The media audit business has primarily centered on cost benchmarking and media buying evaluations, with concentration on how effectively agencies perform in delivering the best available media costs. The focus on media delivery confirmation has depended on affidavits provided by media confirming schedule delivery, which agencies use to compare to original orders. Verance and AudioAudit have been at the center of a technology-led confirmation and verification business focused on the accuracy of the affidavits and how accurately media sellers -- especially local broadcasters -- are delivering on the schedules purchased by agencies. Discrepancies have been an industry bugaboo for years, but the issue has traditionally been swept under the rug.
Throughout the 1970s, 1980s and 1990s, agencies conducted occasional manual audits of radio and
television station invoices, comparing them to station logs to determine the percentage of spots that were claimed to have aired by the invoice but actually never aired or had audio and/or video lapses. Typically, agencies found the cost of the manual audit was greater than the budgets recouped as a result of the audit.
It's standard operating procedure for agencies to check all invoices in comparison to the original orders and station confirmation, also an extremely timely and expensive manual process that computers and electronic data interchange (EDI) system enhancements have simplified.
Because schedules undergo significant and constant change between the order and the invoice, this process is especially cumbersome.
Programs change; ratings are under delivered; schedules are revised and upgraded; weather, news and sports interfere with schedules. There are myriad reasons for orders to be constantly revised between the time of order and the final invoice. As reported in yesterday's Jack Myers Report and in part one of this special report (JMR 6/16/04), the first step in the audit process must be improved electronic communications between buyers and sellers incorporating orders, confirmations, revision notices, make-goods and invoices into a single coordinated computer program. As reported, Donovan, Encoda, Wide Orbit and others have taken steps, in association with the efforts of several agencies, the TvB, ANA and 4A's, to advance the EDI process, but it has not yet become fully automated.
Jack Poor, SVP Marketing at the Television Bureau of Advertising agrees the detection based auditors such as Verance and AudioAudit have technologies that are accurate for determining what aired and didn't air on broadcast, but questions who will pay for this service.
"On a stand alone basis, there has not been enough value for agencies, clients or media to underwrite the full costs." As a result, these companies are developing ancillary services and working with other audit companies to offer strategic evaluation services. "The challenge," says a senior industry consultant, "is how do you make this into a business. These companies have attracted capital but the speed with which they have changed their business models suggests some difficulty."
Agencies are under increased pressure from clients to assure that every penny spent on advertising is delivering return on their investment. Before extensive investments can be made in effectiveness research, the first step is a simple and basic audit to confirm that what is being paid for did, in actuality, run as invoiced. This need has empowered the need for verification services but has also triggered the development of more sophisticated services. Steve Saslow, Chief Executive Officer of Verance, says his company is distancing itself from the traditional verification space. "We really don't see ourselves as being limited to that function," he says. "Our path is to solve a 30-year industry problem, which is not identifying discrepancies but providing campaign reconciliation.
The real issue is not a discrepancy problem; it's a communications problem."Verance's ConfirMedia service provides reconciliation at the end of every broadcast month between what was ordered and what actually ran, including all change orders that may have happened within the month.
"We have taken the position that it's important to work in partnership with agencies and broadcasters and to enable us to all look at the same information," says Saslow. "In our model, the agencies and broadcasters are seeing reconciliations at the same time and it enables broadcasters to be proactive in resolving differences."
Unlike competitors, Verance is asking broadcasters to underwrite the service, believing that it enables them to collect payments in a much timelier fashion. Saslow agrees with MindShare's Kathy Crawford, who believes it is appropriate for media sellers to underwrite invoice verification, but who is funding beta tests of services. "Reconciliation and verification is the next generation of stewardship," says Saslow. "Serving clients' needs is part of the cost to broadcasters and should be built into the cost of media. Agencies get our service at no cost to them."
By incorporating both broadcasters and agencies into the communications loop, Verance differentiates itself from competitor AudioAudit, which provides a verification monitoring service funded by and delivered to agencies.
Both Verance and AudioAudit, along with Teletracks, Media Guide and AdCheck utilize audio verification through either watermarks or pattern recognition. Harold Geller, Verance's SVP Business Solutions explains "the audit business started with a baseline service: did everything run as the invoice claims?
With the agency and broadcaster now working from the same basic information, reconciliation can be done daily." Joel Zaremby, who joined Verance as SVP Sales & Marketing last July after a long career in media and media buying, points out "agencies want to pay reconciled invoices in a timely way and Verance has separated ourselves from everyone else in the space by having the understanding that both sides of the industry have issues that need to be solved." Verance, he claims, is designed to provide an accounting solution to meet Sarbanes-Oxley requirements. "Clients, agencies and broadcasters need an electronic paper trail based on general accounting principles. Both agencies and broadcasters now can have electronic proof to show auditors."
Zaremby suggests the traditional problems and workload inherent in media buying still exist today. "Agencies still sit on invoices because of discrepancies. Billing people are more hassled today, not less. Clients are hammering agencies and little has changed." The solution, adds Saslow, is to eliminate work for the agency, not to add more work. "Our primary goal is to provide a logical way for bills to be paid quickly."
Verance says it is working with five of the six major media buying services and is targeting its service to broadcast station groups and cable networks, and intends to expand the service to radio network and station groups, local cable and cable interconnects.
A business proposition in cable TV, says Saslow, is monitoring clearances of cable network spots in the thousands of local cable markets.
