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Does Your Organization View Marketing Spend as a Material Expense?

2 Mar

digital mediaWhile on the surface this seems like a nonsensical question, advertiser indifference toward independent contract compliance, financial management and performance auditing of their agency partners might suggest an answer that would surprise you.

According to The CMO Survey conducted by Deloitte, Duke University’s Fuqua School of Business and the American Marketing Association in February of 2018, companies surveyed spent on average 10.3% of their annual sales on marketing. This would certainly qualify as a “material” expense in our book, particularly when one considers that this investment is being made to build brand equity, establish customer loyalty and to drive demand generation.

So why do so many advertisers take a laissez-faire (French term that translates as “leave alone”) attitude toward basic governance and assurance practices related to their marketing spend?

Is it the belief that a tight client-agency agreement provides the requisite safeguards and controls? Perhaps it is because of an unyielding level of trust in one’s agency partners, intermediaries and third-party vendors exhibited by an organization’s C-suite.

Based upon our experience over two decades of providing contract compliance support to some of the world’s leading advertisers we know that this is not the case. Marketers recognize that the industry is fluid and that the breadth and rapidity of change is such that contract language needs to be reviewed and updated on a frequent basis. Similarly, while advertisers certainly trust their agencies, there is also a core belief in the concept of “trust but verify.”

No, we believe that the reason for the laissez-faire approach to marketing accountability is the fact that no one function “owns” this task organizationally.

In our experience, few marketing departments willingly invite independent scrutiny of their marketing and advertising practices, controls and or the performance of their agency networks. If such examination is not mandated corporately, it will likely not be initiated by marketing. Similarly, the procurement organization is typically focused on screening, vetting and contracting with current and potential marketing vendors. Many procurement teams recognize the value of periodic agency audits, but as “support” departments they rarely have the budget to self-fund such accountability initiatives. The same is true of Internal Audit and their ability to underwrite the cost of audit projects in this area.

In many instances, procurement and internal audit leaders will approach marketing and ask for their participation in and funding for a governance and assurance initiative, but too often this is proffered on a voluntary basis. Unfortunately, this scenario rarely leads to a marketing accountability and transparency review. Thus, in the end, if an organization doesn’t mandate periodic examinations or the ongoing monitoring of its marketing investment or provide funding for such an initiative to its procurement and internal audit team(s) than it may be “flying blind” when it comes to safeguarding its marketing investment.

The irony, as progressive marketing organizations have learned, is that a formal governance and assurance program, which includes marketing, provides financial returns that more than pay for the cost of the attendant independent examinations. Further, the resulting improvements in contract language and process related learnings yield efficiency gains for clients and agencies alike and the resulting transparency gains can serve as the impetus for improving the level of trust and ultimately the relationship between these partners.

With an admitted “pro audit” bias, we can state unequivocally that our experience over the course of two plus decades of providing contract compliance and financial management audit support to advertisers, our belief in the old saying; “In god we trust, all others we audit” has never been stronger.


Compliance Auditing: The Path to Building Client Trust

26 Oct

Accountability Final“Trust is the one thing that changes everything” ~ Stephen Covey

In the context of client / agency relationships, transparency simply means removing any element of doubt. Whether in the context of an agency’s earned revenue, billing accuracy, net payments to third-party vendors or the agency’s resource investment on behalf of a client.

The best means of achieving transparency is through an agency contract compliance and financial management audit and or the implementation of a continuous performance monitoring program focused on these aspects of the relationship.

After all, the marketing investment made by most advertisers is material and often ranks as one of, if not the largest SG&A expenditures. Which is precisely why marketing budgets are currently drawing more C-Suite attention from finance, procurement and internal audit personnel, working in conjunction with their peers in marketing.

This type of cross-functional oversight is a good thing. Particularly when striving to build a unified team by earning each other’s trust across the organization. Additionally, experience has shown that sound enterprise accountability and assurance programs can create value for all parties:

  1. Client financial team members benefit from the specific knowledge as to how their marketing dollars are being managed at each phase of the marketing investment cycle.
  2. Procurement gains insights related to the organization’s return on agency fee investment, optimization of contract language and opportunities for potential future cost avoidance initiatives (not related to agency fees).
  3. The internal audit group gains confidence in knowing that contract terms and organizational controls are being adhered to and if not, that actions are being recommended to shore up potential gaps and risks.
  4. Marketing gains feedback on the agency’s financial management performance, while identifying opportunities for process improvements that can boost the efficiency and effectiveness of their marketing investment.
  5. The agency benefits from direct feedback on their performance in this important area, the opportunity for interaction with and exposure to a broad cross-section of senior client management and the trust and associated confidence that comes with receiving a solid “report card.”

Over time, agency contract compliance and financial management performance audits have evolved in a manner which has yielded in-depth institutional knowledge and feedback that greatly assists advertisers in stewarding their marketing organizations and agency network partners. This is occurring during a period of time where the complexities of the advertising and media marketplace have expanded significantly, increasing an advertiser’s risk / reward considerations. 

Of late, there has been significant industry concerns relating to the questionable transparency relative to the disposition of an advertiser’s investment. How much money flows through to third-party vendors versus what is retained by the agency? What percentage of activity is directed to the agency’s affiliates or holding company, without client insight or approval rights? Is the agency earning excessive float income on the client’s marketing spend?

Rightly or wrongly, in the wake of these concerns, advertising agencies have found themselves all painted with the same broad brush of operating under an opaque modus operandi. This in turn has raised the specter of mistrust among many on the client-side, which has had negative implications on the strength (and length) of client-agency relationships. Needless to say, this is not a healthy dynamic for generating above average in-market results, solid returns on marketing investment, fair and fully disclosed agency remuneration levels or in building strong relationships.

Time and time again, we have seen clients and agencies alike benefit from the investment in compliance audits and the sustained comfort levels that come with ongoing performance monitoring programs. The chief benefit to both parties is the assurance of knowing that the advertiser’s investment is being well managed by their agency partners and the insight to fuel future process improvements.

In the end, these programs represent the quickest and most economical path to restoring trust between clients and their agencies, allowing both to focus on building strong brands and increasing demand generation. In the words of author Joel Peterson:

“Trust doesn’t just happen. It takes initiation, nurture, evaluation and repair.”

3 Thoughts on Facebook’s Video “Watch Time” Issue

3 Oct

facebookFrom an advertiser’s perspective, there were three things that stood out in the wake of Facebook’s recent disclosure that it had mistakenly overstated average video ad watch times.

First and foremost, the miscalculation was not uncovered by the advertising agency community. Given the dollar volume being committed to Facebook, whose digital ad revenues will eclipse $6.0 billion, it would be fair to assume that ad agencies had a fiduciary duty to verify/investigate Facebook’s performance monitoring methodologies prior to investing their clients’ media dollars. The fact that Facebook had not embraced industry standards and asked the Media Rating Council (MRC) to accredit its performance metrics should have been the hot topic of conversation prior to Facebook’s disclosure, rather than after the fact. Ironically, in the wake of this disclosure, WPP stated that the mistake “further emphasizes the importance and need for third-party verification of all media — not only to verify trading terms but also to verify performance.” So if agencies truly felt this way, why wasn’t this standard not being applied here-to-for?

Secondly, it would appear as though the agency community is somewhat fearful of Facebook. Too many agency executives spoke to the trade media on the basis of anonymity rather than overtly stating their personal and or their company’s perspective on both the inflation of the viewing time metric and the need for accreditation. This seems an odd dynamic given the percentage of digital media spend represented by the “Big 4” agency holding companies. Advertisers might rightly expect that the scale of these entities would offer them some level of leverage and protection when interacting with media sellers. This is apparently not the case.

Thirdly, advertisers need to put a stake in the ground when it comes to media transparency and performance authentication. Self-reported performance indicators, such as Facebook’s average video watch time, cannot be the basis upon which they invest their media dollars. If a media seller has not had its delivery and performance metrics audited and accredited by an industry accepted resource such as the MRC, IAS, Nielsen or comScore for example, then they should be excluded from the media investment consideration equation.

The Association of National Advertisers (ANA) CEO, Bob Liodice appropriately addressed this issue when the ANA issued the following statement: “ANA does not believe there are any pragmatic reasons that a media company should not abide by the standards of accreditation and auditing” calling this important step “table stakes” for digital advertising.

The issue with the misstatement of the video ad watch times is not whether or to what extent the :03 second watch time threshold was utilized by ad agencies to assess Facebook’s performance. Quite simply, the issue is that self-reported performance metrics are unequivocally no substitute for independently audited outputs.

For anyone to suggest that the miscalculation is really no big deal, because it is a metric that is not utilized when considering the purchase of video advertising on Facebook, is misguided. The lack of transparency, further compounded by the media seller’s lack of adherence to industry standards when coupled with the self-reported inflated viewing times can and did wrongly influence agency and advertiser decisions. Thus, raising the all-important question: “Absent an independent audit, what portion of Facebook’s self-reported performance metrics can an advertiser trust?”





Funding Accountability Initiatives

26 Aug

Accountability FinalThe desire on the part of many advertisers to extend their organization’s accountability initiative to marketing is high. This is due to the fact that marketing is both one of the largest indirect expense categories within an organization and, for those that believe in its ability to drive strategic outcomes, critical in driving brand value and demand generation.

One of the key challenges for Internal Audit and Procurement professionals in implementing accountability programs is that they typically do not have a budget to fund the projects. Rather, they are reliant on their peers in Marketing to “buy in” to the concept and to underwrite the investment associated with analyzing contract compliance, financial management and in-market performance across their agency networks. This dynamic can create a loggerhead that delays or prevents corporate scrutiny into marketing and advertising spending and its resulting business impact.

The irony is that relative to the millions of dollars invested in marketing, the cost of implementing an accountability program for this corporate function is much less than one-percent of total spend. As we know, applying the skills and capabilities of audit and procurement teams and outside consultants typically results in improved controls that mitigate financial and legal risks to the organization. Further, these efforts often uncover historical errors and overbillings, and always generate future savings and improved marketing return-on-investment opportunities that more than offset the cost of the program.

It has always been a mystery as to why more advertisers simply don’t formalize and legislate the marketing accountability program and establish the requisite budget to be administered by the CFO / Finance organization. A minority of our clients operate in this manner, but clearly a “win, win” situation is created where internal audit and procurement provide their support and apply their resources pro-actively and marketing doesn’t feel as though funding is coming at the expense of critical business building programs within their budgets.

From our perspective, the source of funding for extending a corporate accountability initiative to marketing is the last hurdle. The reason is that we have seen marketing’s appreciation for accountability support grow along with their respect for the audit and procurement functions and a recognition that such programs can improve the efficiency and efficacy of the organization’s marketing spend.

The advertising industry is a complex; rapidly changing, technology-driven sector fraught with opacity challenges and risks such as digital media fraud and non-transparent revenue practices employed by agencies, ad tech providers, ad exchanges and media sellers. In light of these dynamics, organizations truly understand the benefit of monitoring the disposition of their marketing investment and the performance of their advertising agencies and third-party vendors.

It has been over 140 years since Philadelphia merchant John Wanamaker offered the following perspective on his ad spend:

Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.”

Yet, with the passage of time it would be difficult for the industry to suggest that much has changed with regard to a marketers ability to accurately assess the efficacy of their advertising spend.

There is no time like the present to proactively develop; implement and fund transformative accountability programs that can optimize planned business outcomes, while safeguarding marketing spend at every level of the advertising investment cycle.

Interested in learning more about marketing accountability programs? Contact Cliff Campeau, Principal at Advertising Audit & Risk Management| AARM at for a complimentary consultation on the topic.

Advertiser Audit Rights: Define & Exercise Them

2 Aug

dreamstime_xs_7828625There is a new trend developing within the marketing agency community when it comes to negotiating client contract language – and that is a fairly aggressive attempt to limit the advertiser (client) audit rights and scope. In other words, limiting what the agency is required to have available as “proof” and support for agency billings to the client and agency use of client funds.

At a time when there is much talk about the need for transparency and its role in helping to bolster trust and strengthen client-agency relationships, this trend is highly antithetical.

The most common examples of agencies trying to dictate and limit the client’s “Audit Rights” are:

  1. Limiting the window of time in which an advertiser can conduct the audit. For example, 12 months from date of service or invoice, as opposed to a 3 year window.
  2. Limiting access to agency financial data and or records, as opposed to full access to information that support agency billings, financial management and performance. This can include denying access to data such as employee time keeping records, agency overhead or holding company allocations to client, freelance records, prices paid for certain media and agency affiliate company costs.
  3. Limiting the amount of time the agency is required to retain data and records.
  4. Limiting the type of audit firm that an advertiser can engage to perform the testing – and or including language that seeks to secure agency approval of advertiser’s auditor selection.

In order to ensure full-transparency into the financial stewardship of funds by the agency and third-party vendors, experience suggests that advertisers must secure client-centric contractual audit terms and conditions. It is our belief that this is an advertiser’s unassailable right. After all, it is the advertiser who bears the risk of non-compliance and sub-standard performance when it comes to the investment and management of their marketing funds. And it is the advertiser who is providing the funding to the agent.

Contract language dealing with Audit Rights should grant advertisers the ability to establish the scope of the audit, deploy an audit team of its choice and to have unfettered access to information necessary to validate agency compliance and or performance (i.e. contract compliance, media performance, etc.). To ensure full transparency, advertiser Audit Rights should extend to the agency holding company and affiliates in any full-disclosure relationship.

As important as securing solid Audit Rights language, within a Client-Agency agreement, is the need for advertisers to exercise those rights on a regular basis. Whether through the deployment of internal audit personnel, engaging independent contract compliance or financial auditors or the use of a media performance audit firm, it is imperative that advertisers monitor and vet agency performance in these areas.

The frequency of such oversight actions can range from annual reviews to quarterly reconciliations to the implementation of continuous monitoring programs to assess the disposition and performance of advertiser funds, while under the control of their agency partners.

Sharing audit findings with both advertiser and agency is highly recommended so that both parties, if necessary, can adjust practices going forward. After all, the goal of an accountability program is to provide improved transparency, assurance, improved process, and stronger client-agency relationships. In the words of Thomas Huxley, the noted 19th century scientist:

“Learn what is true, in order to do what is right.”

If you would like to receive a complimentary review of your organization’s “Audit Rights” contract language please contact Cliff Campeau, Principal at Advertising Audit & Risk Management at


Decision Time for Advertisers in Wake of ANA Study on Media Rebates

5 Jul

time to decideU.S. advertisers have long suspected their presence and agencies have steadfastly denied accepting rebates in the U.S. market. Depending on which side of the ledger one fell on, the ANA/ K2 study on media transparency may not have swayed your perspective on the topic one iota.

If such is the case, that is too bad. As the noted Irish playwright, George Bernard Shaw once said:

“Progress is impossible without change, and those who cannot change their mind cannot change anything.”

The study was thorough, insightful and shed light on some of the non-transparent sources of revenue available to agencies. These range from AVBs or rebates and value banks consisting of no-charge media weight to the spread earned by agency trading desks from the practice of media arbitrage or “principle buying” as it is often called. The source of these findings were agency, ad tech and publisher personnel that participated in the study in exchange for the ANA and K2 protecting their anonymity. Of note, not one representative from an agency holding company or ad agency was willing to go on the record and participate in this study.

We believe that the study should serve as a wake-up call for advertisers and agencies alike to engage in serious discussions regarding the level of disclosure desired by clients when it comes to the stewardship of their media investment. In the wake of the 4A’s shortsighted, premature withdrawal from the joint task force dealing with this topic and their subsequent challenges of the ANA/ K2 study methodology and findings, these discussions will have to occur on a one-on-one basis. Which, candidly, is the best means of affecting near-term change.

In most instances, it is not illegal for agencies to generate non-transparent revenue and is likely not even a violation of the agreements, which have been signed with their clients. Why? The contracts are lacking in the requisite control language to protect advertisers and agencies are masters at interpreting “gray areas” within those agreements and bending the rules in their favor. This coupled with the fact that only a small percentage of advertisers audit their agency partners and it is easy to see how such practices could exist.

Thus, as an industry we should not cast blame for the emergence of non-transparent revenue as an important element in agency remuneration programs… even if not sanctioned by advertisers. Nor should we accept the agencies excuse that client’s driving fees down somehow makes it acceptable for agencies to pursue non-transparent revenue to counter remuneration agreements, which agencies have knowingly signed on for.

Agencies are not suffering financially. Consider that in the first-quarter of 2016 the “Big 4” holding companies all saw increases in revenue ranging between 0.9% – 10.5%. WPP achieved a 10.5% increase on an 8.5% increase in billings, OMG saw net income per diluted share increase 8.4% and IPG achieved operating margins of 33.8%. Between these performances and media inflation outstripping GDP growth or increases in CPI and PPI it is easy to see how advertiser investments are fueling the trend of continued acquisition by these holding companies as they snatch up ad tech firms, content firms, digital agencies and traditional ad shops. Not to mention the fact that WPP’s chairman has an annual compensation package, which tops $100 million per year.

The focus of clients and agencies should be on returning to a principal/agent relationship predicated on full-disclosure. This is the surest path to rebuilding trust and establishing solid relationships focused on objectivity, transparency and a mutual focus on maximizing advertiser return-on-media-investment. Secondarily, both parties need to evaluate how to minimize the number of middlemen in the media buying loop, particularly for digital media, rethinking the role of ad tech firms, exchanges and publishers and the cut that each takes, lowering the advertisers working media ratios.

From our perspective there are four steps, which advertisers can take to address these issues:

  1. Revisit client/ agency Master Services Agreements to tighten terms and conditions, which deal with disclosure, financial stewardship and audit rights.
  2. Undertake constructive conversations regarding agency remuneration, with the goal of ensuring that your agency partners are fairly compensated, removing any incentive for non-transparent revenue generating behaviors.
  3. Pay more attention to the proper construction of statements of work (SOWs), establishing clear deliverables and review/ approval processes against which your agency partners can assess the resource investment required to achieve such deliverables. This will assist both client and agency in aligning remuneration, resources and expectations.
  4. Monitor agency performance, resource investment levels vis-à-vis the staffing plan and audit contract compliance to ensure that contractual controls and the resulting levels of protection and transparency are being met.

The ANA/ K2 study can and should serve as a platform for advertisers and their agency partners to work through any concerns or expectations regarding media transparency, both in the U.S. and across the globe. Experience suggests that progressive organizations will use the insights gleaned from the study as a launch pad for improving contractual controls, working media ratios and client/ agency relations.

For the industry, it is important to dispatch with concerns regarding media transparency quickly. This will allow all stakeholders to focus on tackling the myriad of issues that dramatically impact media effectiveness including ad fraud, cross channel audience delivery measurement, viewability and attribution modeling.


Advertiser Audit Rights: Omnipresent but Seldom Enacted

11 Apr

transparencyVirtually every contract that exists between advertiser and agency partner provides the advertiser with the “right to audit” agency books, records and accounting practices related to services rendered. However, oddly enough, advertisers seldom act upon these negotiated, protective contract provisions in spite of the significant dollars being spent in this area. This is unfortunate for both advertiser and agency alike.

Why? At a time when many client / agency relationships are strained, largely as a result of diminishing levels of trust and transparency concerns, contract compliance work represent an excellent tool for building clarity around and confidence in agency financial management practices, resource investments, and actual performance.

Contract compliance work identifies gaps in understanding that can be negatively impacting client perceptions and agency margins. Whether related to the project briefing, the approval process, rework levels, mushrooming custom reporting requests, and or payment timing issues, independent testing work provides a prescriptive for positive change to benefit all stakeholders.

In our contract compliance practice, it is common to identify process and behavioral breakdowns that have crept into day-to-day activities between client and agency and that can be directly attributed to lack of oversight. Unchecked, bad habits whether accidental or intentional create financial risks that can be very costly to both parties. Periodic compliance work and ongoing performance monitoring can greatly provide new learnings that assist the advertiser to mitigate risks, optimize process, and eliminate unnecessary costs.

Independent audit work absolutely provides assurance and marketing spend governance. It drives in-market performance in a manner that improves the advertisers return-on-marketing-investment. An additional dynamic, born of a consistent marketing accountability program and contract compliance work, is a very real incentive for the parties to reform behaviors that are distracting an otherwise solid client / agency relationships predicated on trust and confidence.

A wise risk management practitioner once shared a somewhat comedic perspective on this dynamic by citing the following question and answer:

“What happens when you lock a wild hyena in a room with an Internal auditor? The hyena stops laughing.”

 Audits can be sobering and should be approached with a healthy and serious level of respect. However, they are not intended to intimidate or strike fear in the hearts of marketing team members or agency personnel. Further, sound audit methodologies should not interrupt client/ agency workflows, nor should they come with an onerous cost in terms of advertiser or agency resource investment required to participate in the process. The goal is to identify opportunities for improved transparency, controls, risk mitigation practices and financial management stewardship, and build long-term relationships.

We see relationships flourish and be strengthened when both parties embrace the process for what it was intended. That is why “Right to Audit” clauses exist and why they are so broadly represented in client / agency agreements in the U.S. and around the globe.



Two Words That Represent Accountability’s Biggest Obstacle; “Who’s Budget?”

24 Feb

Accountability FinalMany organizations want to implement an accountability program. Virtually all Internal Audit directors would like to extend that accountability initiative across the enterprise and most certainly want to provide coverage for categories with a significant spend, such as marketing.

Yet, in spite of the good intentions, U.S. companies have been slow to embrace independent compliance and performance auditing of their marketing supply chain partners. Ironically, the reason emanates from the answer to a very simple question, “Which departmental budget will be tapped to fund the initiative?” More often than not the answer to that question, in the context of a marketing and advertising spending review, is “Marketing.”

Given this dynamic, it is often a challenge for companies to implement an “unbudgeted” audit project once the fiscal year planning process has been completed, even if results dwarf its cost. Additionally, while many CMO’s have come to value the feedback and insights provided from the independent testing of supplier contract compliance and performance, there are others that still do not embrace audit or accountability initiatives. As a result, unless mandated by the C-Suite, independent accountability testing may never make its way into the budget, causing a huge assurance gap governing that company’s multi-million marketing investment.

There is good news however for procurement, finance and audit executives seeking to remove these obstacles and manage associated risks. Namely, that in addition to the opportunity for process improvements, performance monitoring, contract language enhancements and better controls, these engagements yield hard dollar returns resulting from various financial true-ups and future savings opportunities; far exceeding the fees necessary to conduct the review.

Positive financial returns aside, the costs associated with an audit of an advertiser’s agency network partners is miniscule when compared to the tens of millions or hundreds of millions of dollars being expended in this area.

Perhaps best of all, independent assessments of marketing agency compliance and third-party vendor billings sets a tone of the desired financial stewardship and accountability behavior that the client would like to see employed across its marketing supplier base. In turn, the very act of performing an independent audit, provides a powerful incentive for an agency to diligently self-police itself by tightly adhering to the processes and guidelines agreed to and memorialized in the Client/ Agency Master Services Agreement. In the words of the noted English author and speaker, Simon Sinek:

Actions speak louder than words. All companies say they care, right? But few actually exercise that care.

Interested in learning more about fielding a marketing agency network accountability initiative at your company? Contact Cliff Campeau, Principal at AARM | Advertising Audit & Risk Management at to for a complimentary consultation on the topic today.




Did You Trust the Banker When You Played Monopoly?

26 Jan


If you were a “gamer” (in the days when board games were the norm) that implicitly trusted both the banker and the individual who controlled the distribution of the real estate properties when playing Monopoly, than this article isn’t for you.

On the other hand, if you are one who turns a wary eye toward those in control of assets, particularly your assets, then we would like to pose one question: “Do you know what happens to your company’s marketing funds once checks have been distributed to your agency partners?

In our experience, few if any individuals within an advertiser organization have a clear perspective on the disposition of approved funds once an agency invoice has been paid. The primary reason for this is that the industry still operates largely on the concept of “estimated” billing and the pre-payment of funds from the advertiser to the agency. Over the years the resulting transparency gap has been compounded by the fact that few if any advertisers require their agencies to provide copies of all third-party vendor invoices with their final project or campaign billing. Most advertisers have document retention and audit rights clauses in their agreements, but few act upon these contractual rights.

As contract compliance auditors, we review thousands of agency bill-to-client invoices as part of our hard copy vouching and testing process. In general, the lack of specificity contained on these invoices, particularly when one recognizes that there is often little accompanying back-up can be startling. For example, imagine coming across an invoice for the production of television commercials for a major seasonal advertising campaign that simply stated; “Holiday Campaign TV Production – $785,000.” Was that for one commercial or six? Were these :15 second spots or :60’s? Is this for a U.S. campaign or a global effort? Apparently, answers to those types of questions aren’t always required to process payment for that invoice… as long as the invoice amount doesn’t exceed the approved purchase order, if there is an approved purchase order.

Do you know if your agencies are abiding by the contractual guidelines for competitively bidding jobs? Do you know whether or not the agreements with the agencies in your network even requires three bids or at what spending threshold? More broadly, do you know which of your third-party vendors are actually related to your ad agency partners (i.e. shared financial interests, investors or corporate lineage)? If so, was this disclosed in advance of work being awarded to those related parties?

If you’re like most advertisers, you are billed in advance of production or media commitments being made on your behalf, or at least prior to the activity occurring. Likely, your company pays that invoice within 45 days of receipt. Any idea how much time elapses prior to your third-party vendors being paid or whether their billing to the agencies is scrutinized for accuracy? Let’s assume there are credits issued by third-party vendors or approved funds that are not spent by the agencies, how long does it take for the agencies to identify and return those funds to you? Who is involved in determining the disposition of those funds? Marketing? Or are checks cut and sent to finance?

Do you compensate one of more of your agency partners based upon a direct labor model, with estimated monthly fees tied to a contractual staffing plan predicated on the hourly time investment of specific individuals? How often to you see time-of-staff reporting from the agencies? Monthly, quarterly, annually, ever? Have those fees ever been reconciled to each agencies actual time investment? Have you ever tested your agencies time-keeping systems to assess the accuracy of the reports that may be shared with your team?

We have good news for you, news that can provide answers to each and every one of these questions. There is a proven means of closing this transparency gap and providing your organization with the processes and controls necessary to assess the disposition of marketing funds at each step of the advertising investment cycle.

It is called agency contract compliance auditing, it is an industry best practice and it will provide insights, answers and recommendations that will benefit an advertiser’s agency stewardship efforts and their agency partners’ financial management performance.

If you still have some apprehension about this complex ecosystem called marketing, consider the words of former Supreme Court Justice, Oliver Wendell Holmes when weighing the pros and cons of a contract compliance audit; “When in doubt, do it.”

Interested in learning more about safeguarding your firm’s marketing investment? Contact Cliff Campeau, Principal with AARM | Advertising Audit & Risk Management at for a complimentary consultation on how to implement or enhance your organization’s marketing accountability initiative.




Is Agency Ownership of Audience Measurement Providers a Good Idea?

13 Feb

transparencyRecently, WPP indicated that they were planning to take a large equity stake in comScore, one of the world’s largest online campaign measurement providers. This is in addition to WPP’s recent investment in Rentrak, a television audience measurement service, an organization in which WPP is now the largest institutional shareowner.

With WPP’s continued push into the campaign measurement space, advertisers may begin to question the consequences of an agency holding company’s ownership of audience delivery measurement resources. After all, these campaign measurement service providers gather and analyze data and publish ratings which are utilized to assess the efficacy of the agency’s media purchasing efforts on the advertiser’s behalf.

More broadly, based upon the business activities in which the agency holding companies now routinely engage in, one might legitimately question whether or not the designation of “agent” is even an apt description of the role which advertising firms play in support of their clients. Activities such as media arbitrage or reselling if one prefers, joint media and technology ownership deals with publishers, participation in AVB or volume rebate programs offered by media owners to agency holding companies tied to transactions entered into on behalf of their clients, all raise a legitimate question about “Whose” interests agencies are beholden to.

What recourse do advertisers have? After all, there are often distinct advantages to utilizing large agency holding company brands. Independent agencies, which while unencumbered by questions regarding their fiduciary focus, sometimes lack the scale or depth of resources required to perform in certain situations. Enlightened protectionism in the 21st century requires advertisers to aggressively push for enhanced transparency, improved controls and the unimpeachable right to audit their agency’s contract compliance and financial management performance. In the oft quoted words of President Ronald Reagan; “Trust, but verify.”

As a sound first step, it is essential for advertisers to understand their agency partners’ affiliate relationships. Secondly, it is imperative for advertisers to fashion contract language which requires their agencies to provide full disclosure when an agency affiliate is being utilized on their behalf, how that affiliate is compensated and by whom and whether or not the rates charged by that affiliate are competitive with comparable providers in the market. Whether in the context of ad serving, programmatic buying, trading desk operations or campaign measurement, an advertiser has a right to know when their agency has engaged an affiliate firm. This affords client stakeholders the opportunity to raise any questions or concerns they may have regarding such a selection and its impact on the agency’s objectivity. 

Once affiliate firms have been identified, tracking what percentage of an advertiser’s budget is being spent collectively at the agency holding company level can prove enlightening. More importantly, understanding the value of their account to the holding company based upon total revenues enhances an advertiser’s negotiating position when considering agency remuneration options going forward. 

As the ad industry has grown in size, generating approximately $521.6 billion in revenue in 2014 (source: MAGNA GLOBAL), it has also grown in complexity which is due in large to the rate and rapidity of technological change. Thus, it comes as no surprise that relationships among industry stakeholders have evolved, becoming more complex in their own right. The industry has begun to come to terms with the plurality of such relationships where partners may simultaneously be competitors or buyer agents may also function as sellers. However, “coming to terms” doesn’t mean blind acceptance. Rather it requires a new level of discourse and enhanced controls to protect advertisers and their investment.

Interested in learning more about agency network “affiliate management?” Contact Cliff Campeau, Principal at Advertising Audit & Risk Management, LLC at for a complimentary consultation on the topic.  


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