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Dentsu, Facebook: the problem with digital advertising

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MUMBAI: The advertising industry just got a hit in an area where it hurts: right in the solar plexus. Last week, Japanese ad agency Dentsu which accounts for a lion’s share of advertising in Japan, admitted that it had overcharged (read: “fleeced”) digital clients to the tune of Yen 230 million between November 2012 and to date. Now, if that sounds like a lot of money it is only $2.3 million or about Rs 14-15 crore. The agency management discovered more than 633 suspicious transactions with 111 advertisers being impacted. Around 14 advertisers were charged but the ads were not placed on the internet at all.

Dentsu has been expanding globally and it acquired the Aegis Network in 2012 at a cost of $5 billion and today around 50 per cent of its advertising comes from global operations. In India, it is led by Asish Bhasin with a clutch of agencies below its umbrella. Bhasin has been charting aggressive growth for the Dentsu Aegis Network (DAN) and has been shopping around for growth opportunities through acquisition. His latest buy was mega PR firm Perfect Relations.

Coming back to the fudging of bills by Dentsu, its president and CEO Tadashi Ishii has clarified that it is restricted only to Japan. Said he in a press release issued earlier this week: “In relation to a part of our digital advertising services for advertisers (including performance-based digital advertising services) provided by our company and some of our group companies in Japan, it has been found that there were multiple incidents where services were provided inappropriately. Types of irregularities involving inappropriate operations which we have detected to date include discrepancies in advertising placement periods either made consciously or by human error, failure of placement, and false reporting regarding performance results or achievements. Additionally, it has been detected that there were incidents where our invoices did not reflect actual results, resulting in unjust overcharged billing.”

He went on to add the agency was taking the matter very seriously and corrective measures are being taken to prevent a recurrence. “As an interim measure, in order to ensure that human errors or inappropriate operations in digital advertising will be prevented and detected, in early September we transferred operations to verify the specifics of advertising placements, publications and billing to a separate section which is independent from the section previously responsible for such operations, and we have endeavored to strengthen our business system for such verifying operations.”

“Our company is determined to clarify the causes leading to the inapropriate operations and to establish further requisite measures for resolving the situations and fundamental preventive measures, and to implement such steps faithfully and steadily in order to restore confidence in our company. Following the taking of such steps, we plan to report the progress of our efforts to our clients and business partners including advertisers, related associations and organizations and all other stakeholders. At this stage, we are aiming at doing so by the end of this year.”

He went to sincerely apologies to Dentsu clients and shareholders “from the bottom of our hearts for causing concern and trouble. At this moment, we do not believe that our business results would be materially affected. However, if we find any new matter which would materially affect our business results in the future, we will disclose such new matter promptly, as soon as it comes to our attention."

In April, Dentsu had consolidated its digital business under a new offshoot called Dentsu Digital Inc in a bid to increase its hold internet advertising, which was not its strong area in the land of the rising sun.

Dentsu in India has been pushing aggressively in digital and around 30 per cent of its revenues come from online advertising. In the urge to grow could some wrong doing have happened in India too? These are questions Bhasin and DAN will have to address. Nonetheless sources say that the India office did meet some of its Japanese clients over the past two days to allay any concerns.

Be that as it may, this is not the only instance where the advertising industry has got its face muddied in the past week. Facebook, the word’s largest social network, too issued an apology on Friday saying that it had overstated on its video viewership metrics, that it had been giving marketers an inflated number for the average time being spent viewing online clips.

Facebook admitted that it had been boosting its average viewing time by only counting videos as viewed if it had been seen for more than three second. It had excluded from its calculations videos not viewed or those which had a view time of less than three seconds.

The two instances above indicate the high-pressured advertising industry’s urge to surge and its excesses. No doubt, it will dent the ad industry’s image where it hurts the most: the area of trust. As it is, consumers are tending to have a sense of disbelief about the claims advertisers are making in advertising, online and in TVCs. There’s very limited monitoring of online advertising and the claims made online, compared to the volume of advertising that’s out there on the internet. And that is a cause for worry. With users shifting to consuming a lot more news, videos online and on mobile devices, the cases of inappropriate, false claims ads will only rise.

It’s over to the ad industry to find some solutions.

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