Comparing Apples To Apples And Other Questions For Auditors

martin-albrechtData-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Martin Albrecht, managing partner and co-founder at Crossmedia.

Media agencies undoubtedly will come under scrutiny after an Association of National Advertisers (ANA) report on rebate practices comes out on Tuesday.

They will volunteer to conduct audits of their media spending and financials or they will be asked to do so by their clients. The auditing process isn’t perfect – it’s complex and there are limitations to it but where there is a need, there can be a way.

In order for an audit to be more than just a routine and expensive bureaucratic exercise, advertisers should ask themselves and their auditors several questions when developing their audit process.

Is The Media Price Comparison Apples To Apples?

The more intelligent the media strategy and buy, the less it is standardized.

For example, if certain guarantees, added value or special positioning were negotiated into the TV buy, the prices could not be compared to a run-of-the-mill buy. Auditors need to be aware and willing to go the extra mile of making buys comparable, which is far less trivial than it sounds.

Is A Media Cost Database In Your Best Interest?

If we’re going to put all of our cards on the table, let’s take a closer look at the auditors’ business model. Auditors make money from client fees and using clients’ data to feed their database. They don’t really need an advertiser’s net costs to say what the net spending should have been.

If they know gross spend, they can simply report the benchmark drawn from all other advertisers without taking individual data. But finding an auditor who is willing to forego this part of their business model is a hard feat.

Still, by passing net rates to auditors, theses rate become the benchmark for other advertisers, diminishing competitive advantage when your rates are actually better than average. Is this in your interest?

Can Auditors Plan Better Than Media Agencies?

Are auditors better equipped to rate the effectiveness or quality of the media buy than an agency?

Auditors have far less information about the campaign and usually less expertise, data and tools to come up with the right solution. Otherwise, why don’t they develop their own plan rather than policing agencies? Since clients expect their media to be as differentiated as their creative, isn’t the idea of “the right media plan” as determined by industry standards counterintuitive?

Is The Contract As Good As The Audit?

Auditors can only audit what has been contracted. Therefore, clients should consider consulting with auditors before they contract an agency. That way, an auditor’s experience can enter the framework of the client-agency relationship.

Adhering to this framework can and should be checked frequently. For example, if an advertiser is concerned about its share in rebates – its receipt of a volume discount or compensation from media buys not passed on to the client – it needs to have contracted its share before it has any recourse to obtain them.

Can You Really Audit ‘Transparency’?

The weird thing about transparency is that it is a vast field of gray. If you look at the market today, there are as many definitions of transparency as there are agencies.

Is sharing a media invoice enough to be transparent? Is shifting the dirty deals to the holding company level transparent? Is sharing the discounts but keeping the rebates transparent?

There is a clear line in the sand only after transparency has been defined. Clients need to dive deep into the issue to understand and distinguish between acceptable and unacceptable practices. And importantly, they need to determine if they view their agency as a vendor or as a consultant.

Follow CrossMedia (@crossmediany) and AdExchanger (@adexchanger) on Twitter.

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1 Comment

  1. Tom Salonek

    These are all good points Martin. Apples to Apples, or payment for work done, is important.