Magazine Unit Wants To Give Credit Where Credit's Due: The Rest Of The Media Marketplace

by Joe Mandese, Feb 25, 2004, 12:00 AM

• Comment
• Recommend
• Tweet
• 

The Media Credit Association (MCA), a little-known annex of the Magazine Publishers of America that provides credit information and services to magazine publishers to help them collect payments due from ad agencies, has been spun off from the magazine trade group and is aggressively pursuing a broader agenda that would make it a clearinghouse for advertising accounts receivable data--including the media payment, delinquency, and default histories of ad agencies--for all the major media.

The centerpiece of the plan is ClearanceNet, a Web-based cooperative in which major magazine publishers agree to share confidential agency payments and receivables histories online. "It's aggregate accounts receivable data," says Jerry Ashton, head of CFO Advisors, a private concern that has taken over the license of the MCA and the operations of ClearanceNet as part of an outsourcing agreement with the MPA. ClearanceNet's new Web site launches today.

"Essentially, we're operating like the PIB," said Ashton, referring to the Publishers Information Bureau, a division of the MPA that is managed partly by TNS Media Intelligence/CMR, which turns around and sells the ad pages and revenues data as part of its syndicated competitive advertising database.

Ashton said the MCA, which continues to be run by longtime president Vaughn Benjamin, has no foreseeable plans to turn around and sell the media payments data publicly, but he said the organization does have an aggressive plan to expand MCA's data-sharing services to other media, and ultimately even to Madison Avenue. Ashton said he's begun preliminary conversations with the credit associations of the other major media groups, such as the broadcast and cable industry's Broadcast Cable Financial Management Association. While most of those organizations collect industry data such as credit policies and so-called DSO (days sales outstanding) reports that show the average number of days it takes for a medium to get paid by advertisers and agencies, none of them have a facility like ClearanceNet that facilitates explicit payables and receivables histories about the agencies its members do business with.

Currently, about 30 percent of the MPA's members--mainly the biggest group publishers such as Conde Nast, Hearst, and Time Inc.--provide data to ClearanceNet, which works like a cooperative, giving each participant complete access to the records of their competitors' financial relationships with ad agencies. MCA's Benjamin said the database includes detailed accounts histories on about 50,000 advertising agencies, including many retail-oriented mom-and-pop operations.

While MCA and CFO do provide some customized reports and other services, none of the data is aggregated into actual credit reports or credit ratings for advertising agencies, although members of ClearanceNet are free to draw their own conclusions on the quality of agency payables based on their profiles in the database.

Ashton said the data indirectly has material marketplace implications for media and agency alike, because media sales departments factor the quality of agency payables into the deals they strike with agencies on behalf of their advertisers.

The expansion of ClearanceNet also comes at a significant juncture for media shops, which are facing greater financial and performance accountability from their clients, and their own management teams.

Recently, there has been a rapid proliferation of media auditing practices, including some that focus on purchasing compliance. And while it is common practice for many agencies to go well past contractual due dates for making their clients' media payments, some agencies are known to profit from the "float"--or the interest they collect by sitting on their clients' media budgets--by delaying payments to the media. Some clients, such as Procter & Gamble, have explicit policies against that, and have developed procedures to ensure their agencies do not hold their ad budgets longer than it takes to pay the media. Others have made it an implicit form of ancillary compensation for their media agencies.

Ashton said an expansion of ClearanceNet throughout the magazine industry and into other media would help media outlets put their own controls on the practice, or would at least enable them to sort the bad apples from the good ones.

Given the increased financial pressure and scrutiny ad agencies are under, Ashton said he'd also like to extend ClearanceNet to Madison Avenue to enable ad agencies to share information on their clients' payment histories, which would help them get a better handle on their commissions and fees.

• Comment
• Recommend
• Tweet
• 

Be the first to comment on "Magazine Unit Wants To Give Credit Where Credit's Due: The Rest Of The Media Marketplace"

Leave a Comment