MediaPost: Agency Chiefs Nip Media Billings Plan In Bud

Regulators, litigators question
agency holding company

In the current climate of corporate accountability, heads of large ad agencies are increasingly uncomfortable with the whatever-you-please and sometimes purely fictive methods of accounting for media billings. Where in the 1980s agencies fought to beat their chests the hardest, today agencies worry that such chest pounding could be the cause of action for shareholder lawsuits when the subsequent profits don't show up. The situation was highlighted when the Sarbanes-Oxley Act put a quick stop to billings claims for fear of criminal penalties.

Mediapost's Joe Mandese has been covering a nascent reform effort, led by Starcom's Jack Klues, who indicated that there had been a "handshake agreement" to put a stop to the exaggerating policies. But formal approval of a common method for counting billings was quashed by agency holding companies. In the absence of a method, billings are currently going unreported entirely, rather than provide the embarrassing comparisons of a more realistic number versus past representations. According to one executive, Interpublic's (IPG) Initiative Media, which currently says it is the third largest U.S. biller, would be a mere ninth largest in the new accounting method. IPG is now laying off staff and coming to grips with a profit line that is rather inconsistent with past claimed billings trends.

It seems that in the absence of their own realistic measure, the four largest agency holding companies may be forced in the end to adopt a more rational policy at the pointy end of a class action investor suit. The recent passing of the Sarbanes-Oxley Act, the cause of the new silence among agencies on billings, may not trip up the quiet agencies, but the revelations of past billings dalliances may afford opportunity for investors to litigate in civil courts regarding past claims.