Private Advisors in Ad Agency Land

This post will shine light on advertising agency employees being given options/warrants/equity/cash in exchange for being a private advisor.

A transparent piggy bank. Pretty apropos for this piece.

What I will not focus on in this blog post: the hundreds of lunches, manicures, spa appointments, Super Bowl trips, tickets to the Knicks, jean parties, sneaker parties, Hamptons houses, catered breakfasts, sushi parties, Medieval Times trips, or similar that publishers give agencies. This topic has been covered here and here.
What I will focus this post on: privately becoming an equity/optioned/warrant/cash holding advisor or liaison for a publisher or technology company and not disclosing it to your employer and/or clients.

Fact: There are people at all levels of seniority working for advertising agencies who have agreements with publishers or technology companies and receive equity/options/warrants/or cash in exchange for looking out for their best interests within an agency. You’ve probably never heard of these before because most of these agreements are private.

I am not saying that agency people accepting money or shares for advisory is bad. What I am saying is that these agency folks should find a way to make it known that they are advising these companies so that their clients and other partners [could] find out about these agreements.

If I was running an ad agency, I’d require all staff to report any compensation from any of our vendors and keep a record of this within a staff file. I would also find a way to make this public, if it existed. I had to do similar when I was working at kbs+ as I was making angel investments on the side. All of these were noted by our CFO.

In finance reporting, you always see a disclosure from the writer and organization on each piece of news. If the writer is talking about $NFLX and she personally owns some shares, then she discloses it at the bottom or the top of the article. This is the accepted standard in the industry.

The advertising world does not have such standard, at least to my knowledge. It should though.

Maybe why agency people aren’t disclosing their advisory is because there is no central place to do so?

I tested the general concept of this idea with a few of my trusted friends and the response was the following:

1) Who cares?
2) Isn’t this what AngelList is for?
3) Good idea! Now what?

Lets tackle each of these in order:

Who Cares?
If a client is paying an agency $50M in media budget and $3–4M in fees, I have to assume they will want to know if there is any inherent bias to the media plans they are putting forth. If agency staff are making decisions because they are being compensated versus making decisions on the merit of the performance, this should be addressed.

Isn’t this what AngelList is for?
Sure. I do not assume that AngelList will tackle everything in this world, especially if it’s not directly for angel investors. I don’t look at agency advisors as angel investors so this is non-core to my knowlegde of the AngelList platform. For the record, I’m a big fan of AngelList but I don’t see it being used much for advisory, only investing (even though you can list advisory).

Good idea! Now what?
I’m thinking thru this part. I have some ideas but want to hear from you. Ping me using this form or @dherman76 on Twitter or Confide.

If at a minimum, I’m shining a light into this sketchy area. I think that is important.

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