Though not all advertisers are aware of it, advertising agencies sometimes receive incentives or rebates from media companies for steering clients in the direction of that particular media outlet? That is, the people you pay to help you promote your products and services may be paid by the people who are recommended to you as sound media partners. Potentially problematic conflict of interest? You betcha.
The practice is less common in the US than in other jurisdictions, but it does happen, as revealed in a recent survey conducted by the Association of National Advertisers and Reed Smith (the firm of yours truly). The survey found the practice most likely in radio and tv advertising, though still a factor in new media advertising (Internet, social media, etc.).
Why is this an issue? Because companies that advertise their products or services (in other words, everyone) should expect impartial advice from the people they pay to help promote their products and services. Or at the very least know when there is a potential conflict and so can assess the agency's recommendations more accurately. Moreover, for companies with large-scale ad budgets and/or lots of bargaining power, this could mean a reduction in your overall expenditures if you are able to get a pass-through on rebates or incentives.
So what should games companies do about this issue? Understand how the "dollar flow" goes with regard to their ad spends, and make sure that knowledge is reflected in your assessments of ad agency agreements and recommendations. Here are some "best practice" tips from to help with this:
- Require your ad agencies to be completely transparent regarding any rebates / incentives offered and received, and make sure that the entire benefit of the rebate goes to you, the advertiser (or if you're willing to give some portion of it to the agency, but either way, state how much you get).
- Clearly specify how rebates will be handled. Do they come back to you within 30 days? Can they be put into the account as a credit against outstanding fees? If you don't say, there's the potential for the agency to sit on the rebates for a while, making this an interest free loan to the agency (assuming you get it back at all).
- In the case of "global" advertising arrangements, make sure that this language is reflected in both the agency and holding company levels so that leave no stone unturned.
- Consider conducting periodic audits to ensure that unauthorized incentives / rebate activity is not occurring.