Facebook’s agency review is about to head into its final stage, with proposals from the three remaining firms, Dentsu, Publicis and Havas, due in September, and a winner expected to be selected in October, according to people familiar with the process. The social media behemoth has been running agencies through tests and simulations to pick the one best suited to helm its brand, these ad executives say.
Now, more than four months into its media agency review, a clearer picture is emerging about what the social network wants in its next agency. Facebook has made audits a priority in an effort to account for every penny it spends through its next agency. Also, within the past two months, Facebook has run simulations with the agencies to test their ad buying capabilities and their “thought leadership” skills, according to people close to the review. And Facebook especially wants an agency partner that is most adept at buying media on its own platforms, which aside from its flagship namesake also includes Instagram, these executives say.
“They have a lot of money that goes through their own platform,” one advertising and media executive says, speaking on condition of anonymity. “So you need an agency that is really good obviously at using Facebook properties for marketing.”
The audits have been a sensitive subject for the agencies, though. Facebook wants to account for all the dark methods that advertising agencies could deploy to boost their revenue, like unbilled media and proprietary inventory. However, it has been viewed as an ironic position for the social network since it has also been on the other end of such demands, with advertisers pressing Facebook to be more transparent.
“Facebook wants to make sure that agencies are the subject of audits of any money that passes through the agency,” the advertising and media executive says. “There is nothing atypical about that demand.”
With unbilled media, agencies sometimes keep money from clients even when the money isn’t spent or when the publisher, who owns the ad space, doesn’t bill for it as a matter of oversight. Proprietary inventory is a pool of advertising space that agencies secure and resell from publishing and platform partners. Often brands are left in the dark about the true value of that inventory and how big a markup they were charged.
Matthew Kasindorf, senior VP of business intelligence and insight group at 4A’s, the ad industry trade group, says that brands are becoming bolder in their requests of agencies. Kasindorf is not involved with the Facebook review, but the 4A’s has been hearing, in general, marketers are asking for more.
Kasindorf says that Facebook’s conditions around audits may not be out of the ordinary, but it depends on how strict the company is. For instance, if Facebook wants to know pricing around “proprietary inventory,” most brands would demand such transparency. But if Facebook wants to know the details of the agency’s profit margins on proprietary media, that could be invasive.
“Marketers are looking to get more and more out of agencies,” Kasindorf says. “We are seeing that. I’m not quite sure why it becomes less than very professional or respectful as a business relationship, but often it does. Marketers are making a lot of demands. “Marketers face a lot of challenges too and they are being squeezed, but it continues to roll down hill and it gets to the point that it severely impacts an agency’s ability to do business.”
Facebook declined to discuss details of its terms with agencies in the review process. “This is the first time Facebook has reviewed our global media planning and buying partnerships, and we are looking forward to reviewing full service, global capabilities of potential partners, inclusive of everything from strategic thought leadership, innovation, media investment, cross-channel approaches, tools, tech and operations,” a Facebook spokesperson said by email.
The spokesperson also pointed Ad Age to the Association of National Advertisers, which has formulated many of industry practices in regards to agency-marketer relationships, highlighting the need for transparency in billing and full disclosure about how data is handled.
In April, Insider reported that Facebook made the demands to audit agencies in the review. Then earlier this summer, Wall Street Journal reported that WPP had withdrawn from the running, leaving Dentsu, Publicis and Havas still in the mix.
WPP, Dentsu, Publicis and Havas did not return requests for comment for this story.
In March, Facebook launched its media agency review to award its $1 billion in yearly advertising. Facebook had been spending about $750 million yearly, but the budget is rising as the social network spends more to promote its services and rehabilitate its image, according to advertising insiders. Facebook had been working with WPP’s Mindshare and Dentsu as its media buying agencies. Facebook has also been reshuffling its creative agencies, looking for new partners to work with its Creative X internal creative team. In April, Facebook tapped Johannes Leonardo to drive the "larger creative strategy" at Instagram.
Facebook is heading into a new phase for its brand that needs a marketing upgrade. Last year, it picked Alex Schultz to become its new chief marketing officer, after the departure of Antonio Lucio. Facebook is dealing with multiple threats to its image, which has taken a hit over the past five years. The Federal Trade Commission is currently challenging Facebook as a monopoly in personal social networking, and wants to potentially unwind its ownership of Instagram and WhatsApp. Meanwhile, Apple has led a public relations offensive against Facebook’s personalized advertising business model, which has helped fuel negative sentiment around the social network’s practices. Apple’s changes to its devices and software, restricting how much consumer data it shares to platforms, has forced Facebook to rethink its own operations.
At the same time, Facebook has external competition coming from rivals like TikTok and Snapchat.
These are all issues that are on the table during the agency review, according to people familiar with the review. Facebook is grading each partner on their ability to navigate these types of topics and come up with a game plan to react.
“The agency exercises are related to Facebook’s business or they’re related to Facebook’s view of the media industry or Facebook’s key future priorities,” says another ad exec, speaking on condition of anonymity. “It’s specific about what Facebook should be thinking about. What are the opportunities or threats.”
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August 23, 2021 at 04:00PM
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Facebook tests media agencies as review nears final round - AdAge.com
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