This means that agency profits were bolstered by rebates that were earned on the basis of client spends. The ANA represents 700 firms such as Procter & Gamble, Coca-Cola and Apple that together spend or support $300 billion a year on marketing and advertising, says the ANA website. Even a middling 10 per cent on that amounts to $30 billion dollars. That is a lot of money for an industry controlled by six holding firms, the biggest of which, WPP, had a top line of $18.7 billion, last year.
Incidentally, this was the third report/survey highlighting the issue of rebates in the US, since 2012. For long agencies maintained that rebates were common in foreign markets, not in the US. So the report, which doesn't name any firms or person, has created a storm of sorts in the US ad industry. There is talk of investors in the holding firms getting involved, of a clean-up etc.
In India matters have gone way beyond rebates, yet no advertiser or agency group has raised any alarm. For years there have been gory stories about the amount of corruption in media buying and how entrenched it is. Three years backthis column had written about it. There has since then been one report tracking fraud in the media and entertainment industry from EY. It listed the practice of paying a bribe to a media buyer/planner as one of the most common forms of it.
It is routine for planners or buyers at media agencies to demand and get anything from consumer durables (an AC, a fridge, a TV, smartphone), tickets to events, cash, a honeymoon trip among other things. One firm seeking advertising money directly from an advertiser had to search for a flat for the manager in charge of the decision and pay the brokerage too.So not just the agency, which is the middleman, but the advertiser too, at times, is complicit. And these are not hole-in-the-corner companies but "BSE 30 type of firms," says the head of an event firm that depends on ad revenues. That explains why advertisers don't create a ruckus or demand better metrics, when they fail or are not available.
There are variations though. Media suppliers say they don't face a demand while dealing with promoters of advertiser firms directly. And firms that do not play the game survive, but barely so. Five years back when the event firm mentioned above decided not to make pay-offs, its revenue plummeted by 40 per cent before creeping back up.
The blame for rampant corruption is attributed to several reasons - the biggest being that India is a buyers market. Of the Rs 47,500 crore that marketers spent on advertising last year a bulk passed through the hands of seven large communications groups - WPP, Publicis, Interpublic, Omnicom, Dentsu, Madison and Havas. Each of them is vertically and horizontally integrated and together they have a stranglehold over the biggest advertisers. For instance WPP owns JWT, O&M, Group M, Mindshare, and dozens of firms in design, advertising, so on. On the sellers' side more than 800 news channels, over one lakh publications, thousands of websites make it a fragmented, hyper-competitive mess.
That is the structure of the market but it still doesn't explain why well-paid young, middle-aged men and women, working in the private sector, need financial favours to do their job.
Twitter: @vanitakohlik