Mumbai: Media buying agencies are hitting back at auditors benchmarking ad rates, as advertisers increasingly turn to auditors to determine whether their agencies are helping them get optimal mileage and the best media rates.

Mint reported on the trend of advertisers hiring auditors on 18 November. Since then, the debate between media specialists and auditors about who is actually providing clients better value in a slowing economy has only intensified.

Optimal mileage: Spatial Access’ Meenakshi Madhvani says the current media environment makes it imperative to have rate benchmarking. Ashesh Shah / Mint

Media agencies’ main grouse is that auditors overemphasize the role of prices through simplistic rate benchmarking and neglect the context in which rates are negotiated, says Ravi Kiran, South Asia chief executive officer for Starcom MediaVest Group, a media buying agency.

Auditors make ad rates the dominant currency of their assessment. Firms such as R3 and Spatial Access Media Solutions Pvt. Ltd do “rate benchmarking", advising clients on average ad rates being paid for a particular media property, without disclosing specific deals swung by other clients. Some media buyers say it’s unethical for auditors to use confidential client information to benchmark rates.

Meenakshi Madhvani, managing partner of Spatial Access, however, says the media environment makes it imperative to have rate benchmarking. Spatial Access, for one, does benchmarking through the “aggregate pool" approach which averages ad rates clinched by the firm’s other clients, without disclosing specific client names or rates. Advertisers who approach Spatial Access have to disclose their rates before signing up for its services.

Advertisers such as Amit Gupta, director, marketing and communications, ING Vysya Life Insurance Co. Ltd, say it pays to have media planning and buying processes vetted by another pair of eyes.

“Media as a sector is growing too fast and there is too much of proliferation and discounting. It helps for an advertiser to be on top of things," Gupta says. The firm achieved 10% savings on costs due to efficiencies introduced by its outside auditor.

Audit companies also give cost efficiencies through planning. For instance, Spatial Access helped ING Vysya Bank Ltd get better reach by buying more spots on weekdays versus weekends, he adds.

Says Aditya Agarwal, director, Emami Ltd, “Spatial Access helps us identify areas where our share of voice has not matched up to (the) money spent by us (on media vehicles) due to wrong media planning and buying decisions..." He adds that it had helped Emami identify channels where they ought to be in during certain time bands and where ads of competitors are being placed and how they stack up in comparison.

Audit firms clearly help rationalize media costs. Greg Paull, principal, R3, says, “Yes, we are seeing more than ever, marketeers looking to generate more efficiency from their (ad) investments in these tough times. Our challenge is to make sure their requests are realistic as agencies are not magicians and are under the same pressures this year."

Madhvani says most media owners have very sophisticated pricing mechanisms in play, and many agencies and advertisers do not understand these because they are obsessed with lower rates.

“An auditor helps clients balance two divergent approaches: cost versus value," Madhvani says.

Rajesh Jain, head, information, communication and entertainment, KPMG Advisory Services Pvt. Ltd, says the firm has witnessed greater interest from advertisers because of the downturn, though he declined to disclose any names. KPMG conducts audits of ad processes and contracts and is not into rate benchmarking.

Auditors bring objective benchmarking to the table, so that issues internal to a media specialist do not handicap its client, Madhvani says. She explains: “Agencies have either positive or negative relationships with specific media owners that influence their ability or willingness to negotiate fair deals with them."

Also, some agencies get volume rebates from media owners, wherein they commit to buy a certain amount of inventory at a certain price for certain discounts. The client could even end up paying a premium when it shouldn’t, she adds.

Kiran differs. “Media and asset owners, on the other hand, are increasingly looking at media value delivered to clients holistically and adding benefits that defy classical rate benchmarks," he says. Benefits advertisers receive from media owners include brand activation and running collaborative promotions, among others. He says audit firms are yet to develop metrics that assess the overall value a client gets and, in that sense, end up misleading clients.

“You will rarely find seasoned or multinational clients using Indian audit companies. Global audit companies such as Accenture Ltd, on the other hand, emphasize non-price elements as much as rates and have a more wholesome evaluation of agency and media owner delivery," Kiran adds.