Media Audits & Agency Reviews
What is Media Auditing?
A definition of media auditing refers to the process of determining whether the media purchased by a client via their vendors, partners or agencies, appears correctly and at a fair market price.
Larger brand advertisers typically use agency relationships to faciliate their advertising strategy, creative production and media buying. They will therefore hire media agencies (either directly or indirectly) who are tasked with booking, purchasing and coordinating the correct supply of advertising creative material to the end ‘publisher’. We use the term publisher broadly, meaning any party which has an audience and sells advertising media space to the market. A publisher could be Youtube, a TV station, a radio station, newspaper, magazine, social media platform, a blog, online website etc.
When the advertiser aka “the client” contracts a marketing/advertising agency, they will supply the client with a media plan for sign-off prior to the campaign commencing.
The Media Plan
The media plan should detail things like the different media, mediums, channels which will be used, the amount of advertising space being bought, approximate costs, a schedule of the media ‘slots’ aka ‘ad space’ and typically some rationale around why this is being recommended.
Once the agreement has been signed, the client has essentially agreed to this media plan, and depending on the contract, will be legally compelled to pay the agency for their services.
The media agency will typically make profit in one of two ways. Either from taking advantage of media rebates/commissions that the publishers offer buyers as incentives, or they will simply add a mark-up on top of the cost of the booked media (cost-plus pricing).
Note: asking a company to grade an agency’s media buying performance by analyzing price vs quality isn’t what one would deem traditional media ‘auditing’. Instead, this work is closer to an ‘agency review’ or a ‘price bench-marking’.
Let’s first look at each of the four types of media auditing below so you can be clear which type you need.
The Four Types of Media Auditing
1 – Media Agency Reviews and Benchmark Pool Auditing
This type of audit typicaly reviews a media agency’s performance via a standard comparison benchmark method. The performance and cost of the media is compared against various industry benchmarks and/or data the media auditor has gathered via secondary or primary research methods. Even by using sample data, a general picture will quickly appear as to whether the client has received an adequate service in return for their expenditure.
There are large numbers of self appointed ‘auditors’ who operate in this space, perhaps in part due to the fact that operators do not require formal qualifications.
Many of the conclusions from less experienced auditors can be subjective and the benchmark data inaccurate, unavailable or contain bias. Some of these media auditing companies may even be using audits as a way to gather customers who are later up-sold or cross-sold other services. This doesn’t mean all of these media auditors are inaccurate or ineffective however.
Better quality auditors will be aware of bias and opionated reasoning. They will use multiple tools and data sets. They will admit to tollerances and potential inaccuracy within their reports. Others may even go to the trouble of conducting live tests and/or mystery shopping research in order to lend higher integrity to their conclusions.
This is the most simple and quick of the four audit types to complete, especially if it relates to just one marketing channel for example an SEO audit or social media audit. This style of auditing is popular with the small and medium businesses community and can be combined with a contract compliance audit (see below).
Ppool benchmarking refers to where the advertisers price and quality demands are benchmarked against the pool of clients an auditor has access to. General comparisons can be made betwen the competitiveness of the media prices in relation to the quality of the media bought.
Value tracking is a method where the actual media prices are compared against the media agency prices quoted in the agency pitch or media plan proposal. Typically these quoted prices are compared by the client during the pitch process between competing agency offers. The problem with this comparisson is that the client can be unaware of actual market rates. Comparing the cost of media, even to the market rate doesn’t account for the quality or potential effectiveness of the media. That is a completely different discussion altogether.
2 – Contract Compliance Audit
This type of media audit is much closer to what most professionals would agree to be an official audit. Contractual compliance audits involves the auditing of the contractual agreement and specifically whether the agency has delivered on their obligations. It aims to uncover instances where they are ‘delivering’ as well as the areas where they are not.
This type of media audit is essentially an evidence-based review of the agreement between two parties (client and the agency) to understand the degree to which the agency has complied with the terms of the contract. For this reason, a lot of the findings will hinge on the detail contained within the original agreement.
The auditor typically meets with the financial director, senior account managers and perhaps other operational staff within the media agency. The auditor will introduce their role and also explain the scope of the audit process that has been defined by their client.
At this point the agency can quickly reveal to the auditor how they are feeling about the situation which can be an early, indicative sign of guilt.
Auditing digital media can be complex and there can be more room for error. Commissions and rebates offered within the traditional media insutry can also add complexity to the audit process. Most modern agencies will use electronic booking systems which makes this task easier, but human error can also play a part. Data is extracted from booking, measurement and reporting systems before being analyzed. Samples of selections are investigated in higher detail and the auditor may ask for additional documenting invoices to verify those charges and make sure they are justified.
A lot of the results from this audit type is determinant on the original contract which is why it should be the first thing your auditor investigates in detail. For this reason, you auditor needs to have both a grounding in contract law and be a subject matter expert. Clients are always encouraged to talk to the agency and ask probing questions prior to even considering hiring an auditor.
3 – Financial or statutory auditing
This is the type of auditor that you would associate with financial accountants. Conducted typically at financial year end, this audit process involves investigating the financial statements of a company which will be submitted to shareholders in the effort to ensure people have a true fair view of what’s going on within the company.
4 – Click Fraud and Bot auditing
We’ve included this as a separate area due to the topical nature of digital “click fraud” and other forms of advanced bot systems which simulate human activity online in order to inflate certain metrics.
Some digital advertising systems involve very complex, technical systems as well as complexity within the supply vertical. The use of bots is nothing new, but their sophistication has increased over the years making it more difficult to identify.
Most of the fraud in these systems can be identified by hiring a programmatic media expert to review the campaigns or by simply runnning live tests. What a lot of people fail to understand about digital media buying is that unless you’re buying digital media direct from the publisher, it’s frequently done in a live bidding auction environment. There are no fixed prices as price is reflective of demand and supply at any one time. Much of a digital media auditors job will concentrate on viewability, fraud and brand safety.
The applying a traditional media audit model to the digital landscape is problematic and covered well in this article
Things You Should Know About Media Auditing
Regular media auditing is only one element of best practice marketing governance. The first thing we ask client is why they are conducting the audit in the first place. The answers to this question often vary considerably. Sometimes you might not need an audit at all.
Some clients will instead require an MIS (Marketing Information System) set up which provides an independent source of media verification that flows through to decision-makers. Often third-party verification tools can be easily set up and configured. However, information from these various tools and services can be limited or inaccurate or not include financial cost data. The name for this service is Media Monitoring which is widely used within the Public Relations sector to track brand mentions.
What many people who work outside the inner workings of the communications agency ecosystem don’t realize is that there is a complex web of commission and fees between suppliers within the media supply network. This distorts the market rate for media and can easily hide the true value of the supplied media. Contrary to popular perception, media agencies can in fact end up being more expensive than direct buys (buying media directly from the publisher).
Are you auditing media because it’s the largest visible cost and are you ignoring other working costs. Depending on the size and industry nature of the company, expenditure on media is typically the largest line-item in any marketing budget. Creative production costs and other labour costs can be high, but generally far less (around 1/5 of the cost of the media). For organizations operating within highly competitive industries such as FMCG, generic consumer services (retail banking) etc. media can be the single largest purchase each year – far outstripping other raw material or operational production costs.
Corporate governance stipulations for larger firms warrant frequent investigations into these large expenditure line-items in order to ensure company funds are being put to the best use. Media audits by independent firms is good business practice and will help reduce financial risk. Investors will often require investigation into any large proposed expenditure items before committing approval for the allocation of funds. This discretion is pronounced during times of financial hardship and perceived risk is high.
Most large advertisers will routinely use media auditors on a regular basis. Often the CMO will be responsible for answering questions from the CFO/CEO such as, “What was the return on our marketing spend”. In some cases, answering this question can be complex, and only rely in part to the cost of media expenditure.
A conflict of interest arises when the media buying entities are asked to self-audit. Often a vendor which is also part of the same group of media companies is contracted to perform this task unbeknownst to the brand advertiser. We have personally heard of instances where very large advertisers have very large conflicts of interests in their marketing services supply chain with little to no oversight in the expenditure process once the account has been ‘won’.
Alternatively, purchasing direct from the media supplier such as Facebook for example, means you are restricted to data that the platform supplies to you. Independent verification methods may be required to prevent bias.
Getting the most from your audit
An audit can go one of two ways. The findings are used to provide additional insight into performance or it’s used for ‘agency bashing’ where the agency becomes a scapegoat for performance issues.
There is still much debate in the media industry around which metrics are the best to measure and how to verify figures. With some media channels, there will be less ability to provide accurate figures and conclusions when compared to others. However, there have been many recent studies with the advent of technological solutions which can provide accurate sample data which can be used for projections.
At the start of the audit process we recommend the client to work closely with one of our staff in order to set the scope of the investigation. From that point on, this scope will restrict the level of detail and areas which the auditor will investigate. Often, commercial relationships make audits a political process and we must tread carefully.
We also need to discuss how the auditor’s methodologies work, and what improvements his/her analyses can enable. Often audits can produce great outcomes for clients when used for constructive feedback for existing business relationships. We always recommend to give the incumbent agency a chance to improve before ending any commercial relationship prematurely.
Costs of Media Audits
The cost of the media audit will depend directly on the scope set at the first meeting and thus costs will vary significantly. The cost will of course vary, depending on the number of media channels under investigation, the number of participants in the supply chain, the availability of information, contractual agreements and frequency. Large audits will require more expensive tools and purchasing of data together with more labour that’s required during analysis.
Expect large media agency audits to cost between $50 000 and $250 000.
Smaller, single-channel audits will typically range from $2500 to $50 0000.
While expensive, the benefits from independent audits can be significant – especially if opportunity cost is taken into account.
We understand there is a lot of concern around over media transparency and many advertisers are looking for compliance audits to check whether the agency is fulfilling their service obligations. Conducting regular audits using a mix of the price bench-marking audit and contractual compliance audit methods are advised.
Step 1 – Read the media agency contract
The contract should outline many rights you have when conducting an audit. Look for the following:
- Which specific party are you contracted with? Is it the trading entity who you interact with or a holding company?
- Is there a dispute resolution clause or mentions of rights and process related to compliance auditing?
- Is there a specific restriction as to which auditor you can use? We’ve noticed some contracts will attempt to limit the auditors to specific entities rather than which ever auditor may be most suitable.
- Is there a notice period that must be given in advance of your audit commencing?
Step 2 – Speak with your media agency directly
- Most larger agencies will be familiar with audits and their other clients will submit other similar compliance requests
- Your agency may give some information as to how they perceive different auditing firms
- It is best to break the ice early on in order to set expectations of further investigation. This may help to limit any future animosity
- Keep in mind, auditing aims to improve the working relationship and in our experience, often leads to more productive outcomes. Align key stakeholders early in the process to avoid the potential for hostile or aggressive behaviour.
Step 3 – Chose an appropriate media audit company
- The scope of work will help determine if it’s appropriate to contract a large auditor or mid-small tier firms. We would recommend partnering with an independent firm for the best results. KMPG, EY, PWC, Deloitte, Accenture, Bain, McKinsey are the larger players. Given most of these firms have now invested in media and ad tech business divisions, their previous ‘independent’ nature could be now questionable.
- Some advertisers would prefer expert advisory from an industry specialist. Often the complexity of the media area requires technical expertise and a level of depth of understanding that may not be present with the larger consulting/audit firms.
- It might be that a collaborative mixture of firms may be needed for the best results. The financial audit acumen of an established auditor, mixed with the technical expertise from a boutique industry specialist and a legal contract expert.
Ask Whether You Even Need to Audit
We believe it’s important to look at the audit process from a holistic perspective. Is the audit necessary for internal compliance reasons or is it precipitating an existing undesirable situation with the current media suppliers? Typically the clients that reach out to us are mostly in the second camp, where there is suspicion that the current media suppliers are not performing as expected.
The bigger question is whether this situation exists because of the direction they have been given and the contract that has been signed, or because of malpractice. A negative perception of performance could have arisen because the agency was optimizing for the wrong performance metrics. Ultimately, we realize you want to make sure your external agencies are working optimally and in a transparent manner in order to achieve business objectives.
Brands that don’t have an audit system in place for the media agency should seriously consider their right to do so. Many are not even aware that audits may be specifically refereed to within the detail of the contract. Either way, first reflect on what you deem to be ‘media auditing’. Perhaps what you require is instead independent advisory to review existing campaigns.
Media Audit Examples and Templates
For redacted audits, which we are allowed to share with potential clients, contact our company director John James via LinkedIn. We have a cache of audit templates that we use as a general guide to each marketing channel as well as holistic audits. SEO audits, social media audits, SEM/PPC audits, programmatic display audits, TV audits, Radio audits etc. Get in touch with John first.
The Association of National Advertisers (ANA) has published a handy Media Transparency Guidelines document which should be essential reading and guide discussions prior to any contractual agreements being signed with your media agency.
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