Third-Party Sales: Easy as ABC?

By: Jay Schiller Third-party home-delivery sales offer an advertiser the ability to designate in what areas it wants to reach non-subscribers and for what periods of time.

The advertiser pays a qualifying rate of at least 25% of the newspaper's basic price as well as a nominal fee for a "wrap." There is no minimum price for the wrap, and it can simply say, "This paper is courtesy of the advertiser," or it can be an advertisement for the business itself.

The Audit Bureau of Circulations (ABC) is now trying to enforce a tolerance level of 15% for non-delivery of these papers, labeled "Third Party Sales/Home Delivery." On page 24 of ABC's official rules, the rule "C3.3 Third Party Sales" details how these copies are to be qualified and reported. Nowhere on page 24 is there a reference to a 15% maximum non-delivery factor.

The 15% non-delivery allowance is an arbitrary percentage set by ABC. There are no similar percentages set for other third-party sales, such as at hotels, restaurants, or other businesses. While working as an ABC auditor years ago, I would check into hotels that sometimes had a large stack of undistributed USA Todays on the counter. It didn't matter how many of the copies were distributed, just how many the hotel paid for. Newspapers aren't required to issue return credits for undistributed bulk copies to count them as paid; they are reported at gross.

What is making the 15% non-delivery tolerance level hard to swallow for newspapers is what ABC includes in the 15%. If the auditor cannot make contact with a non-subscriber that the newspaper delivers to, the assumption is that the non-subscriber didn't receive delivery.

An auditor should make multiple contact attempts or throw the address out of the sample. Counting residents not home as "no good" (not delivered) or doing "drive-by" audits of the delivery (if auditors don't spot a newspaper in the driveway they assume the paper wasn't delivered) doesn't really cut it.

If nothing else, the result of this will be inflated audit costs. The newspapers that fall victim to the 15% non-delivery tolerance level will try to rebut the findings of the ABC auditors. Rebuttals are normally accompanied by additional testing with commensurate review by ABC managers--and with the audit clock ticking through all of it. Unlike court proceedings where the losing party sometimes is required to pick up court costs and legal fees, ABC keeps getting paid, win, lose, or draw.

The best way for a newspaper to avoid becoming a victim is to simply discontinue third-party home delivery during its ABC audit. There is a limited window of opportunity for ABC to audit this type of circulation, the best-case scenario being the same day of delivery. It's not reasonable to contact non-subscribers weeks or months after the fact to verify delivery. Ceasing and desisting until the audit is over makes testing impractical.

Even if ABC does a live test and determines a non-delivery factor of more than 15%, it can't extend that no-good factor to prior delivery days. ABC can't make the assumption that the day they tested is representative. In actuality, the bureau would hit an audit wall because it would be impossible to verify historical delivery to non-subscribers with any degree of certainty.

As a matter of consistency, if ABC insists on assigning arbitrary non-delivery tolerance levels to third-party home delivery circ, it should do the same to other types of third-party sales. USA Today, for example, reports more than 1 million copies as "Other Circulation," the bulk of it being given away in hotels. There is nothing in the ABC reports detailing how many of these copies are actually received by hotel guests and how many are left on check-out counters or at complimentary breakfast buffets.

Most newspapers have very low penetrations in apartments. Third-party home delivery offers the opportunity to reach these non-traditional subscribers. For example, pizza places often leave flyers and door-hangers in apartment complexes advertising delivery. Why not hook up and have them pay for delivery of the newspaper with a "wrap" promoting their business? And at the same time include an attractive subscription offer with the newspaper?

Maybe a free pizza to every new subscriber?