Data Is Power
Ad buyers and sellers get ready for an electronic marketplace
By Ken Kerschbaumer -- Broadcasting & Cable, 6/6/2004 8:00:00 PM
Banks do it. Retailers do it. Even the government does it. And finally, it appears, broadcasters will embrace the full menu of electronic-invoicing options, simplifying the process of ordering and billing for spots. For years, the industry has been moving toward electronic invoicing, replacing the faxing of paperwork with electronic data. But it never has embraced the whole system. As many as 50%-90% of all stations use some electronic invoicing, but only in limited applications.
|STREAMLINING THE SYSTEM|
|Typical sales order route:|
|A) Advertising rep firm gets order|
|B) It's faxed or e-mailed to station; confirmation is sent from rep to agency|
|C) Spot airs; invoice is sent to agency via mail|
|D) Agency preps invoice for payment; record for each spot is rekeyed from invoice|
|E) Buyer reviews aired schedule, approves payment|
|Agencies find a 70%-80% discrepancy rate between invoices and what actually aired|
|With Electronic Data Interchange:|
|A) Buyer creates order, which is transferred instantly into rep's system|
|B) Rep sends order instantly to station|
|C) Station logs the order instantly, and confirms to rep firm.|
|D) Station invoices agency electronically|
|E) Agency reviews, pays invoice|
|A system that's faster, simpler, less prone to errors|
Advanced electronic data interchange (EDI) is the next frontier, a kind of front-to-back solution that stations have been slow to utilize. Traditionally, an invoice is faxed or mailed to an agency, where it is handled by a small army of employees. Those employees make sure the spot is aired properly and the invoice is paid.
Invariably, though, there are discrepancies: A spot didn't run, or it ran too short, or it was placed next to a competing spot. Such issues make the ordering-and-billing process time-consuming, intensive, and error-prone. And at the end of the day, it results in stations' being paid 70-110 days after a spot has run.
Though helping solve these problems, electronic invoicing invariably introduces new kinds of paperwork, which flies directly in the face of the effort toward paperless invoicing.
That's why EDI is so important. It can facilitate all aspects of the sales process, from ordering to changes to verification.
"Shame on us that we can't get this done when the financial world can," says Kathy Crawford, president, local stations, for advertising agency MindShare. "Here we are living in the '80s." Crawford has been one of the leaders of the electronic charge, demanding two years ago that stations begin using electronic invoices.
The push helped drive 900 of the 1,200 stations that MindShare does business with to electronic invoicing (the move requires updated traffic and billing software).
Verifying that a spot ran correctly can be time- and labor-intensive, and it can also be inaccurate. Similar inaccuracies drove other industries to embrace EDI. "If everyone processed their work electronically," says Crawford, "the financial returns would be enormous."
Abby Auerbach, executive vice president for the Television Bureau of Advertising (TVB), has some good news for Crawford. Later this summer, billing-system vendors will begin beta-testing an end-to-end electronic system. "Our next big success will be electronic ordering," she says. "The system will allow original orders to go from every agency system to every selling system, virtually eliminating paper orders."
The upside is a lot less paperwork; right now, 40% of the orders sent to a rep firm still get there via fax.
Auerbach says that part of the reason for the industry's slow implementation of EDI has been that legacy systems aren't capable of changing as quickly as similar systems in other industries.
But that's only part of the story: TV stations are still grappling with the return on investment. "What they're concerned about is paying extra money to make processing go better and faster without seeing a financial benefit," says Eric Mathewson, CEO of traffic- and billing-system vendor Wide Orbit. "The buyer gets all the benefit, and the station doesn't get as much. If they won't get paid faster, they aren't going to be that excited about it."
Of course, one of the easiest ways to see a return on investment is to prevent losing business. Will advertising agencies begin saying they won't do business with stations that don't work electronically? Crawford says that day is coming. "If a client is interested in advertising on seven stations and only five of them have electronic invoicing and the other two aren't seen as important, believe me, they'll get left out."
Crawford says the reticence on the part of broadcasters is that they are comfortable with the current situation: Rep firms can't find out until late in the game whether a spot ran properly. "Broadcasters manage the inventory by preempting spots," she explains, "and sometimes they don't want to tell us." Those days, she adds, are over: "Putting up with 70%-80% discrepancy rates is out of the question." (Even the TVB estimates that the error rate can be that high.)
Another tool that will help end discrepancies is the Client Product Estimate (CPE), a code established by the agencies to track orders. It identifies the client, the product, and the estimate (used when there are multiple spots for a product) associated with a given invoice.
"CPEs are essential," says Auerbach, adding that the TVB has been working to make sure every invoice that comes into TV stations carries one. "The traffic-system vendors have been working to enhance their systems to include those codes," she says. All systems will be able to import the numbers by the end of the year, a step that will make it much easier to transfer changes from an agency's system to a station's system.
The problem with CPEs is that some broadcasters haven't made them mandatory. The result? "Without the CPE code, someone on the agency side has to scramble around and match the order and manually enter the invoice," says Mathewson. "When they realize an order is missing a CPE, they need to call the buyer and find it. With a CPE," he notes, "the order can move through the system without human intervention."
Another change in electronic invoicing is being spearheaded by the American Association of Advertising Agencies. Executive Vice President Mike Donahue is leading a program that later this month will introduce a database that will be essentially an address book of all buyers and sellers using electronic invoicing. In addition, the 4A's will use XML computer language to translate data moving between disparate systems. XML "hubs" will be established to facilitate data exchange.
"The XML scheme we created was a great vehicle, but it had no road to travel on," says Donahue. "The hubs will be intermediaries between trading partners and allow data to go back and forth between legacy systems."
Those hubs will be up and running by late summer. "By this time next year," he says, "electronic transfer of data and 'e-business' will be done for all steps of the media transaction process.
The hub systems will also serve another function: The more widespread they are, the more likely that electronic invoicing and data interchange will be attractive to local agencies and stations. Crawford believes that stations avoid electronic invoicing simply because not enough of their business is national. If electronic invoicing becomes more widespread, she says, the 300 stations that MindShare does business with that aren't on board will be more likely to sign on. "This is the way business is being done," she says. "It's all moving electronically."
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