6 Challenges Facing CFOs in the Advertising Media Industry
The advertising media industry is fraught with challenges, many of which are related to the fluctuating state of the marketplace. What worked last year may not work today, creating an ever-evolving marketplace that is consistently affected by digitalization, regulations, and customer demands.
While this most directly affects those in ad sales and planning, CFOs and ad sales finance teams aren’t immune to the effects of the media industry. CFOs are responsible for the end product of ad sales, driving the financial future of ad operations and a company’s trajectory overall. However, the unique state of the industry makes it challenging to fully understand the ins and outs, leaving some CFOs in the dark. Unfortunately, this has historically made maximizing advertising revenue a challenge.
While many of the negative aspects of the industry are starting to right themselves, there’s still a long way to go. Therefore we have highlighted the most important challenges facing CFOs in the advertising media industry.
1. Lack of Transparency
Transparency has long been an issue in advertising, largely due to the complex nature of contracts between media companies and their clients, as well as the subject of ambiguous bonuses or benefits that have come from media producers. To remedy this, the Association of National Advertisers suggested that these kickbacks, often known as Agency Volume Bonification or ABVs, should be passed directly back to advertisers. This increased transparency is beneficial, but unless this is adopted as standard practice across the industry it’s hard for CFOs to know what to expect.
2. Lack of Clarity in Invoicing
An itemized receipt, like we have come to expect in our most mundane daily purchases, can be very important in ensuring accurate financial documentation, helping clients to understand exactly what they’re getting for their investment. However, clarity in invoicing has not always been the industry norm. Imprecise or seemingly arbitrary invoices provide an extra layer of obscurity, preventing CFOs from understanding what they’re spending or what they’re making — and identifying where there’s room for optimization.
3. Compliance with Regulations
In many industries, including those working closely with advertising, regulations can impose a serious burden. From complying with auditors and financial regulations to meeting SEC reporting expectations, CFOs often find themselves tied up in red tape rather than performing necessary day to day tasks. This can be particularly consequential in large organizations in which varying departments handle reporting in disparate ways. The energy needed to create compliant reports can be immense, reducing the efficacy of a finance organization.
4. Slow and Manual Processes
While the internet age has inspired many changes across industries of all kinds, media companies have struggled with finding comprehensive solutions to unique ad sales needs. With few effective CRM and financial management solutions that can support the specific quirks of ad sales finance departments, many companies use their own reporting systems that generate clunky Excel reports, leading to a heavy reliance on manual reporting processes. This means that things such as ad sales performance are nearly impossible to track in a timely manner — and failing to note problem areas in time to right the ship means lost revenue.
5. Reporting Challenges
Words like “automation” are becoming increasingly popular in finance functions, particularly as reporting tools are now more robust and better than ever. In spite of this, however, many CFOs are hesitant to take advantage of new technology; 31% cite hesitance in approaching AI solutions, while 53% worry about the burden that implementing new and non-streamlined solutions will cause. This results in a reliance on old or outdated methodologies, making it harder for teams to accurately communicate the state of the business.
6. Problems Obtaining a Full Financial Overview
Ad sales is rarely a straightforward business model. With things like the divide between programmatic and direct advertising as well as the split between print and digital — or, in the television realm, linear and digital — the reporting process has many pieces and parts and relies upon systems that don’t necessarily talk to one another. This can lead to varying reporting from various ad sales support teams that CFOs and their Financial Planning & Analytics (FP&A) teams must combine into a cohesive whole. In doing so, it’s easy for little things to slip between the cracks, creating a situation in which a holistic analysis of company finances isn’t wholly possible.
Maximize Advertising Revenue by Understanding Industry Challenges
Advertising media is a complex industry, and the rapidly changing state of ad sales is only compounding issues. Efforts to maximize revenue are hindered by a number of challenges, many of which are issues stemming from historically inflexible business processes and legacy systems. By identifying the most common challenges facing them, CFOs can create comprehensive plans to improve points of vulnerability and enhance vital functions like budgeting, forecasting, and revenue management.
Originally published at www.advendio.com on August 28, 2019.