Sequential Liability Works for Both Sides

The goal of last week’s third semiannual Media Buyers Summit in Whistler, British Columbia, was to continue the dialogue between buyers and sellers that began at Digitrends’ first Media Buyers Summit last March in Aspen, CO. The primary tenor of this dialogue was to change the way interactive media is bought, sold, and measured. Attending were about 40 VIP media buyers and about 80 VIP media sellers aiming to hash out the latest issues shaping online advertising.

Now, some of you might be thinking, If this thing was in Whistler, wasn’t it really just another media boondoggle? The answer is, well, sure, some boondoggling was going on. But only after the 7:30 a.m. workshop breakfast, the three-and-a-half-hour panel discussions, and the small work groups of buyers and sellers who were gathered around small tables, talking about the issues and working toward a consensus.

What were the issues?

Well, one of the issues you readers of ClickZ have already become quite familiar with was sequential liability. The other grand topic — the current state of pricing models — I will discuss next week.

Sequential Liability: A Hot Issue

This was certainly the hottest issue of the conference. It was the one item in the new Terms and Conditions released jointly by the Internet Advertising Bureau (IAB) and the American Association of Advertising Agencies (AAAA) that really made people angry.

And there were two things related to this issue that caused heartburn for most publishers. One was that many publishers do not hail from traditional media backgrounds where sequential liability (we used to call it “care of” billing in broadcast circles) is common and understood.

The other was that not all publishers were at the original negotiating table when the Terms and Conditions were put together. Many of them felt hurt and left out of the process. I understand those feelings. But I was peripherally involved with the development process of these Terms and Conditions and know that many publishers who did not participate were invited to but didn’t. Now, after the fact, they are upset.

Again, I understand. But, when it is all said and done, the IAB did finally get involved with the final development of the Terms and Conditions (albeit at the 11th hour) and put its name on them. Since the IAB is a representative organization for publishers, sites need to address their concerns with the IAB, not the agencies. If every publisher looking to make hay with paid advertising models was allowed to have the same voice during the negotiations, the whole affair would have been as chaotic and noisy as the buying process is now.

The Publisher’s Responsibility

On the issue of sequential liability, it is necessary to clear something up. Sequential liability does not mean that a publisher must accept any and all insertion orders (IOs) from an agency or — under any and all circumstances — have the financial reconciliation of that contract be subject to sequential liability.

It means that if a site publisher chooses to accept an IO from an agency without the due diligence of running credit checks on the advertiser, then a clause of sequential liability is invoked. If the site publisher, on the other hand, wishes to require payment upfront because the potential advertiser is an unknown or does not demonstrate reasonable fiscal viability in the eyes of the publisher’s credit department, that is quite all right.

Sequential liability does not mean that agencies just sit back and watch the Amway cash roll in from advertisers and ride the money on the float, picking and choosing when to pay publishers. Nor does it mean that publishers assume all the risk and agencies just kick it. It means that in a rush to actualize dreams of avarice, publishers should probably not take every IO that shows up in their fax machines.

The Agency’s Role

The agency is just that, an AGENT. It is not the CLIENT. Now, some publishers might think that they should just go straight to the client then. Well, that worked for a while. But 82 percent of marketing dollars spent every year are run through agencies. Short-circuiting the system means fighting for only 18 percent out of a possible 100 percent. That just doesn’t make sense to me.

Traditional advertisers have had the time to establish these best business practices. So when the “irrational exuberance” of the dot-communist revolution came to them, many charged much higher rates than were standard and almost always required payment upfront from a client that did not pass muster on Dun & Bradstreet. More and more, as traditional agencies become responsible for their clients’ interactive media, rules from the old world will have to apply. This isn’t to suggest that everything that is old becomes new again, but it means that if it ain’t broke, don’t fix it.

Advertising as an industry is famous for reinventing the wheel every two years because it not only forgets what it did before, but it also forgets whether what it did before worked. The interactive space cannot tolerate those kinds of inefficiencies. So let’s not create them. Sequential liability canwork for both sides.

Related reading

screen-shot-2016-09-13-at-10-20-04
mike-andrews
rsz_adblock
/IMG/224/276224/adblock-plus-logo-320x198
<