones.
A GroupM spokesman sent Business Insider this statement:
“Negotiating contracts is our everyday business as we work to deliver advantage to our clients. GroupM UK has simply implemented template contract language and structure to enhance clarity and ensure deployment of best practices. The use of common definitions and format does not change our way of doing business.”
At the center of the revisions is wording around what are known in the industry as “value pots,” sources told Business Insider.
Value pots refer to the bank of free ad inventory media buying groups accrue as credit once they reach an agreed level of spend with a media owner.
Also known as “value banks,” they are a contentious practice in the marketing industry. Most marketers would hope that any bonus inventory, accrued thanks to their ad spending, would be returned back to them. However, as value banks build up across an entire group of agencies at a holding company it can be difficult for an agency to trace back which client is owed what.
There are also concerns amongst marketers that agencies are spending their budgets with media owners simply to meet the value bank agreement they have in place, rather than spending dollars in the brand’s best interests.
In addition, there have been occasions where agencies were found to have sold the free slots back to their clients. GroupM’s Mediacom unit in Australia breached its parent company’s policy by selling value bank slots back to four of its clients at discounted rates, an audit found last year. It has since refunded the clients, as Mumbrella reported.
Redrafting contracts does not mean that GroupM UK has done anything untoward – and as the statement points out, the company wants to enhance clarity.
The timing is interesting, though.
The revisions followed the release of the high-profile Association of National Advertisers (ANA)-commissioned study into media agency rebates. The sources we spoke to think the release of the report followed quickly by contracts being revised was not a coincidence.
The ANA study, carried out by investigations firm K2, alleged rebates and other non-transparent business practices were pervasive in the US media ad-buying ecosystem.
In the US, rebates are illegal if they are not passed back to clients, whereas in the UK, such practices are legal provided they are disclosed. Nonetheless, the ripples of the ANA report, which outlined “evidence of a fundamental disconnect in the advertising industry regarding the basic nature of the advertiser-agency relationship,” were felt across the Atlantic.
In April, UK advertiser body ISBA preceded the report’s release with the publication of a template contract designed to help marketers protect their interests when negotiating terms with media agencies. The 51-page contract seeks for agencies to provide “explicit definitions” of “AVBs/value pots and free inventory.”
With regard to the ANA study, GroupM and parent company WPP have criticized the report’s independence and the advertiser body’s selection process for the firms to carry out the probe.