Advertising agencies haven’t changed very much since the 1950’s. Sure, most of the larger agencies have tacked on “digital” departments and made a number of acquisitions in the past decade to make themselves more agile and responsive to evolving client needs.
However, I was watching MadMen with my wife last night, and I remarked on how similar some of the agencies I work with act as if they were Sterling Cooper Draper Pryce rather than an agency responsive to 2015 needs. The “rebate” is just one of a number of issues facing larger agencies and their feeder smaller agencies in the coming decade as clients and marketers wise up and demand more transparencies…
The rebates stem from the arrangements that some agencies have in place with media sellers that reward them for spending more. If the agency chooses to direct more of their clients’ budgets to specific vendors, the agency may receive lower ad rates, free ad space or even cash.
“Emerging concerns among marketers around different forms of agency rebates in the United States causes us to partially (if slightly) re-assess some of our views on long-term holding company growth,” Mr. Wieser wrote in the research note. “With a drumbeat of negativity to come from marketers only now learning about the issue, we recommend investors move to sidelines or exit the sector for the time being.”