Tom Denford
By Tom Denford
Mar 23, 2012 11:37:25 AM

Rebate Wars Episode IV: A New Hope


Are rebates going to become this years hot topic? We hope so but Darth Vader may have something to say about that.

The WFA published its findings from a recent survey of advertisers about their perceptions of rebates in media trading. It makes for some uncomfortable but wholly unsurprising reading.

Media rebates have been an issue for many years. Like spiders they are ugly and unsightly and many (including myself) would kill them off tomorrow given the chance. Yet a large proportion of the business champion them as being part and parcel of the media trading environment, that they perform a role and are important to the equilibrium and the food chain of media trading.

Whichever side of that particular gnarly tuffet that Miss Muffet sits, it is good that the WFA are trying to raise awareness of rebates broadly. I'm often surprised how little knowledge and understanding there is about rebates amongst many senior media clients companies.

This is no particular fault of their own however, they have perhaps just never been exposed to the rebate question or have worked with agencies that have successfully kept the rebate discussion out of their contracts.

I suggest that understanding of rebates and what they do is a critical part of responsibly managing a media budget these days because despite the media business presenting itself as becoming more transparent and accountable (largely using digital media as the "new Hope") the rebates issue in its many guises could well be becoming worse.

To maintain my StarWars analogies, like 'The Force' in StarWars, digitisation of media trading has potential for immense good to happen (in the form of greater accountability and measurement) but also gives agencies scope for evils (in the form of opaque trading and media brokering) should they decide to follow the Dark Side of the force. Rebates in digital media trading could become far greater sources of 'unofficial' income for agencies than ever before if not kept in check.

Clients need to watch out. A similar recent article in AdAge quotes Mark Butterfield suggesting client's should use an auditor to manage rebate policy but an auditor may only be able to diagnose dodgy rebate practices in the agency, rather than supply the cure. What clients really need is someone to review your contract terms and close the  loopholes that permit rebates to be retained by the agency, ie treating the causes of the problem rather than just the symptoms.

Hand-in-hand with this needs to be a grown up conversation involving agency, procurement and marketing to define how the agency should be incentivised transparently (and paid fairly).