The recent miscalculations from Facebook and Dentsu may have many experts questioning their credibility but that criticism risks overshadowing the worrying number of marketers using data without taking the time to understand what it is they have in their hands. In the second installment in a two-part analysis of the controversy, The Drum explores the fallout of the measurement scandal.
Calls for greater media transparency hit their apex late last month after two of the media’s powerbrokers admitted – in quick succession - that they had been fudging the numbers when it came to digital advertising. Facebook has been overinflating video views, while Dentsu was overcharging for digital work. Inevitably, the knives came out for both culprits and yet the rest of adland seemed unwilling to look at the role they played in allowing these infringements to go unchecked for multiple years.
In the case of Facebook, the issue might have been avoided entirely if the advertisers that were quick to rebuke the social network had bothered to fully grasp that it constitutes a ‘view’ as a duration of at least three seconds.
Whilst marketers can make (yet more) calls for greater transparency, they need to open their eyes to the fact that there has been a chronic undervaluing of the importance of media knowledge within brand marketing teams or face being tomorrow’s headline in the next scandal.
However, the problem is not a simple one to solve, not least because it requires a shake-up of how the relationship between clients and agencies is created in the first place. Brand marketers are grappling to understand the very strategies needed to engage customers in this digital world, let alone price them accordingly and against the right KPIs.
They have reacted by reviewing agency relationships to seek better models. But in the main they pass these over to procurement directors, who are preoccupied with pummeling costs into submission.
"It’s all too easy to have the wool pulled over your eyes if you don’t understand the market in which you are operating,” said Tom Denford, chief strategy officer at marketing consultancy ID Comms.
“Without such knowledge, [marketers] can’t interrogate the value of what’s being offered to them when it comes to specific media opportunities or implement the proper procedures, targets and protocols to ensure that the advertiser retains control of their media budgets.”
And, as some critics say, agencies around the world can and have taken advantage of the fact that marketers have no real precedent to benchmark against.
“This is not a Dentsu [which is based in Tokyo] issue per se,” said Shufen Goh, principal and co-founder of R3 and president of the Institute of Advertising Singapore (IAS). “[The k2 report in the US and the Mediacom scandal in a well audited market like Australia were in contrast more shocking. Hence no experienced marketer can truly claim to be shocked."
The justification? Agencies have seen their services commoditised to such a degree by procurement they invariably need to make margins somewhere (although as Goh adds, they are all too keen to offer discounts on retainers in pitches).
Of course, compounded by the ANA’s rebates report, is the expectation that agencies have a moral duty to price transparently to clients, even when they don’t fully understand what they’re buying - it’s a dilemma that would test any agency chief executive struggling to stretch margins in such a marketplace.
More to the point, is it really the agency’s responsibility to negotiate itself down if the client can’t negotiate effectively with them or understand what they’re buying (so long as they’re not deliberately hiding information from the client)?
And if the entire focus is just on efficiency and not on effectiveness, then clients are equally guilty of not maximising their ROI.
It’s what makes McDonald’s zero-margin, performance-related agreement with Omnicom so intriguing. Although it has been highly criticised in some aspects, the fact is that McDonald’s chief marketing officer Deborah Whal has clearly come to the table with the knowledge to identify the right KPIs and ensure a contract holds the agency to its promises. There’s also the small matter of McDonald’s being prepared to change for the benefit of the partnership, something many agency bosses would argue is unheard of and might have been key to Omnicom being prepared to work at cost.
“Too many payment-by-results contracts simply reward agencies for doing their basic job rather than setting the challenging targets they should, which should be linked closer to the advertiser's business outcomes,” said Denford.
But set-ups of this ilk will be few and far between in the short term, precisely because most brand-side marketers lack the understanding to set the right targets. The more immediate solution to this situation is greater investment in media knowledge and an increased emphasis on training at brands. By doing so, they'll not only take greater control of their media but can go some way to spotting failures in media owner metrics and keep better track of the work their agency is carrying out.
For more forward-thinking brands, this has meant the creation of dedicated roles such as the ‘chief media officer’ in order to build that media knowledge internally and, in part, to prevent them being subject to problems that Facebook and Dentsu’s clients are now dealing with. We could also yet see a rise in agency marketers going client-side, with David Wheldon, chief marketing officer at the Royal Bank of Scotland readily suggesting that those who have worked at both simply gain a better understanding of the market.
Marketers from Lastminute.com, Royal Bank of Scotland (RBS) and the former media boss at Mondelez Bonin Bough shared their views on the matter with The Drum prior to the Facebook and Dentsu scandals. The consensus from these marketers being that while it’s not always feasible to hire a chief media officer, that shouldn’t excuse them from not being aware of what they do not know.
However, this doesn’t mean clients will take media responsibilities away from agencies. As Wheldon put it in an interview with The Drum last month: “There’s an expertise in agencies that clients can’t possibly hope to have. [But] what you don’t want is somebody selling you something because there’s some commission attached or some benefit in the background that you’re unaware of.”
Other marketers are turning to third-party organisations – such as ID Comms and Oystercatchers – that will come into a marketing team to train up and make sure current media contracts are fit for purpose.
But, speaking to about what’s it’s seen, Oystercatchers’ Vladimir Komanicky suggested it goes far deeper than agency relationships. Rather, he believes it boils down to the very way in which digital media inventory is bought by agencies.
“[Programmatic] is great in what it offers – real-time, targeted audiences with ideally much lower cost-per-acquisition(CPA) than traditional digital and offline advertising. Media agencies are pushed by clients to achieve the best results and performance/CPA-based remuneration is often how media agencies are charging the clients (instead of traditional cost-per-mile approach).”
And this, Komanicky said, is where the need for transparency comes in; agencies are unlikely to show their clients that CPM cost if they charge on a CPA basis and whilst in theory the CPA model is much better for clients, it’s also much more prone to mismeasurement as seen at Facebook.
What’s true today is that this is only the beginning of clients reappraising their digital activity – “kicking the tyres of what the metrics should be,” as Wheldon predicts. But during this time, what’s undoubtedly needed is for marketers to take responsibility for building their knowledge of the market and exactly what metrics they should be challenging their agencies on.
With additional reporting by The Drum's Asia editor Charlotte McEleny.