Is Your Media Agency Contract Working for You?

Your media agency contract is one of the most commercially important documents your marketing team has.

Yet it is often one of the least scrutinised.

Whether your business invests £2m, £10m or £20m in media, the contract determines much more than how your agency gets paid. It can determine how rebates and discounts are treated, how proprietary media is governed, what transparency you receive, what information you can access and, ultimately, how much of the value generated by your media investment comes back to your business.

And as media buying becomes increasingly complex, an agreement written several years ago may no longer provide the protection or transparency an advertiser needs today.

At 23 Media Audits, we believe the contract should be considered alongside media performance - not separately from it.

A media performance audit can tell you whether your agency is delivering competitive pricing, quality and value.

But there is another question that needs to be asked:

A contract should establish clear principles around:

• Agency remuneration
• Rebates, discounts and other commercial benefits
• Proprietary and inventory media
• Related-party transactions
• Media costs and mark-ups
• Performance expectations
• Data and reporting
• Audit and information rights

If these areas are unclear, it becomes much harder for an advertiser to establish what it is actually receiving from its agency relationship.

And importantly, this isn’t simply a legal issue.

It is a commercial issue.

Commission remains a perfectly legitimate way of remunerating an agency.

But when agency remuneration is linked directly to media expenditure, advertisers should understand the incentives this creates.

The contract needs to clearly distinguish between:

the cost of media

the cost of agency services

and

any other commercial value or income generated through the advertiser’s media investment.

This becomes particularly important when other commercial benefits exist within the media supply chain.

The question shouldn’t simply be:

“Are we getting a good media rate?”

It should be:

“Do we understand the complete economics of the transaction?”

Media agencies can generate commercial benefits through their relationships with media owners and technology providers.

These can take different forms, including volume-related benefits, discounts, free inventory, value arrangements and other incentives.

The important issue for an advertiser is not simply whether these arrangements exist.

It is whether the contract clearly establishes:

• what constitutes a commercial benefit;
• how it is disclosed;
• who is entitled to it;
• how it is valued;
• how it is allocated;
• and how the advertiser can verify the treatment.

Where value is generated as a result of an advertiser’s investment, the advertiser should not have to rely on assumptions about how that value is treated.

Transparency needs to be contractual, not just promised.

This is becoming increasingly important.

An agency or its associated companies may have arrangements where media, inventory, technology or other services are purchased or controlled on a principal basis and subsequently provided to an advertiser.

These arrangements are not necessarily inappropriate.

But they can make it more difficult for an advertiser to understand the underlying economics.

What did the media actually cost?

What margin has been applied?

Is the agency receiving any additional commercial benefit?

Is the arrangement delivering better value than the alternatives available in the market?

And has the advertiser been given sufficient information to make an informed decision?

A modern contract should make these arrangements visible and establish appropriate disclosure, approval and performance requirements.

The digital media supply chain can involve agencies, DSPs, SSPs, exchanges, verification providers, data companies and other intermediaries.

As a result, the route from advertiser investment to media delivery can be considerably more complex than it was when many existing agency contracts were written.

That complexity can create opportunities for efficiency and innovation.

It can also create opportunities for value to become difficult to see.

Advertisers need sufficient transparency to understand what they are paying for, who is being paid and whether the commercial arrangements are delivering the expected value.

For digital investment, this means looking beyond headline CPMs.

Cost, quality, supply-chain transparency and commercial terms all matter.

Performance needs to be part of the contract

Perhaps the biggest opportunity is to move the conversation beyond simply asking:

“How much are we paying our agency?”

and instead ask:

“What are we paying for, and how do we know we received it?”

Performance should be defined in measurable terms appropriate to the advertiser and its media mix.

For TV, that could include pricing, audience delivery, quality, positioning and other agreed measures.

For digital, it could include cost, quality, viewability, verification, supply-chain transparency and effectiveness.

At an overall relationship level, it could include delivery against agreed benchmarks, service standards and commercial objectives.

The precise measures will differ by advertiser.

The principle shouldn’t.

If performance matters to the advertiser, it should be measurable and, where appropriate, contractually recognised.

This is where we believe advertisers should challenge themselves.

When was the current contract written?

Has it been updated as the media landscape has changed?

Does it reflect the way your agency actually operates today?

Does it cover proprietary media?

Does it clearly define commercial benefits?

Are your audit rights sufficiently broad?

Does the remuneration model still make sense?

And does the contract give you access to the information required to independently verify performance?

A contract can be perfectly acceptable when it is signed and become increasingly inadequate as the industry evolves.

That is why a contract review should not necessarily wait until the next agency pitch or renewal.

An annual media audit and a contract review answer different questions.

The audit asks:

“How well is the agency performing against the agreed measures?”

The contract review asks:

“Are the measures and commercial protections themselves strong enough?”

If the original agreement was written by the agency, or was developed before independent media auditing was introduced, there may be areas that deserve a more fundamental review.

The objective isn’t to rewrite a contract for the sake of it.

It is to make sure the commercial agreement reflects the relationship that actually exists today.

That can include reviewing remuneration, commercial benefits, proprietary media, performance measures, information rights, audit provisions and the responsibilities of both parties.

The potential value of getting this right can be substantial.

A 5% improvement in media value represents:

• £100,000 on £2m of media investment
• £250,000 on £5m
• £500,000 on £10m
• £1m on £20m

That doesn’t mean every advertiser has 5% waiting to be recovered.

Nor should an auditor promise savings before the evidence has been established.

But it demonstrates why relatively small differences in media cost, quality, commercial terms or agency remuneration deserve attention.

The objective shouldn’t simply be to find money after it has been spent.

It should be to create a commercial framework that makes it harder for value to be lost in the first place.

The role of an independent media auditor is evolving.

It is no longer simply about checking whether the agency achieved a competitive CPT.

Advertisers increasingly need to understand the broader commercial relationship:

• What are we paying?
• What are we getting?
• Where is value being created?
• Who benefits from that value?
• How is performance measured?
• And can we independently verify it?

A strong advertiser-agency relationship does not need to be adversarial.

In fact, the best relationships are often those where expectations are clear, performance is measurable and both parties understand the commercial framework from the outset.

For advertisers with significant media investment, that isn’t bureaucracy.

It is good commercial governance.

At 23 Media Audits, we believe the contract, the performance audit and the ongoing agency relationship should work together.

Audit the performance. Review the contract. Align the remuneration. Protect the value.

The best time to establish whether your media agency contract is working hard enough for your business is before the next media pound is spent - not after.