Japanese advertisers start to take transparency into their own hands

The concept of digital media auditing—or indeed any media auditing—is still unusual in Japan. But a spate of incidents, ranging from last year’s revelations of overcharging at Dentsu to global scares around brand safety online, mean that major advertisers are slowly beginning to demand more transparency in terms of what their media spend is delivering.

Sony, which looks to be staging an impressive business turnaround, is one such advertiser. The company held a full audit of its digital media marketing activities for the first time this year, having conducted its first TV media audit last year. The audit spanned 12 group companies, including its banking and insurance businesses as well as its higher profile electronics unit.

Takahiro Doi, CEO of SPI Interactive, who led the digital audit, says there did not appear to have been a single motivating factor for the move; rather, the company is aligning with global trends. Sony did not respond to Campaign’s request for comment on the matter. Doi says Sony is still something of an anomaly in Japan in terms of the approach it's taking to media management.

Given the relatively small commissions and the unusual structure of Japan’s media market, media auditing is a niche business, and SPI Interactive itself only launched in July as a sub-company of SPI, an independent consultancy specialising in marketing communications optimisation.

Digital media audits typically assess cost, process and quality of output. That means looking at how much has been spent and how effective that investment has been. It takes into account human efficiency as well as more straightforward tasks like verifying invoices and ensuring the numbers add up, which, as the overcharging incident showed, is far from guaranteed.

Built on trust

The vast majority of relationships between clients and major advertising agencies in Japan are based on trust: in most cases, agencies are under no obligation to release numbers, meaning that marketers have to trust they are doing the right thing. “Most people still look at it as throwing a job at the agency without looking at the transactions involved,” Doi says. “Of course no agency is going to say ‘we aren’t transparent’. But there’s no way to check that.”

Big agencies have essentially transplanted the opaque TV-buying model to the digital space, Doi says. Some advertisers—international companies such as Nestlé and P&G—are known to only work with agencies on the basis of receiving full transparency. But domestic advertisers are rarely so stringent. Doi points to a culture of double standards in which big agencies are more willing to offer transparency to foreign clients, which insist on following a global template.

A spokesperson for Dentsu pushed back against this suggestion, saying that the company "basically provides the same level of transparency across the board". While unable to provide client-specific information, the spokesperson said that Dentsu has "long-standing relations with many of our clients and they are given a clear account of the services they are offered".

Doi thinks that as well as demanding more openness from their agencies, domestic advertisers should reduce the number of DSPs they use in order to protect themselves against unsafe environments online. That does not necessarily mean following P&G’s global lead in dramatically cutting online spending. But it does mean being more proactive in identifying trustworthy DSPs and channeling their budget into those.

Given the prominence of Japan’s domestic agencies in all digital media-related activities, it would be logical to argue that they should bear responsibility for factors such as viewability. But Doi says all stakeholders have a role to play in cleaning things up.

“Google has been proactive in taking up their share of the responsibility,” he says. “So the brands should demand from agencies that they take responsibility and in return, agencies should demand from DSPs that they take responsibility as well. Once you have that process, the number of platforms you can trust becomes very limited.”

Incentives and responsibilities

Digital spending has risen steadily in Japan for the past five years. In February, Dentsu reported that it broke the 1 trillion yen (US$17 billion) barrier. But relative to TV, it still yields very little profit for agencies. Doi agrees that this state of affairs gives them an incentive to cheat. “That’s why brands need to educate themselves on what’s being done,” he says. “They can’t throw everything at the agency and expect them to do it honestly.”

Advertisers must shoulder some responsibility for their own problems. “The most ignorant brands”, Doi says, outsource everything from planning and buying to creative operations, data and technology management to their agencies “and ask for them to lower their commission”. That is unrealistic and overburdens the agency, which—Japanese culture being as it is—is highly unlikely to push back.

Taking more control of the situation doesn’t necessarily mean hiring an auditor. Taking activities like programmatic buying in-house is not feasible for most marketers at this stage. But they can take a more active role in the buying process while conducting their own reviews, for example. The current setup allows agencies to correct their own homework, as it were, but also wastes their time. “The amount of time spent [by agencies] on creating reports is astronomical,” Doi says. “Brands should invest in creating dashboards where they can see the numbers for themselves.”

Spending more time on operations would free the agency up to focus on their real strengths such as planning and creative work, he notes. “It would just be a lot more productive. A lot of brands simply have agencies hold their data. But tools can collect data.”

Making contracts directly with the likes of Google and DoubleClick for data management also makes it easier for clients to switch agencies, should they choose to do so.

In the long-term, Doi is optimistic. He anticipates international standards set by the Interactive Advertising Bureau (IAB) having an effect in Japan over the next one to two years. Japan is far from alone in struggling to clean up digital media. For all its rigour, P&G allocates around a third of its global budget to digital, but Marc Pritchard estimates just a quarter of that actually reaches consumers. But it’s time Japanese marketers show more concern and play a bigger role in improving their lot. As Doi points out, the “trial period for digital” ended a long time ago.