Deutsche Telekom media chief: ‘Attitudes to rebates are changing in Europe’

gerhard_-19_reducedDeutsche Telekom is two years into a massive digital transformation project. The goal: to take control of its media-buying practice and ensure it’s getting the transparency it wants on digital-media trading, a strategy driven by the continuing process of arbitrage. That’s fundamentally changed how it works with its agencies. DT has built an in-house ad tech stack, chooses its own tech providers, and controls its data.

Gerhard Louw, DT’s head of international media, was on hand at Dmexco in Cologne this week. Digiday caught up with him to hear how things are progressing and what effect the bombshell ANA report on rebates in the U.S. has had across Europe, where attitudes toward rebates are more relaxed.

How big of an effect has the ANA report had on brands in Europe?
A big one. I’ve been involved with discussions around the report with the World Federation of Advertisers. In Europe, we’re used to rebates and that system, so the report was no surprise. But I liked that it focused on defining whether an agency is a principal or an agent. The report wasn’t saying one is good and the other is bad, but just that you’d better be damn sure that in each and every contract, interaction or negotiation with the agency, you understand which they’re acting as.

So it’s OK if they’re the principal, as long as the client knows.
Yes, the principal means they can act in your name — it’s the arbitrage model of buying and selling back to you and not disclosing how much was made from buying and selling back. That report highlighted that agencies have moved from the role of agent to the role of principal. We as clients have allowed it, and the industry has facilitated it.

So what are European brands saying? 
It’s not illegal if it’s disclosed and the clients get the money back. But now, in Europe, every big client will get their legal teams to recheck their contracts and make sure the wording is correct and that the principal role is well defined. We’ve been very careful and upgraded our contract 18 months ago, but we will also recheck. But it’s early, clients are only just starting to get to this, the report only just came out. It will be a long-term change.

So in a year’s time, how will the rebate landscape in Europe look?
Very different. We’ve already seen them reduce in some countries, particularly in classical media, so TV ads. In the Czech Republic, the TV stations aren’t giving rebates anymore. We’ve seen slight decreases in other markets too. The TV guys are putting on the brakes. But it wasn’t the ANA report that triggered that; it was already happening. There’s less money to go around, and more competition; the broadcasters are struggling. But the ANA report could cause another wave of media owners canceling rebates entirely.

What’s the biggest concern for you currently?
My biggest worry is that senior people internally don’t get what digital transformation is. People like us who work with it every day see the change, and, yes, there are problems with robots, fraud, ad blocking, I’m not disputing that. But we shouldn’t get caught up in those problems. Consumers are digital beings, but a lot of people within brand organizations, especially top management or those who are 50-plus, have no idea what’s going on in terms of consumer behaviors and preferences, in terms of media, data, comms. That’s my biggest concern. They’re still thinking in 30-second TV ads. Sure, they get there are more people on the internet, and they say, “We should put some more ads on Facebook.” They get that much, but that’s not really the point.

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