ADventures in Law

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A makegood, as the name implies, is the mechanism by which a media provider will make the advertiser whole for advertisements that don’t run at all (e.g., media is preempted by a breaking news story) or run improperly (including in a manner that is inconsistent with campaign parameters or agreement terms), or for some other form of under-delivery (e.g., for the media company failing to deliver a guaranteed number of clicks or impressions, not meeting certain viewability requirements, or not delivering on audience, ratings or circulation numbers). It’s an issue that media buyers and sellers face in connection with any buy involving guaranteed or expected deliverables – what happens if the media doesn’t run or targets are missed? I have found it can be helpful for the various stakeholders to huddle up and discuss a general approach and position on the issue outside of the urgency and stress of a particular deal. The approach may still need to be tailored to fit specific executions and campaigns, but investing some time to think about how the issue should be addressed may pay dividends later. It gives the team an opportunity to connect and discuss how different makegood options may impact business goals, align on a general approach, identify where there may be exceptions to that approach, identify what stakeholders should be consulted, and review what terms are currently in place around the issue. So, if it’s an issue the team hasn’t connected on in a while, it may be worth having that discussion now.

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The following is a brief outline of some things to consider that may help guide the discussion and review:

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The first thing you will want to consider is what events might trigger the need for a makegood.&nbsp; The IAB Standard Terms and Conditions for Internet Advertising version 3.0 (IAB Terms) identify various things that would trigger a requirement for the media company to provide the advertiser with a makegood, including when ads appear in violation of editorial adjacency guidelines, when the media company has underdelivered on guaranteed deliverables outlined in an insertion order (including due to a force majeure event), and for the media company’s failure to deliver accurate/complete campaign performance reporting. But there may be other scenarios when a makegood is appropriate. It is also helpful to consider and align on scenarios where a makegood would not be expected. For example, makegoods are generally not provided for unguaranteed inventory – including inventory sold on a cost-per-click basis or other scenarios where delivery may vary. In any event, it is worth taking the time to think through where you would expect to receive (as a media buyer) or provide (as a seller) a makegood.

That discussion will also necessarily involve consideration around measurement, reporting, tracking and delivery. How will you know if a makegood is due? What numbers control with respect to determining whether impressions have been delivered? How do the parties know whether viewability metrics have been met or if ads have been delivered in violation of editorial adjacency or brand safety guidelines? And where a determination is to be made based on reporting from third-party ad servers or measurement providers, that should be made clear in the agreement terms.

Once you have a good understanding of what events or circumstances would trigger a makegood, the next question is what the makegood should consist of. The IAB Terms largely leave it up to the parties to negotiate the specific details of the makegood at the time of the shortfall. And in most cases, this may be fine. The relationships between advertisers, their agencies and media suppliers are generally long-term ones, with advertisers and agencies being repeat customers for media suppliers. So, both sides are incentivized to come up with a mutually agreeable solution. And the business teams are likely in the best position to work through what would be acceptable in the context of a particular campaign. In my time working in this space, I have seen few occasions where the two business teams have not been able to engage in good-faith discussions and come up with a solution that works for everyone. That said, you would be wise to include terms in your media agreements that address a situation where the parties are not able to agree on a makegood, and that may include the provision of credits or refunds.

In many cases, a makegood consisting of additional deliverables (e.g., impressions) run against the same media later may be sufficient. But that may not be true in the case of unique inventory or a unique audience such as certain live events (NBA Finals, Olympics, Super Bowl, etc.).&nbsp; Generally, the makegood should be of value equivalent to that of the originally scheduled media inventory. Where campaigns involve some unique or special component that cannot be easily replicated, the parties should take that into consideration when aligning on an appropriate makegood. Publishers and other media providers understand this, and they will frequently set aside or hold back some portion of such special inventory in case they need to provide makegoods to advertisers in those circumstances. Then they may release this inventory later, once they know it won’t be needed.&nbsp;

Another thing to consider related to remedies is whether the makegood should be the “sole and exclusive” remedy available to the advertiser. Before agreeing to such terms, advertisers should consider the potential impacts on the business of any shortfall. There may be times when a simple makegood is all that is needed to make an advertiser whole, but there may be other times when a failure by the media company to deliver on promises could have some significant consequences or impact on the advertiser, and in those cases, the advertiser may not want to foreclose other remedies that may be available to it.

<strong>Interactions with Other Agreement Provisions</strong>

Lastly, you should be mindful of the interplay between makegood provisions and the other provisions of your media agreements. For example, you should understand how the makegood provisions in your media agreements interact with force majeure clauses and the provisions related to tracking and reporting, as those are issues that may be addressed, at least in part, by makegoods.&nbsp;

Revisiting Makegoods in Media Buys