Should advertisers insist on programmatic being included in all audit programs?

Since the latest ANA Media Contract template was released in 2018, there has been explosive transformation in the digital media send category. We have seen huge spend shifts from traditional media to digital media, the complexity of the vendor-side offering has increased heavily and the way we buy digital has also changed drastically.  

To help Advertisers stay abreast of the changes, ANA has worked on an updated version of the media MSA. This update will be released at the annual ANA Advertising Financial Management Conference at the end of April this year. The updated version will include a completely new section on transparency, both for programmatic media but also inventory media.

Clare  O’Brien, ISBA’s Head of Media, Performance & Effectiveness, recently highlighted that whilst the ISBA and PwC 2^nd Programmatic Supply Chain Transparency Study demonstrated improvements in transparecy in the programmatic ecosystem, Advertisers are still struggling to get to grips with the accountability of their Agency spend in this area. This in itself presents both a challenge and also an opportunity for client-side Marketing Procurement teams and their expanding role within the client-Agency partnership framework.

With global programmatic Advertising spend forecasted to potentially reach over $250BN by the end of 2023, Advertisers are increasingly turning to their Procurement functions for help in navigating this complex plethora of investment channels. Marketers have for a long time continued to migrate investment to the vast array of new digital channels and platforms on offer. The increasing developments in cost-effectiveness, brand building capabilities and targeting has also fueled the migration to digital programmatic. Yet their feeling of bewilderment is only heightened by the sustained need for transparency to effectively and efficiently demonstrate ROI parameters to key stakeholders. The role that this accountability has in media investment decision-making plays to the strengths of those Marketing Procurement teams already involved in managing Agency relationships by helping to navigate across the various functions and drive internal collaboration within matrix organisations.

Building on the great work that the study highlights, the establishment of the UK cross-Industry Programmatic taskforce and its recent publication of the Programmatic Financial Audit toolkit subsequently went further in helping to address the lack of transparency within the supply chain. To this end we are still some way off having routine audits as a normal best practice with the gaps that currently exist in accurate, quality data.  Herein lies the contradiction as the vast majority of Advertisers and their Marketing Procurement teams spend an inordinate amount of time negotiating audit rights into their Agency contracts but are invariably unable to take advantage of such an important control mechanism with the current lack of transparency within the programmatic supply chain.

Procurement teams have always led processes to support and improve the efficiency of functions across their companies, including Marketing. However, Procurement professionals’ goals are often viewed as being contrary to the goals that their Marketing colleagues have, as well as those of the constituents they work with, including Agencies, Media owners and other related partners. Procurement is often perceived as failing to understand the industry and the value tied to longer-term brand investments, and instead for targeting lower costs as a priority.

This long-held view is particularly confusing for Marketing Procurement given it has long since been at the forefront of helping to address the many publicised stumbling blocks that Advertisers are confronted with in their Agency relationships in normal day-to-day operations. Challenges such as diminishing levels of transparency into Agency financial management practices, lack of a direct line-of-sight into the rates paid by its Agency partners, Agency resource constraints and personnel turnover have inevitably been upheld as the reasons to audit.

It is for all of these reasons that “Right to Audit” clauses exist within many Advertiser contracts and why it is considered “Best Practice” to engage independent, specialised audit support to assess an Agency’s contract compliance and financial performance. The benefits of auditing are meaningful and many, with the resulting financial true-ups, identification of process and contractual improvement opportunities and new learnings in general providing substantial contributions to future efficiencies.

These outcomes can have a significant financial impact for both parties. For Agencies, who have made oversights, misinterpreted or misapplied certain contractual conditions, there is the obvious impact of correcting those items to correctly reflect the terms of the agreed contract. Advertisers benefit from the collection of past due credits, settling financial matters, identifying and eliminating unauthorized, non-transparent Agency revenue and realigning its scope of work and Agency resources going forward.

It is true that the consequences of an audit can sometimes cause both Advertiser and Agency some discomfort. However, bearing in mind that most non-compliance that is detected was not intentional, these important accountability programs are more than offset by the positive outcomes that ultimately drive compliance within the agreement and motivate the need for greater efficiencies and more effective financial stewardship. Implementing annual audit programs across all Advertising spend categories (media, creative, PR, BTL, production etc.) help the Advertiser always have an up-to-date Master Services Agreement and best-in-class operations.  

Unlike the usual audit best practices outlined above we are still some distance away from normalising audits within the programmatic supply chain and achieving a genuinely transparent process. Yet the same rules of the more traditional audit road should apply – Advertisers will continue to keep pushing for it, Procurement will still be seen as the conduit for driving accountability and compliance within it and Agencies should welcome the benefit of being able to further demonstrate where the money goes across this supply chain.

In short, the audit should be a commonplace feature of any long term mutually-beneficial commercial partnership between the Advertiser and its Agencies, including programmatic media. A well-executed audit will cover every aspect of the financial relationship between a client and its Agency, enhancing trust and supplying the Advertiser with the insight it needs to maximise the effectiveness of its entire media spend. 

Ultimately, in an ever-evolving digital world that is progressively being driven by data, accountability and transparency are of paramount importance and they should help Advertisers to decrease waste with improved targeting and to achieve enhanced ROI. Marketing Procurement teams should ensure that they are uniquely positioned and informed to help champion the cause and to drive transparency for Advertisers with superior market intelligence and industry developments. 

Sources:           
ISBA/PwC 2^nd Programmatic Supply Chain Transparency Study            
ISBA/UK Cross-Industry Programmatic Task Force