Tuesday, April 24, 2007

ROI 2.0?

It seems that everything has a 2.0 at the end of it these days. Except for perhaps the most important thing - the advertising business model. That's not to say that people aren't starting to touch on this issue. At the 4A's Conference in Florida last week, a more expansive concept of ROI was discussed. According to the 4A's, ROI now means return on ideas, return on involvement and return on investment.

In other words, there are now three things to try and measure instead of just one. My question is, what's the difference between the three? How is a return on ideas measured any differently than a return on investment when it comes to how an agency is paid?
Return on involvement, on the other hand, is directly measurable in the digital marketplace. Second-by-second commercial ratings are now becoming more prevalent. As they do, advertisers will know how long viewers choose to be involved in their commercials.

Once advertisers know that viewers watched say, only 10% of their spot, I would think that they would be hard pressed to pay their agency full fare for the other 90%. Could a sliding scale be created so that the more involving the work, the more the agency gets paid?

I ran this idea past some of the more creative agencies in the country and their response was quite positive. After all, they equated viewer involvement to good work. And, in their opinion, a sliding scale would allow good work to be worth more than bad work. I also ran this idea past some of the more traditional agencies in the country and they, not surprisingly, thought the idea was abominable.

Traditional agencies, it seems, would prefer to continue to be paid based on how many work on a commercial and for how long versus how many watch a commercial and for how long. In other words, to continue to be paid based on effort, rather than outcome.

And this is where a mindchange needs to occur. The industry's current business model is set-up around labor-based fees regardless of results. Whatever ROI 2.0 turns out to be, it will need to be set-up around results-based fees regardless of labor.

A difficult change if yours is a large agency.

But as measurement becomes even more granular, viewer time spent with a message, i.e. involvement, will become more valuable than agency time spent working on it. If involvement, as creative agencies seem to believe, is a by-product of good creative, then what we need now are advertisers willing to pay their agencies on this basis?

These would be the same advertisers who were nodding in agreement at the recently completed 4A's conference in Florida.

It's time to stop nodding guys, and start doing.

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