Upfront: Rise of the Auditors

Back to Contents of Issue: August 2004

How auditing has transformed advertising.

by By David Kilburn

At the turn of the last century, the Victorian entrepreneur Lord Leverhulme famously remarked that he knew half of his advertising budget was wasted. But he did not know which half.

Since those distant days, Leverhulme's family soap business has grown into Unilever, one of the world's largest advertisers and pre-eminent marketing firms.

Part challenge, part joke and part curse, those remarks have stood the test of time. Until roughly a decade ago, many advertisers were still hard pressed to know just how much they should spend on advertising and exactly what they would gain in return.

Now, however, the personal computer, improved research and modeling technologies have started to dispel the cloud of unknowing that once loomed above the advertising industry. Today, both advertisers and agencies increasingly talk about ROI (return on investment), a term that has become part of the new language of marketing.

It is not hard to see why. For many large companies, advertising and promotional budgets can be their single largest expenditure after salary costs, raw materials, plant and equipment. Not surprisingly, shareholders, managers and competitive pressures all require such budgets to be carefully allocated.

Agencies have responded to the pressures by developing better planning tools. Clients have responded by seeking independent specialist firms to analyze just how well the budgets are planned and spent, and what return the advertiser gets for his money.

In the UK now, over 70 percent of all advertising expenditure is examined by Media Auditors, a new breed of specialist consultants. The percentage in the rest of Europe is lower, but rising quickly.

Surprisingly, Japanese advertisers have joined the largest Western multinationals to become leading users of these services. Examples include Canon, who use auditing services throughout Europe, and Nissan, who have enabled the leading European provider of auditing services, the UK's Billetts International, to open for business in the US to help Nissan get more value for money.

Now Sony has joined the club. Billetts will be working with Sony and one of their Japanese agencies, Frontage Inc, on a new project to evaluate the effectiveness of the advertising expenditure of Sony group companies worldwide.

According to a report in the Nihon Keizai Shimbun, "the analysis will cover ads that Sony and such key group companies as Sony Music Entertainment (Japan) Inc. place in about 40 countries in four global regions: North America, Europe, and the Asia-Pacific outside of Japan."

It will only be a matter of time before equally rigorous analysis of advertising expenditures becomes the norm in Japan as well. One of Sony's key goals is to make meaningful comparisons between different countries, including Japan, regarding what advertising delivers.

Auditing requires transparency, accurate knowledge of media costs, and benchmarks, three things that are in short supply in Japan. Even so, one company, SPI Japan, part of the Aegis Group, has now been providing audit services for about ten years.

Some advertising people refer to media auditing disparagingly as yet another incursion by the bean counters. But in fact the reverse is true. The ability to demonstrate a positive or prompt return from advertising makes the advertising budget as important as those other big sums spent on raw materials, salaries, plant and equipment.

Interviewed by Advertising Age earlier this year, Julian Spooner, CEO of Media Audits Ltd, another leading UK-based specialist, discussed the impact of auditing: "As we see auditing grow, it fundamentally changes the market. The market never goes back to what it was. In Spain, where there was no auditing 10 years ago, auditing was one of the most opaque and least transparent, and was not providing good value for advertisers. It is a fundamentally different market now. It is far more transparent. Agencies are much more accountable to their clients, clients know much better where they stand [and] the stakes are very high." @

Note: The function "email this page" is currently not supported for this page.