“5.4” Invoking Marketing Dept Audits by PwC, EY, Deloitte?

5.4 marketing channels = the average number of channels used in 2017 by advertisers according to Salesforce’s 2020 Report. In 2018, it will climb to 6.2 different channels.

Yet according to the DMA Report from 2017, only 13% of advertisers are using advanced attribution. Meaning, 87% of advertisers still give credit to one channel (also known as last click measurement).

Now enter the Army’s squander of $220 million ad dollars discovered when Adweek acquired an Oct. 5, 2017 audit document titled “The Army’s Marketing and Advertising Program, Return on Investment.”

The audit revealed, “only 3 of the 23 marketing programs generated a positive impact during the year…For [fiscal years 2018-2023], AMRG would continue to use about $220 million for the same ineffective marketing programs.”

$220 million of waste discovered: paid for by every American tax payer.

The Army, like 87% of all advertisers, didn’t use any advanced advertising attribution, and the Army used > 5.4 marketing channels.

5.4 ≠ 1 (Junior High Math)

5.4 channels does not equal one channel.

Statistically, any marketer not using advanced attribution who’s spending ad dollars in 5.4 channels will be mistaken in its measurement by 5.4x.

Accounting’s “Matching Principle”

Every CFO and auditor understands the “matching principle” also referred to as activity base costing. Unit level revenue matched to unit level cost.

Between digital fraud, lack of online display viewability, and last click measurement used by the US Army: performance measurement fell short of basic accounting standards which inadvertently allocates credit to the lower funnel and the last marketing expense versus a full, activity-based costing approach.

This…is why the Army missed 20 of 23 KPI’s.

Nielsen’s former Chairman & CEO John Dimling (joining C3 Metrics in 2012) said he was a champion of Nielsen and Arbitron’s ambitious but ill-fated ‘Project Apollo’ to create a single-source measurement system.

Project Apollo failed to succeed with old technology, but modern, complete, attribution platforms with massive computing power prove to be today’s answer.

The most common error in marketing accountability is over-counting.

When adding up revenue from siloed tracking systems, the industry over-counts conversions/KPIs by 5.4x. Each marketing channel and vendor tries to claim 100% of credit versus an activity-based method which is deployed every day in accounting.

Without the matching principle, nothing matches.

Enter the Auditors

Section 302 of Sarbanes-Oxley requires that quarterly and annual documents “contain no untrue statements.”

CEO’s and CFO’s who’ve made statements about marketing/advertising effectiveness based on single channel marketing measurement versus advanced attribution measurement, may be putting themselves at risk under Section 302 of SOX.

As advanced attribution is generally well-known by CMO’s at publicly traded companies (but not being utilized) statements may be considered to be untrue because the reporting mechanism of last click is untrue.

Here’s where it gets murky: if the CEO or CFO knew about the difference between last click marketing measurement and advanced attribution measurement…what did they know, and when did they know it?

But, is “I simply didn’t know,” a defensible argument for violation of SOX Section 302 (which is punishable to a CEO and CFO by jail term and fines).

If a certain portion of the U.S. Tax Code changes, and the CFO simply didn’t know…Section 302 doesn’t care because auditors (EY, PwC, Deloitte, KPMG, etc) are specifically there to impart their knowledge of untrue statements and or practices.

But it begs the question: as the big four accounting firms enter the space of marketing and advertising, they now know about both the matching principle and the difference between last click versus advanced attribution.

Once auditors know, their publicly traded clients then have to know in order to not violate Section 302.

And, they know 5.4 ≠ 1. Add it up.