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Agency Conflicts of Interest

  |  June 14, 2001   |  Comments

Positioned between the media and technology suppliers on the one hand and the spenders on the other, an ad agency is like a middleman, aware of the motives and objectives on both sides. Adam reveals potential conflict-of-interest scenarios.

Working for an agency, whether traditional or online, allows for excellent insight into the advertising industry. Positioned between the media and technology suppliers on the one hand and the spenders on the other, the middleman agency is generally well aware of both sides' motives and objectives.

Consequently, many ad-industry folks who work on client accounts (e.g., project managers, planners, buyers, traffickers) end up expanding their roles beyond their respective job descriptions. For example, my primary role is planning and implementing our clients' Web marketing strategies, but I have assumed secondary roles along the way, such as product development (expanding our services and products) and business development (partnerships, new-business pitches, and company expansion).

In our day-to-day operations, we come across the odd scenario that presents the agency with a slight conflict of interest. Every agency wants to maximize its client base and, ideally, have its clients continuously spending in large volumes. But there are situations in which a client relationship can be difficult for all parties involved. The following are examples of scenarios that can arise from time to time and can bring about potential conflicts of interest for an agency.

Scenario 1: Ad-Supported Clients

This type of client has become more and more scarce due to market conditions, but many publishers have remained successful with this revenue model, building their user base through advertising and selling ads at a premium on their site.

There are instances when a client like this will request that their agency spend other clients' ad dollars on media placements on their site. This is a tough situation, especially if the agency-client relationship depends on it. But as tempting (and as easy) as these buys may seem, every client's best interest needs to be taken into account before making any media buys, and to commit any dollars under this presumption is not possible. There's nothing wrong with placing buys on a client's site (and we have spent client dollars like this), but only in cases where the advertiser benefits from strong targeting and pricing rather than being a victim of a previous agreement.

Scenario 2: Same-Industry Clients

Interactive ad agencies are generally less particular than traditional agencies about servicing more than one client from within the same industry. For many traditional agencies, it's harder to sign a long-term agency of record and attain significant ad budgets if they already service another client within the same industry. We were recently approached by a potential client who was keen on working with our agency. At the time we were servicing another client in the same industry (although not a direct competitor), who was uncomfortable with the arrival of this potential client and saw the that client as a competitive threat. It's always tough to turn down a potential client, especially when you have relevant experience in servicing the client's industry.

In the case where the two clients are direct competitors (e.g., both are e-tailers that sell identical items), there is clearly a conflict of interest. But having same-industry clients makes you more attractive and valuable to potential clients -- because you specialize in their industry.

From what I read about traditional advertising, there are some industries, such as healthcare/pharmaceutical and nonprofits, in which competing companies often work with the same agencies. Agencies often even have industry-specific divisions to service such clients. So, is this a specialty situation (i.e., the agency has experience and expertise in a particular industry) or a conflict-of-interest situation?

Scenario 3: Licensing Agreements

I once with a gentleman who was developing a unique online advertising tool to allow for improved targeting. I was impressed with the product, and once it is fully developed, I will definitely examine it more carefully for my clients. Additionally, we also discussed the possibility of a licensing agreement for rights to the product for the Canadian market. The potential of such an agreement sounded promising, the only problem being that there is no way of telling what our clients will need in the upcoming months, and it's unfair to commit them beforehand. This is another example of a potential conflict of interest that often needs to be addressed within the agency environment.

It's always hard to avoid conflicts when everyone has his or her own best interest and the client's best interest in mind, when the online world is still in a state of flux, and when the learning curve across the industry is still so steep.

I'd like your feedback on these scenarios, especially if you're coming from a traditional agency perspective. Please email me your thoughts, and I'll try to explore them in another article.

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Adam Posman

Adam Posman is a strategic planner with BAM Strategy, a leading digital agency with offices in Montreal and Toronto. BAM's core services include strategic planning, media buying, creative production, online contests, email marketing, and customized marketing technologies.

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