"5.4" Invoking Marketing Dept Audits by PwC, EY, Deloitte?

According to Salesforce’s 2020 Report, 5.4 = the average number of marketing channels used in 2017 by advertisers. 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). Imagine: if all 100 yard dashes were 87% shorter, only 13 yards long.

Now enter a real-life example of measurement shortfall. The U.S. Army’s squander of $220 million ad dollars discovered via Adweek’s 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], the U.S. Army would continue to use $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 modern advertising attribution, and the Army used > 5.4 marketing channels.

In 2018, however, the Army chose C3 Metrics to be the unbiased platform measuring cross-channel performance of every ad dollar spent.

5.4 ≠ 1 (Junior High Math)

5.4 channels does not equal one channel.

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

Without the “Matching Principle” Nothing Matches

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

Between digital fraud, lack of online display viewability, and inaccurate ‘last click’ measurement used by the US Army: measurement failed to incorporate basic accounting standards which inadvertently allocated credit to the lower funnel and the last marketing expense…versus a full funnel, activity-based costing approach.

This, is why the Army missed 20 of 23 KPI’s (and cost U.S. taxpayers $220 million), and why C3 Metrics is now in place for the US Army and US Taxpayer going forward.

Nielsen’s former Chairman & CEO John Dimling, who joined 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.

Over-counting is the most common error in marketing accountability.

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 the activity-based method 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 modern attribution measurement, may be putting themselves at risk under Section 302 of SOX.

It’s analogous to being out of code for electrical. Knob-and-tube electrical can still be used, but it’s out of code. Ungrounded electrical can still be used, but it’s out of code.

As attribution is generally well-known by CMO’s at publicly traded companies (but not being utilized) statements made by CEO’s and CFO’s regarding their advertising effectiveness 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 (or their auditors knew)…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 (PwC, EY, 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 so they’re not in violation of Section 302.