Competition watchdog the ACCC has decided against regulatory intervention of media agencies when it comes to digital ad pricing and disclosure practices.
The interim report on the digital advertising services inquiry says agencies perform a key role in purchasing ad inventory, including programmatic digital advertising.
And this may also add a layer of opacity to the adtech supply chain.
The ACCC also looked at rebates from publishers influencing media buyers to transact with platforms offering the greatest profit margins.
"Conflicts of interests between ad agencies and their advertiser clients may materialise in some pricing and performance transparency issues relating to the disclosure of rebates, discounts and incentives, and the use of ad tech services that are owned by the agency or holding company," says the report.
"However, the ACCC’s preliminary view is that regulatory intervention is not required in relation to the pricing and disclosure practices of ad agencies.
"The ACCC’s preliminary conclusion is that potential issues relating to ad agency conduct may be mitigated through advertisers informing themselves about the impact of certain practice (e.g. rebates, discounts and incentives, agency-wide fee models, and whether the agency owns any ad tech services) and seeking protections in contracts to ensure their contracting agency acts in their best interests."
Publishers may offer agencies or the agency holding company discounts, rebates, or other incentives, if they reach certain levels of spend.
"While this is common practice, the ACCC considers that there are potential conflicts of interest that may arise," says the report.
"Generally, the more that an agency, trading desk or holding group spends with a publisher or digital platform, the higher the level of rebates, discounts, bonus ad impressions or other incentives that the agency will receive from the publisher or digital platform.
"Specifically, the ACCC has heard from stakeholders that large platforms such as Google and Facebook offer
incentives to increase advertiser spend."
However, the ACCC says this is not inherently a problem but could influence the agency’s decisions about where to direct advertiser dollars.
"This may cause concerns if agencies are directing spending towards publishers who provide them with the greatest profit margins (for example, where agencies can minimise their costs by achieving volume discounts), and the related impressions either are not the best value for their advertiser clients or are not being served to the most appropriate websites," the report says.
"This concern is exacerbated when the client is unable to effectively monitor decisions about how its advertiser dollars are spent."
The Media Federation of Australia told the ACCC that the level of transparency that advertiser clients receive is partly influenced by the remuneration method.
Advertisers have an increased desire for visibility over cost components.
For example, with an itemised commission based model an advertiser will generally be able to see all costs and fees to be incurred by the agency.
In a fixed price guaranteed outcome model, the agency guarantees a performance outcome and provides a fixed price to the advertiser upfront before any ad inventory is purchased.
The agency then works to purchase advertising at a cost lower than the agreed price in order to earn a margin.
Under this agency fee model, the costs incurred, discounts and rebates provided to the agency (by sellers of ad inventory) are
not always shared with the advertiser.
The ACCC: " ... while agency fee models may differ, it is not entirely clear to what extent the remuneration model impacts the level of transparency and information that can be provided to advertisers."
The IAB reports that 40% of advertisers bought content publishers’ ad inventory through an agency in the September quarter of 2020.
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