On this 239th episode of “Marketing Today,” I speak with Rizwan Merchant, CEO at Media Merchant. Merchant is the first guest from Pakistan and brings over a decade of experience in the Pakistani Media Industry. Today, we talk about the 2016 ANA Transparency Report and how these issues are still present today, four years on.

We start our conversation with the exploding media industry in Pakistan, which has gone from less than $100M in advertising expenses to over $550M in just ten years. With that massive growth has come a plethora of problems, not only in Pakistan but also for marketers worldwide. Merchant has seen “exactly what goes on behind the doors.” Merchant then takes us through the ANA Transparency Report that came out in 2016, which identified a myriad of problems and fraudulent practices among the agencies that bridge the gap between the media houses and advertisers. The advertisers have forgotten that “agencies are there in the business to make money as well,” so their intentions may have nothing to do with the benefit of their client. Advertisers are still losing boatloads of money because of their inability to structure contracts for themselves. Merchant says, “the easiest way to plug that financial outlet is to start paying the media directly instead of going through the agencies.”

Merchant suggested that the best way to battle this problem is for clients “to upgrade their knowledge when it comes to the media supply chain.” Another problem now is that “many agencies have started to own the media that they are pushing to advertisers.” It seems if there is money to be made, agencies will find a way. The onus is on marketers to be smarter and more vigilant.

Highlights from this week’s “Marketing Today”:

  • Rizwan currently lives in Pakistan, part of Southeast Asia, and is a growing market with a booming media industry. 1:45
  • The Pakistani media industry has grown from less than $100M in advertising expenses to $550M in the last ten years. 2:30
  • An accountant by education, Rizwan joined Mediacom on the finance side when he returned to Pakistan in 2004. 3:35
  • In 2015, Rizwan started his media audit agency, Media Merchant. 5:10
  • The ANA Transparency Report identified problems with the rebates received by the agencies based on advertiser money. 6:00
  • Principal transactions came up in the ANA Transparency report, showing that agencies were buying inventory through holding companies. 6:50
  • Agencies were found to be selling free inventory they received from the media houses to their marketing clients. 7:15
  • Advertisers were found to be trusting agencies blindly, a failure on the part of the advertisers. 7:47
  • Rizwan identified multiple problems that didn’t come out in the ANA report. 8:15
  • Media Buying Houses came into existence by providing the agencies with multiple suggestions that acted as a financial bomb. 9:20
  • The agencies exploited the lack of connection between the advertising clients and the media outlets. 11:50
  • While there are specific rules and regulations in different countries, this is still a problem all over the world. 12:24
  • With media outlets being drained of their finances, their ability to create content is greatly affected. 14:30
  • The relationship between the media and advertising industries the opposite of what it should be right now. 16:00
  • As a result of the ANA report, guidelines were created to guide the creation of the contracts. 17:34
  • The main problems are found in the governance of the agencies within the creation of the contracts. 19:24
  • The creation and execution of one’s own media plan make it hard to do their own homework. 23:28
  • Marketers and financing departments should act as the custodians in the creation of contracts. 24:05
  • The best thing that marketers can do is stay up to date on policies and control the abundance of fraud amongst agencies. 26:20
  • Agencies are in this to make money, and because of that, Rizwan does not blame them for the problem. 29:41
  • The Big 4 financial institutions do not know the media industry and therefore are less effective when it comes to auditing services. 32:10
  • A desire to challenge himself has shaped Rizwan as a person as he has taken on many different positions throughout his life. 34:20
  • Patience is a virtue that Rizwan wishes he had learned earlier in his life. 36:16
  • Fragmentation in the Pakistani social-economic classes inspired Rizwan to start a soccer league for over 10,000 kids to earn money and skills. 38:15
  • Digital marketers have the opportunity to connect directly with consumers in a way that has never existed before. 40:26
  • A lack of knowledge threatens marketers as agencies are the ones that provide them with information. 41:50

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Alan B. Hart is the creator and host of “Marketing Today with Alan Hart,” a weekly podcast where he interviews leading global marketing professionals and business leaders. Alan advises leading executives and marketing teams on opportunities around brand, customer experience, innovation, and growth. He has consulted with Fortune 100 companies, but he is an entrepreneur at his core, having founded or served as an executive for nine startups.