Tuesday, January 15, 2008

Why Are CBS, NBC And ABC Leaving Money On The Table?

Check the currency exchange rates today and you’ll see that $1 U.S. will buy you .67 euros, 108 yen and 10.9 pesos.

I mention this only because it’s time for media companies to think about exchanging their current currency—impressions—for a much stronger currency in the digital marketplace.

Time-spent (as measured in seconds on digital platforms).

The question is, what is one second of a viewer’s time worth? As an industry, we’ve never had to deal with this before. The advertising business has been built on buying and selling impressions, not time-spent.

Traditionally, a thirty-second spot costs so much per viewer—at $0.02/viewer, it’s a $20 CPM. Whether the viewer watched all thirty seconds, or zero seconds, has no bearing on price.

Time-spent with the message, if it occurs at all, is basically thrown in for nothing. It’s as if time-spent has no value.

But let’s say that you’re running a 30-second spot. Would you consider a 29-second impression to be more valuable than a 2-second impression?

If your answer is yes, then why are media companies like CBS, NBC, ABC, Comcast and Time Warner, not charging for this added value?

Or, in other words, leaving money on the table?

In the eyes of the investment community, media companies are currently being valued based on size, i.e. ratings. (Read the Diane Mermigas article for more on this.) As audience size continues to shrink, so too, does a media company’s value. Switching from a devalued currency—impressions—to one that’s increasing in strength—time-spent—would increase a media companies perceived value in the eyes of Wall Street.

Value, after all, lies in what is scarce. Because time is finite—there are only 24-hours in a day—time-spent will continue to increase in value. While the number of ways to spend one’s viewing time increase every day, the amount of time in which to do so, does not.

Obviously, how much time a viewer spends with a commercial is not the responsibility of CBS, NBC or ABC. Rather, it is the responsibility of the creative agency.

The responsibility of CBS, NBC, ABC, Comcast, Time-Warner and others, is to provide the data so that advertisers can hold their creative agencies accountable.

And, since this time-spent data offers value, to provide it at a price.

Which brings us back to where we started. What’s a fair price for a second?

How about $50? Sounds high at first blush, doesn’t it?

But considering that the production cost for the average second in a national TV commercial is close to $13,000, paying $50/second to see if that second was actually watched seems to be a small price to pay.

What’s more, because time is finite, the more time an advertiser can involve a viewer with their messaging, the less time that viewer has to spend with the competitor’s messaging.

In this way, time-spent starts to offer advertisers a competitive advantage. And allows them to see how a healthy Return on Involvement can lead to a healthy Return on Investment.

I don’t know how many seconds CBS, NBC or ABC run in advertising on their digital platforms on a yearly basis. But multiplying each of those seconds by $50 would seem to add up to a relatively healthy revenue stream rather quickly.

So, obviously, I’m missing something.

After all, it’s not like them to leave money on the table.

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