EMM in the News

The audits cometh

by Chris Powell, Marketing Magazine: June 2005

Stung by spiralling media costs, audience fragmentation and corporate accounting scandals, marketers are hiring media auditors to take an unbiased look at the books  

Q: What is an auditor?
A: Someone who arrives after the battle and bayonets the wounded.

"A fool and his money are soon audited."

It seems law isn't the only profession that lends itself to a good punchline. In fact, a Google search for "auditor jokes" (hey, it's hard to come up with a compelling intro for a story on media auditing) produces more than 65,000 results. Some might even provide welcome fodder for media agencies dealing with the so-called "new breed" of media auditors.

A number of these independent auditing companies, including Billetts, Effective Media Management (EMM) and Media Audits Group, have sprung up in the U.K. over the past decade. They monitor advertisers' media spend -primarily TV, though Billetts does include other mediums in its repertoire-providing services ranging from simple spot verification to benchmarking and providing counsel on media strategy, targeting etc.

While many of these functions might once have been considered the sole purview of a marketer's media agency, auditors argue third-party involvement is vital in an era of rising costs, increasing consolidation of accounts with a single media AOR, and ROI-focused marketers.

"No agency has ever told a client they didn't get a good deal," reasons P.J. Leary, chief operating officer of Tarrytown, N.Y.-based Media Performance Monitor America (MPMA), Billetts' three-year-old U.S. division. "No agency has ever told a client they didn't beat the market. That would be like me asking my 12 year old how he did in school, and not worrying about talking to his teachers."

Says Hugh Dow, president of Toronto-based media buying firm M2 Universal: "Most Canadian media management companies I know of have a pretty good fix on providing their clients with objective media counsel. I suppose when there is a pointed difference you could bring in a third party to perhaps review the situation, but to provide strategical expertise on an ongoing basis that would challenge, or perhaps contradict, the media management company is not a situation I would relish being part of."

Yet media auditors have already become a fact of advertising life in the U.K., where, according to a recent report in the Wall Street Journal, an estimated 75% of the £11.12 billion (C$25.1 billion) spent on advertising is now scrutinized by these independent firms. In addition, several of these companies have established a U.S. operation in the past 36 months as they attempt to capture a share of that country's US$161.4 billion ad market-a mere 5% of which is currently audited.

Accordingly, some of this activity is spilling over into Canada. Billetts- which already has operations in 12 cities including Madrid and Paris-has extended its relationship with global marketers Sony and Nissan, and is mulling setting up a Canadian operation (the company is rumoured to be actively seeking a Canadian head). Auditing has already become so prevalent here, adds Dow, that M2 has created a sort of "auditing 101" course to guide auditors through the media buying process.

In an article for the U.S. trade publication Advertising Age back in 2002, noted media expert Erwin Ephron (whose company, The Ephron Consultancy, subsequently partnered with MPMA) said that, among other factors, media auditing is a natural product of increased account consolidation. "In the past a large advertiser could count on its several brand media agencies to keep it informed- and keep each other alert," he wrote in a paper titled "The Age of the Anxiety?" "The dynamic was competition."

But as many marketers have consolidated their media accounts- McDonald's with OMD, for example-they have become "captive" to a single media AOR. "No matter how trustworthy the AOR," wrote Ephron, "best practice requires a second view."

Leary-who was recently in Toronto for a series of marketer and agency meetings-says auditing has become a particularly hot topic among U.S. clients as they grapple with the by-now familiar list of advertiser concerns: spiralling media costs, audience fragmentation and even the recent spate of corporate accounting scandals. "All of these things, combined with the fact that people are realizing how much money is in the marketplace, are helping create a climate of receptivity for us," says Leary, who spent 15-plus years in the media department of agencies including Young & Rubicam, Ammirati & Puris and Lowe before going over to what he jokingly refers to as "the dark side."

For marketers, auditing can offer the allure of significant cost savings. Leary points to one MPMA client that achieved US$4 million in year-over-year savings on its media costs through a combination of reduced ad rates and improved quality. MPMA charges clients on a "scope of work" basis as opposed to linking its fees to media billings or cost recovery. "We think that's a bad way of doing business," explains Leary, "because it makes it feel like we're looking for problems."

When Billetts founder and chair John Billett set about establishing MPMA three years ago, the response from U.S. media directors ranged from "skepticism" to "insolent." Independent auditors, he says, were a perceived threat to agency fees and "already thin margins."

Yet despite phrases like "surrogate media departments" and "homework checking" appearing in auditor/ agency discourse, the relationship between the two camps, while occasionally combative, doesn't appear as fractious as you might think. While media directors do occasionally take umbrage with certain facets of the auditing process-a perceived overemphasis on cost, for example-many concede it has a place in the media process.

"I understand it and I think we're the better for it," says Patrick Walshe, chair of Starcom MediaVest Group Canada, adding that "an audit is very valuable to the people being audited, because it helps them understand what's going on in the real world."

Even Sir Martin Sorrell, CEO of London-based WPP Group-whose global media agencies Mediaedge:cia, MindShare and MediaCom all rank among the world's largest buyers of media-endorses the practice. "Given the amounts of money that clients spend, (they) quite rightly want to know if it's being spent in the right way," said Sorrell after speaking at a recent conference in Toronto. "I think that's perfectly understandable."

One senior media buyer, who wishes to remain anonymous, tracks the rise in auditing to shared best practices among multinationals. "If you look around the world, multinational clients are looking for multinational vendors across a lot of markets," he says. "When that happens, they're looking for like-to-like comparisons. If you had an auditing company that was global, it would stand to reason that would be a smart thing. It's another indication of how globalization is impacting this marketplace."

Buying heads also point out that auditors are becoming de rigueur for virtually every new business pitch. OMD Canada president Lorraine Hughes agrees her agency's exposure to auditing firms like Billetts has come primarily through global new business pitches, althoughmarketers like Nissan also use auditing on a continuous basis.

But while senior buyers generally agree the intensity of auditing has increased, they also point out the process isn't new to the Canadian market. Developed 13 years ago by Mississauga-based Semple Media-which last year merged with Forde Media Works to create Forde & Semple Media Works-the SMART Report analyzes and benchmarks some $1.4-billion worth of Canadian TV ad spending for top-drawer marketers including CIBC, Ford and Kraft.

OMD's Hughes chuckles when asked if Canadian media agencies were wary when The SMART Report was first introduced in the early 1990s. "It was the unknown," she says, adding that, yes, some agencies may have felt "insulted" by a third-party analyzing their clients' ad spending. However, Hughes also says it has ultimately been beneficial for the Canadian media industry-particularly in the volatile TV market.

"Before Semple you were basically looking across your own (client) portfolio to establish benchmarks," she explains. The SMART Report "gives you a big sense of the industry and where it's going. It allows us to quantify with our clients the cost of their decision, the impact on efficiency, the impact on cost. I think a lot of clients look at it as an intelligence tool and a real asset."

Sherland Forde, the former head of MediaVest Canada and now one of the principals in Forde & Semple Media, declined interview requests for this story, but Hughes' comments regarding the SMART Report were echoed by a number of prominent media heads.

The SMART Report has also proven a vital tool for clients conducting new business reviews. "People can come in and say anything about what they can and can't buy TV at," says the anonymous media executive. "It's important to have a guy like Semple who is able to understand whether agencies are going to be able to deliver the costs they say they're going to deliver, based on their past history and a profound understanding of the Canadian market."

While Hughes' quibble is not with the intent of audits, she does bemoan the "enormity" of the work that goes into preparing for them. With no electronic system in place for tracking the entire media buying process from RFPs to the final affidavit, preparing for an audit, she says, requires extensive labour and resources as it requires following a lengthy paper trail. "Hopefully," says Hughes, "we can get to a day where we do have fully-integrated commerce with the broadcasters. It will certainly help provide a seamless audit trail and accountability trail from initial negotiation to the final reconciliation of the buy."

So while senior buyers may not always agree with their methods, they seem to at least have a congenial relationship with auditing companies like Billetts. Of course, we can't help but wonder if that's the case with EMM, whose outspoken founder and chair Stephen White (perhaps only half-jokingly) characterized media buyers as "Rejects from the Addams Family" during a panel discussion at the Canadian Media Directors' Council's annual conference in April.

Silly name-calling aside, the discussion featuring the heads of two prominent U.K. media auditing firms and two of Canada's most senior media directors provided some insight into this burgeoning area and helped map where auditing in this country may be heading. It also appeared to underscore a fundamental difference in how the auditor and buyer camps view the process. While practitioners say the audit creates a "feedback loop" in which added knowledge fuels creativity; critics counter that, in some cases, they place undue emphasis on "legacy" measures like CPM, while undervaluing less tangible qualities like creativity and innovation.

The neither creepy nor kooky Dow believes that qualitative judgements are beyond the scope of media auditing companies. "Increasingly, our clients are looking for innovation and creativity," he explains. "They're looking for breakthrough ideas that would enable them to secure a competitive advantage and to stand out from the competition. That involves qualitative advances that, in many cases, have no precedent and are really very difficult to compare."

His concern, he adds, is that the auditing process leads clients to view media simply as a commodity-one to be bought at the lowest possible price. In this age of creatively-driven media, such a perspective, Dow cautions, is "increasingly irrelevant and useless" when determining the effectiveness of a media buy.

MPMA's Leary doesn't buy it. "I think clients want creative media people, but I don't think that's to suggest they don't want to be sure they're good and fair value for the money in the marketplace," he counters. "You can have both. You want the money to be working hard for you so you can actually focus on the creativity."

And when it comes to millions of ad dollars...well, that's no joke