Nadia Shchipitsyna
By Nadia Shchipitsyna
Sep 23, 2016 2:00:00 PM

#MediaSnack Ep. 44: Agency Overcharges Client 600 Times!

 

On this episode #MediaSnack we bring you rather sad news that the media transparency concerns are not going away anytime soon. Stories have been emerging this week from Japan where Dentsu, the dominant advertising services group has admitted that its digital media buying operation has overcharged some clients, they suggest there could be over 600 cases of over-charging across the last 5 years. It is believed that the victim on this occasion was long-standing Dentsu client Toyota, one of Japan’s biggest corporations and famous for the 60+ year longevity its Dentsu relationship in an era of increasingly short-lived client and agency tenures.

The story has made big news around the world and unsurprisingly spilt into the finance pages beyond the marketing trade press. The Financial Times, Bloomberg and others have been reporting the details and the impact of the news has brought Dentsu stock down 5% at the time of writing.

What does it mean for the industry? This is a very big deal. It calls into question a few things, not least Dentsu’s dominance of the Japan market and the potential for conflicts of interest that could exist in a company which not only buys media on behalf of its clients but also has an interest on the other side of the table, owning some of the media it is buying for its clients. This ‘complexity’ of Dentsu’s influence has been well-known for many years, but has been accepted as a cultural norm because Japanese business relationships have been built on gentleman’s agreement and deep trust. These revelations, which have now caused Dentsu CEO to issue a public apology and admit the wrongdoing, will surely have a lasting impact on the reputation of Dentsu and perhaps even change the way advertisers engage with agencies in Japan, now demanding greater transparency and accountability from their media buying contracts. 

Earlier this week, Tom spoke to Asian trade press AdNews and highlighted that these kinds of leaks coming out of advertising agencies may increase as more light is shone on the non-transparent practices of media agencies around the world. 

On #MediaSnack we consider the implications and what, as a global marketer, you should make of this latest scandal over agency financial management? Is it a concern, how should you react and what should you be demanding from your media agencies to avoid this stuff? Sadly, there’s not room on the show to detail all the transparency stories as fast as they are appearing, should you be interested to read further try some of these links: