The flurry of advertisers reviewing exactly what their media investments deliver has “stimulated” the audit industry but the real threat to budgets resides in markets like Japan and the Middle East where transparency is questionable, warned WPP’s chief executive Sir Martin Sorrell.
The advertising executive cut a frustrated figure on his company’s third quarter earnings call earlier today (31 October) as he tried to refrain from saying ‘I told you so’ now that it’s become clear that Japan may have a transparency issue when it comes to media spend.
Much of the focus in the wake of the Association of National Advertisers’ (ANA) controversial report has centred on the US, however Sir Martin, along with other media commentators, has maintained that it is one of the more transparent markets and that the real offenders are in the East.
Without naming names, WPP’s boss seemed to refer to the revelations that rival holding group Dentsu had overcharged at least 111 companies for internet ads, a mistake that has forced it to pay back an estimated 230 million yen ($2.3m) to clients.
As clients, trade bodies and the media round on these irregularities, Sir Martin said he was frustrated that it has taken until now to see action, particularly because his group had offered to help the ANA push for better transparency in Japan and the Middle east, where he claimed transparency was effectively non-existent in some parts.
“I don’t want to say I told you so but I do,” he mused. “We [WPP] said that the two areas of the world that need greater scrutiny is Japan [and the Middle East]. We offered to help the ANA; we said if you want to deal with some of the issues in Japan, where there is very little transparency and work with us in the Middle East where there is even less transparency. In one of the territories there [the Middle East] there has been a rejection of sophisticated media measurements and one has to wonder why that happened other than for reasons of transparency or the reverse."
He went on to add that while transparency around advertising was something “everyone knows we have to deal with” and that it was no good pushing on an “open door” like the US, urging the industry to push on the “closed doors” where it's difficult to get traction.
Some observers such as Darren Woolley, founder and global chief executive of marketing management consultants TrinityP3, view Sir Martin's comments as an attempt to distract attention away from the US, and consequently WPP's own practices there. While others like Tom Denford, chief strategy officer at media change consultancy ID Comms argue that the US should not be ignored.
"Sir Martin's comments are a little distracting. Just to put his comments into some context, let's remember that the US is a $180bn media market, whilst media spending across the entire Middle East and North Africa region amounts to only $8bn, less than half a percent of US, he continued.
"So, I think advertisers are rightly making it a priority to look at US transparency issues and the ANA has done them a great service in providing some insight. The lack of transparency in the Middle East is certainly a problem but its value is a mere rounding error compared to the scale of the US market."
The observations come at a time of heightened interest in the efficacy of media investments following a string of events that have knocked the confidence of advertisers. From the ANA’s claim that rebates are rife in the US, Facebook’s inflated video views to two of Google’s metrics being suspended from the Media Ratings Council or Dentsu’s costly auditing error, senior marketers are questioning whether they have overinvested in digital, Sir Martin said.
That concern has roused some advertisers to commission their own audits. However, the amount is nowhere near the 20 audits Publicis Groupe’s chief Maurice Levy has claimed, argued Sir Martin.
“There have been a few,” he said, before confirming that “the ANA report had stimulated the audit industry”. Proof of that has come in the form of McDonald’s chief marketing officer Deborah Wahl revealing to Digiday that the advertiser is hiring auditors to scrutinise its nearly $1bn advertising business. L’Oreal is another advertiser, The Drum understands, that is insisting on sharper measurement of its media investments.
The potential impact on media spend these revelations threaten to have did little to dent investor’s view of WPP. The world’s largest advertising group saw shares rise 4% in the third quarter as a 23.4% boost in revenue pushed sales to £3.61bn as overseas sales were flattered by a weaker sterling.
Explaining the somewhat inevitable slowdown post-Brexit, Sir Martin told the BBC: “In the third quarter we softened a bit in the UK … What it tells you is that uncertainty in the UK over Brexit, and some of the other things that are going on round the world, makes our clients a little bit nervous and hesitant to invest.
“That level of uncertainty makes our clients less willing to invest in capital investment, building plants and making investments and, in our own parochial case, investing in innovation for consumers and brand. Uncertainty is the enemy of growth.”