The vagaries of variance

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In the wake of numerous circulation scandals, publishers are grappling with the concept of variance, or the difference between the circulation numbers they report themselves and the circulation numbers coming from the audit bureaus.

BPAWorldwide has no stated variance, according to BPA President-CEO Glenn Hansen. "It's intentionally done that way so that in our rules and regulations you won't find a fudge factor," he said. "If we say 2% [variance], everyone will put in 1.9% more." Publishers are expected to accurately report their circulation, and BPA has discretion in the case of variances.

Still, that process is subjective. "We have to use our own judgment if it's a material variance," Hansen said. "If it's material, then we'll issue a report correcting the data." However, if a publisher is found to be manipulating the numbers, no matter how small the amount, "we've got a big problem," Hansen said. "If you accept that, you then condone worse behavior."

At BPA rival Audit Bureau of Circulations, the stated variance is 2%. That fraction is fine with Jerry Okabe, VP-audience marketing at Primedia Business.

"Obviously there are times when we wished the allowance was a tad higher because we exceeded the tolerance,"Okabe said. "But for the most part I think this percentage has a historical foundation that allows for reality on the publisher side and adequately protects the media buyer and advertiser by not making the allowance too big."

Jim Fischer, circulation director at Reed Business Information, said the audit bureaus shouldn't create restrictive rules and proposes simple transparecy as a solution. "[The bureaus] should report what they find during the audit as compared to the publisher's claims," he said. "If there is a variance, of any degree, they should simply report it."

BPA's Hansen believes tougher scrutiny by media buyers could-and should-lead to rate bases being chopped industrywide. "If I were a publisher, this would be the perfect time for me to chop off the nonrespondents and go out and resell my product to media buyers," he said. "It's all about targeted these days, not mass."

Fischer said the larger problem is the time delay between the publisher's claims, which are promoted and used for ad sales, and the audit adjustments to those claims, which can take 18 months. What would help is "closing [that gap] enough that advertisers can make confident decisions on what the publisher claims through audit confirmation."

Fischer proposes two solutions. First, roll the audits through the year rather than having all publishers report their claims on the same date. Second, split up the audit process and do short, targeted audits on questionable areas such as print order or sponsored and agency sales, and then come back for a full review later.

Hansen noted that BPA has talked about putting each publication's circ numbers up on the Web after each issue has shipped. That way, media buyers wouldn't have to wait six months for the next audit statement.

But publishers are wary of this, he said. "They think that then they'll have to meet the rate base with every issue, which is what they should be doing now," he said. "Who buys on an annual schedule these days?"

Besides, Hansen said, many media buyers are buying per-issue or on a quarterly basis, so this move could only help publications sell ad space. M

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