Saturday, November 10, 2007

The Average Online Impression Costs 5¢. The Average Produced Second Costs $12,666. Which Would You Rather Optimize?

Everyone today seems to be talking about making advertising more relevant through dynamic insertion and behavioral targeting. And for good reason. The more relevant the ad is to the viewer, the better optimized the media buy.

At a $50 CPM, each impression is costing the advertiser 5¢. And while I know that a penny saved is a penny earned, and 5¢ is nothing to sneeze at, I'm curious as to why everyone seems to be ignoring the much larger number that's floating around.

$12,666.

This is the average cost to produce one second of TV advertising. (Average production cost for a :30 TV commercial is $380,000.)

Now here's the problem. Most commercials these days are created with a mass market in mind. Niche advertising, if created at all, is saved for print.

The reality is that we're now able to target commercials to an online audience even more precisely than we're able to in print. Yet the commercials that we're running, are, for the most part, commercials that have already been created. Which means that they are not as niche as the targeting that is delivering them.

Now I suppose that none of this would be a problem if not for the fact that advertisers are getting the viewer time spent data for their commercials. Imagine you're an advertiser that's running a :30 second spot that cost the average, $12,666 per second, to produce. Data comes back showing that most viewers opted-out of your spot at ten seconds. What this means is that those 20 seconds not watched have just become even more expensive.

What some advertisers say they are going to do is use the viewer time spent data to optimize their advertising. If they find out that viewers stopped watching at ten seconds, then they'll go in and re-work the commercial at the ten-second mark.

Unfortunately, commercial optimization is not nearly as inexpensive as landing page optimization, or banner ad optimization, or even search optimization.

Yes, advertisers could film a variety of alternatives, just in case. But, in commercial production, time is money. Which means those alternatives become even more expensive if the advertiser doesn't end up needing them.

The best way to optimize commercial production is to monetize viewer time spent with the commercial. In other words, to have the cost of the commercial be related to how long viewers are engaged in it.

The longer viewers are involved in the commercial the greater the profit to the production company and the greater the creative fee to the agency.

Working this way, unwatched seconds would cost the advertiser less per second, while watched seconds would cost more.

I've talked to many large advertisers about this approach and everyone I've talked with said that they would be more than happy to work this way with their agency. After all, advertisers don't mind paying well for success.

What irks them to no end is paying well for failure.

Of course, there are other options.

For some, the answer is to produce commercials for substantially less, in effect dumbing down the quality of their messaging. Others, those more retail-minded, are exploring the modular approach. Summer scenes for viewers in Florida. Winter scenes for those in Minnesota.

But the fact is that neither of these options are ideal for those marketers who are trying to build equity in their brands through advertising.

For them, the answer lies in allowing their agencies to earn their fee by being brilliant. To agreeing to pay their agencies well for creating viewer time spent. And little, if not.

As I mentioned, advertisers are ready. As are a handful of agencies, those more confident in their ability.

Others will follow.

After all, they have little choice.

$12,666 per second is not a figure to be taken lightly.

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