While the effects of these rebate schemes continue to reverberate across the industry, in my opinion it’s advertisers who remain most negatively impacted by these schemes for two interrelated reasons.
First, media agencies became dependent on rebate revenue, especially as clients insisted on lower and lower media management fees. The growing dependency served to distort media buying incentives and recommendations.
Second, critically, campaign ad performance and ROI for advertisers became secondary to rebate economics. At MediaMath, we regularly ran “head-to-head” competitions versus DBM (Google’s DoubleClick Bid Manager, now Display & Video 360) that showed demonstrably, consistently superior ROI. But these results didn’t matter relative to the offline economics at play. Budget allocations would remain.
Advertiser ROI, we might appreciate, is a cornerstone of adtech’s promise. What better way to stifle innovation and destroy competition than to render advertiser outcomes irrelevant to winning media budgets?
How rebates were actually delivered was dark comedy, as I learned from countless conversations with procurement directors at big brands and agencies around the world.
Cash worked where it was legal to receive and where CFOs could figure out how to report the income. Alternatively, agency leadership told me that gifting free media was the preferred method—it enabled the agency to sell the media to their clients at a cost higher than zero and pocket the difference.
But my personal favorite was shown to me on a tour of a New York media agency buying floor, whose office and cubicle walls were adorned with promotional posters for Google products. Google paid the agency for the “ad space.”
In all cases, the art was to distance these paybacks from client ad procurement processes, per internal guidance from a 2018 memo that recommended strengthening the rebate schemes. A section called “Evolve Agency Partnerships” makes clear that Google “can sufficiently minimize any risk of collusion and competition with the right controls in place.”
And in 2019, internal memos revealed through discovery showed that Google sought to include its Ad Exchange (ADX) Programmatic Guaranteed and Preferred Deals as part of the rebates for ad buyers, which hoovered up a major growth driver for my business by making that spend eligible for rebates under Google’s Display and Video Incentives Program.