WPP's digital media buying chief, GroupM CEO Rob Norman, has admitted to Ad Age that his company uses "arbitrage," the practice of buying media and the reselling it at a profit to clients without disclosing to clients the original cost. The report says, "Group M's global digital chief, Rob Norman, called his company's approach 'transparent but not disclosed,' in a separate interview with Ad Age, and pointed out that his clients know his group makes money, but don't know the cost of the original media -- no more than they would if they bought inventory from a third party ..." Norman tells Business Insider that, "we never operate on a non-disclosed basis without the specific contractual consent of our clients. Around the world we have over 1,500 such specific agreements. It is our unshakeable belief that the agency/client contract together with whatever law operates in the relevant territory has primacy and is inviolable." Ad Age states that WPP's Xaxis, an online buying agency, is one agency that engages in this. It justifies the higher prices because the agency may layer new data onto the media it has bought, thus making it more valuable, and because the agency has taken on the risk of buying media it may not be able to sell. Arbitrage is controversial precisely because it is not transparent to clients. Last week, GroupM chairman Irwin Gotlieb said at a conference that he did not believe there was a need for original prices to be "fully disclosed" to clients. Interpublic Group does not practice arbitrage for this reason, Ad Age says.
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