Understanding kickbacks in the advertising industry
It’s 2021 and who doesn’t know about the existence of kickbacks in our advertising industry. A practice that is prevalent for ages in the marketing industry and still the agencies are happily performing it to earn more money.
Advertisers are not very open to talking about the practices of kickbacks in the advertising industry, but still do perform it. It's kind of a legal form of bribe but it's still very controversial.
What are kickbacks and what are their forms?
Well, a kickback seems more of an illicit payment made in exchange for special benefits or some other form of shady service rendered. Cash, a reward, payment, or something of value may be used as a kickback.
Kickbacks are a bribery activity that disrupts an employee's or public official's ability to make objective decisions. It's usually considered as a form of an illegitimate bribe.
Why do kickbacks even exist?
The answer lies in the highly ‘money-making’ intention of the industry where everyone wants to get filthy rich, by hook or crook. The issue of kickbacks is more of cultural practice in the industry where trust, ethics, and transparency are murdered.
It’s all about hiding things better, the better you hide the better you can extract the money.
Although there are several different types of kickbacks, they all involve collaboration between two parties.
For instance, a private or government company's business manager can accept a product invoice despite the fact that the bill is inaccurate. And the product seller may then pay the business manager a portion of the profit (or some other kind of reward). The detection and investigation of kickback schemes are one of the most complex forms of fraud.
Let's look at among the most popular red flags of kickback.
These might not always indicate that if something sinister is happening, but the more of these are present, the more likely a kickback scheme is taking on.
Clients are overly pleased with vendors.
Organisation compels workers to use a single vendor.
There will be no open tender procedure (or lower bids are ignored)
The seller has usually a history of legal or regulatory issues
Organisations tend to use suppliers who deliver substandard goods or services.
There's always a delay in delivery dates
Mostly during the buying process, there is a lack of sufficient monitoring.
Rates for products or services are higher than usual rates
So, Do clients also take profit from kickbacks?
To say, YES, to some extent, they can.
There really is no doubt that a publisher would be willing to offer a rebate to high-spending customers.
Rebates are provided by advertisers to guarantee that a larger portion of the inventory is purchased at a better price rather than being marketed at different prices through an ad exchange.
However, a kickback can also help a client get a better inventory rate if it's in the company's or publisher's best interests to provide a lower value at the time to assure that the media purchase happens.
This may be affected by how close an organisation is to achieve a kickback agreement and also how important the kickback is towards the business overall.
How can the clients be more cautious dealing with kickbacks?
To deal with kickbacks and lack of transparency, the client must ask certain questions to self and based on those should take further actions. Some of the basic and necessary questions that he or she should take into considerations are:-
Is it possible to meet my target audience via other digital platforms? If that's the case, which platform is the most cost-effective?
Can I recognise the difference between the expected and real rate that the publisher and my agency are supplying?
Why aren't my inventory rates or estimates changing from reporting period to reporting period or campaign to campaign? (a clear sign that the department is accepting bribes)
Are commercial marketplace agreements helping me achieve my promotional objectives?
Who is creating the investment decisions, and why are they being made?
Are there any extra data or custom innovations included in the package? If so, how can these contribute to my campaign's goals?
Why is there so much delay in the supply?
Should I do some more research about the agency?
Why is there a shortage of communication?
Kickbacks in the media industry may come in the form of rebates or false charging for products that do not exist.
Clients spend a value in the form of higher prices or a poorer quality of service than they would usually expect for their money. Agency fees are shrinking, and a difficult-to-understand digital marketplace is delivering the encouragement and shield for such behaviour.
And as already said, it’s still one of the most complex forms of white-collar crimes that can be detected.
Author : Auhsini Das
About Her : With a Data Science degree from IIT Madras, Aushini enrich audience with her high quality tech articles. Having +5 years of experience in content writing, She work passionately to create copy that converts, with a focus on maintaining your authentic brand voice.