$25 billion in media money just went up for grabs - and nobody can agree on why

In the past six months 20 (twenty!) huge companies have called media agency reviews. At least $25 billion in spending is currently up for grabs.

Media reviews let brands reassess their ad spending, often by offering those contracts out in a competitive bidding process.

The companies include General Mills, Procter & Gamble, Volkswagen, Visa, Sony, Coca-Cola, Citi, 21st Century Fox ... the list goes on. Some of these - P&G, Sony, and 21st Century Fox - spend more than $1 billion on advertising each year.

The trend is so unprecedented, US trade magazine Adweek has dubbed it "Mediapalooza 2015."

There are several conflicting theories for the mass-exodus.

It could be that marketers are finally getting fed up with the apparent lack of transparency about where their budgets are actually being spent and why.

On the other hand, marketers might finally be waking up to new consumer media trends and are exploring whether the agency that helped them spend hundreds of millions of dollars on TV each year has the same expertise to help them shift tens of millions of dollars of their budgets over to online video.

Or perhaps it's simply a house of cards: Once your biggest rival calls a media agency review, it's easier to justify to your CFO that you might need to go through the often laborious, costly, lengthy (but necessary) process, too.

The transparency argument

Back in April, Pivotal Research analyst Brian Wieser downgraded his stock ratings for all the advertising agency holding companies he covers - reducing IPG from buy to hold, and WPP, Omnicom, and Publicis Group from hold to sell. He cited "emerging concerns among marketers" around "mis-leading" payments and different forms of volume discount rebates that agencies claim in the United States as his reason.

At the center of the issue was the the rebates that media companies like TV networks and big digital platforms pay to agencies to keep client dollars rolling in (sometimes this happens even if an advertiser's budget could be more efficiently spent elsewhere.) Most contracts insist that these rebates or other benefits earned by media spending are returned to the client. But not all agencies disclose how much they are receiving back, so a client may never know that rebates are not being returned to them.

Wieser said in a research note earlier this week that the scale of the media agency reviews in the past few months "reinforces our view on the sector and recommendation that investors exit it or stay on the sidelines for now."

We pressed Wieser on whether this could be the sole reason so many brands are putting their media agency accounts up for review. He told us: that he guesses it is a contributory factor.

Wieser added: "If a marketer was thinking about putting their business up for review, concerns on the topic might push a brand over the edge towards going through with one. I don't think a review is something that a marketer takes lightly given the resources involved on their end, and no less the distraction it causes the agency working for them. It would be easier to pay for an auditor to go in rather than just put business up for review if rebates were the only issue, although that presumes that the marketer has expansive audit rights (i.e. at the holding company level, not the business unit) in place."

ISBA, a UK trade association for advertisers, appears to chime with Wieser's view.

Bob Wootton, ISBA's direct of media and advertising, told Business Insider: "Forensics - transparency - is a relatively recent entrant but is now informing more and more reviews. This is right and proper because it's the advertisers' money that's at stake. We advise out 450 UK major advertiser members that the pursuit of transparency is an increasingly important inclusion, particularly given the increased complexity of and behaviors in both the online advertising value chain and the big agency holding groups."

The need to move with the digital times

But that view is a little too "one dimensional," according to Richard Robinson, managing partner of Oystercatchers, an intermediary consultancy that acts as a matchmaker between brands and agencies.

Instead, he thinks that there are three things happening before you get to the transparency argument: A desire to explore new marketing models that challenge the status quo of old media - like Procter & Gamble which cut its spend on traditional media by 14% in 2014, and has shifted 30% of its budget to digital advertising; advances in technology, such as social media, which brings brands closer than ever before to the consumer (rather than just relying on old methods of advertising that talk at the consumer, but don't necessarily listen or engage with them); and a reality check that "the globalization of media is an unstoppable force" - previously brands had local agencies that would deal with local TV stations. Now a man in France might be watching a great social media campaign for a brand like Guinness that was created in South Africa. Geography is no longer a barrier.

Robinson adds: "Agencies who have embraced yesterday's science fiction and made it into today's normalcy have nothing to fear. In fact they will be in the ascendancy, recognizing that a decrease in the time and touches that happen between brand and customer will be their competitive advantage."

That shift is already being recognized by some advertisers: Spend on digital advertising is set to overtake TV ad spending in the US in just two years, according to researchers at Forrester. And with a shift in spend, a shift in expertise is needed: Data analysis, IT skills, understand of and relationships with social media platforms, mobile - and those needs necessarily be in the skillset of the TV, radio, and outdoor media buyers brands have been using for the past few decades.

FOMO

Another factor that could be influencing the slew of media reviews is simply a fear of missing out: FOMO. While it's true that big media agency reviews often run in five-year cycles, many marketers may look to their peers putting their accounts up to pitch, and that might give them the impetus to do the same too. A house of cards effect.

That FOMO isn't just a case of "anything they can do I can do better," there's a lot at stake by not being involved in the current pitch circus.

Ryan Kangisser, partner for the digital practice at media advisor and auditor MediaSense, explains: "If you're Unilever and you're looking at P&G going to pitch, P&G is going to get access to the best talent. If you're a client that does not going to pitch then you ultimately have no leverage and little ability to renegotiate and get the best out of your agency."

From the media agency perspective, everything is at stake, yet everything is to play for in the current environment of reviews. And it looks as though the agencies that can prove they are transparent with their figures, have the important digital weapons in their arsenal, and - as always - the top executive talent will win out.

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