A funny thing has happened with digital data. Different parts of the advertising business, which, up to now, have not been accountable, suddenly are.
Take the cost of commercial creation and production as an example. This used to be considered a sunken cost, part of the price of doing business. Advertisers did not look for a particular return on the money they spent on making commercials, except down the road, through sales.
And while we’re not saying that sales aren’t important, we are saying that sales are part of the overall marketing budget’s ROI. What we’re talking about here is a commercial production budget’s ROI.
All advertisers have a production budget. In the past it used to be 10% of the media buy. Spend $20M in media and the agency would have $2M for production. There was no immediate return expected on that $2M. It was all buried in the overall marketing budget’s ROI.
But the fact is, there is an immediate return on a commercial. Once a commercial is placed in front of people, there are three options. They watch all of it, some of it, or none of it.
Of the three options, which offers the greatest return?
Commercials cost money to create. And while we all know that the overall job of the commercial is to convince people watching that one product is better than another, its immediate job is to get people to watch.
In other words, to spend time with the commercial.
Now, I’ve been in many meetings where advertisers said they don’t care about time-spent with the commercial. All they care about is sales. What they want to know is the correlation between time-spent and sales. Unfortunately, the correlation between time-spent with a commercial and sales varies, depending on how an individual commercial is crafted.
That said, there is one given. A sale can’t happen if people don’t watch.
Which is why knowing how long people are involved with a commercial is important. Not to mention that every second produced costs the advertiser money. (The average thirty-second national commercial costs some $366,000 to produce. Or, $12,200 per second.)
So what if advertisers told their agencies that they wanted to treat commercial creation and production as an investment rather than a cost? In other words, the longer the data showed that viewers paid attention to the commercial, i.e. the greater the return on involvement for seconds created, the more the advertiser would be willing to pay those that created it.
The lower the return on involvement, the less the commercial will cost the advertiser.
It’s called Viewer Time-Spent Compensation—a new model designed to work off the digital data that's now available. Yes, it does require that creative agencies take on some of the risk of creating commercials.
But they shouldn’t mind too much.
After all, with so much digital data now available, creative agencies have no choice but to be held accountable for something. If they don’t want to be held accountable for the creativity of their advertising, then perhaps they should find some other line of work.
Tuesday, October 28, 2008
Monday, October 20, 2008
Why Behavioral Targeting And Addressability Aren’t The Answer
I remember when TiVo used to be more circumspect.
From the very start they were well aware that when viewers time-shift programming, the commercials were fast-forwarded through in mass. But TiVo was less then willing to share that information with advertisers as they didn’t yet have a solution to the problem.
That has apparently changed. While I’m still not sure whether they have THE solution to the problem, they are certainly more forthcoming in letting the TV industry know that a major meltdown to the system is on the horizon.
Tom Rodgers, head of TiVo, was a breakfast speaker at last weekend's ANA conference in Florida. In no uncertain terms, he reminded the audience that in the next two to three years, the TV industry will face a crisis more serve to it, than the current financial crisis is to the economy.
The reason? In the next two to three years, 50 to 60 million households will have DVRs. The most prevalent behavior with a DVR? Fast-forwarding through commercials. In other words, about two-thirds of the homes that advertisers care about reaching will be fast-forwarding through those advertisers’ ads.
What’s worse, according to Mr Rodgers, fast-forwarding is a given, regardless of the type of advertising. Which means supplying a more demo-relevant version of a commercial to a viewer has little affect on their desire to fast-forward.
Ouch.
Reading between the lines, what Mr Rodgers said without saying is that behavioral targeting and addressability will have little impact on people skipping ads. And he’s 100% correct. Because behavioral targeting and addressability are solutions to the wrong problem.
The problem isn’t that people are skipping commercials because the commercials are not relevant. People are skipping commercials because the commercials are interrupting their programming.
Or, to put it more simply, people are skipping interruptions. Not commercials.
Which is why the solution lies in finding a way to present advertising in a non-intrusive manner. And, more importantly, since this will decimate the reach and frequency pillars upon which the linear model of advertising has been built, finding a way to monetize this non-intrusive model.
Which, at least in our opinion, is where time-spent comes in to play.
The linear, mass media model of advertising was based on how many people saw the message. The digital, viewer-controlled model will be based on how long people choose to spend with the message.
Viewer time spent is where value will be found in the future. Both for advertisers. And, for those agencies that can create it.
From the very start they were well aware that when viewers time-shift programming, the commercials were fast-forwarded through in mass. But TiVo was less then willing to share that information with advertisers as they didn’t yet have a solution to the problem.
That has apparently changed. While I’m still not sure whether they have THE solution to the problem, they are certainly more forthcoming in letting the TV industry know that a major meltdown to the system is on the horizon.
Tom Rodgers, head of TiVo, was a breakfast speaker at last weekend's ANA conference in Florida. In no uncertain terms, he reminded the audience that in the next two to three years, the TV industry will face a crisis more serve to it, than the current financial crisis is to the economy.
The reason? In the next two to three years, 50 to 60 million households will have DVRs. The most prevalent behavior with a DVR? Fast-forwarding through commercials. In other words, about two-thirds of the homes that advertisers care about reaching will be fast-forwarding through those advertisers’ ads.
What’s worse, according to Mr Rodgers, fast-forwarding is a given, regardless of the type of advertising. Which means supplying a more demo-relevant version of a commercial to a viewer has little affect on their desire to fast-forward.
Ouch.
Reading between the lines, what Mr Rodgers said without saying is that behavioral targeting and addressability will have little impact on people skipping ads. And he’s 100% correct. Because behavioral targeting and addressability are solutions to the wrong problem.
The problem isn’t that people are skipping commercials because the commercials are not relevant. People are skipping commercials because the commercials are interrupting their programming.
Or, to put it more simply, people are skipping interruptions. Not commercials.
Which is why the solution lies in finding a way to present advertising in a non-intrusive manner. And, more importantly, since this will decimate the reach and frequency pillars upon which the linear model of advertising has been built, finding a way to monetize this non-intrusive model.
Which, at least in our opinion, is where time-spent comes in to play.
The linear, mass media model of advertising was based on how many people saw the message. The digital, viewer-controlled model will be based on how long people choose to spend with the message.
Viewer time spent is where value will be found in the future. Both for advertisers. And, for those agencies that can create it.
Thursday, October 16, 2008
Whose Intentions Are More Honorable? The Advertisers? Or, The Viewers?
Does the future of advertising depend on being able to shift our focus from measuring the advertiser’s intent to measuring the viewer’s intent?
The advertiser’s intent, as we all know, is to interrupt whatever the viewer is doing in an attempt to shift their focus from something they find interesting to something that, most likely, they won’t.
Currently, reach and frequency measure how many times we interrupt the lives of how many people. One could argue that reach and frequency are really nothing more than a way to measure how proficient we have become at being rude. Or, was it only my mother who used to remind me, in no uncertain terms, that it was rude to interrupt?
Interestingly enough, we can now also measure how many times viewers invite an advertiser into their homes and/or lives. At least, I think this is really what search is - the opportunity for viewers/users to determine what is relevant to them, and then allowing them to choose to spend more time or not with those messages of interest.
In other words, we can now measure the intent of the viewer rather than the intent of the advertiser. And, at least in my opinion, the viewer’s intentions are much more honorable.
According to the recent article by Gord Hotchkiss, search is a measurement of active engagement. Advertising that intrudes is basically a way of interrupting engagement. One could argue that intrusion basically makes engagement inactive.
Inactive engagement is ineffective if one is attempting to create the emotional connections needed to build brands. Active engagement, i.e. search, is a necessary ingredient to creating an emotional connection.
In other words, brands can best be built through search rather than intrusion.
Mr. Hotchkiss didn't say this last part. But, if you follow through on the arguments, that conclusion can certainly be drawn.
Recently, Google’s CEO, Eric Schmidt, mentioned that “Brands are the solution, not the problem” to sorting out some of the content issues one finds online. And yet, Google, perhaps more than any other company, has through it's search platform, helped to turn the Internet into a direct marketing vehicle.
Maybe Mr. Schmidt needs to focus on letting advertisers know that search is more of a branding tool than a direct marketing tool. If nothing else, it would allow him to tap into the 90% of marketing budgets that are not allocated to direct response.
The future of advertising, which coincides with the future of the Digital Marketplace, lies in monetizing intent. Not the advertiser’s intent. That we can already do.
What we need now is a way to monetize the viewer’s intent.
Not only will it prove to be far more lucrative. But, chances are, more honorable as well.
The advertiser’s intent, as we all know, is to interrupt whatever the viewer is doing in an attempt to shift their focus from something they find interesting to something that, most likely, they won’t.
Currently, reach and frequency measure how many times we interrupt the lives of how many people. One could argue that reach and frequency are really nothing more than a way to measure how proficient we have become at being rude. Or, was it only my mother who used to remind me, in no uncertain terms, that it was rude to interrupt?
Interestingly enough, we can now also measure how many times viewers invite an advertiser into their homes and/or lives. At least, I think this is really what search is - the opportunity for viewers/users to determine what is relevant to them, and then allowing them to choose to spend more time or not with those messages of interest.
In other words, we can now measure the intent of the viewer rather than the intent of the advertiser. And, at least in my opinion, the viewer’s intentions are much more honorable.
According to the recent article by Gord Hotchkiss, search is a measurement of active engagement. Advertising that intrudes is basically a way of interrupting engagement. One could argue that intrusion basically makes engagement inactive.
Inactive engagement is ineffective if one is attempting to create the emotional connections needed to build brands. Active engagement, i.e. search, is a necessary ingredient to creating an emotional connection.
In other words, brands can best be built through search rather than intrusion.
Mr. Hotchkiss didn't say this last part. But, if you follow through on the arguments, that conclusion can certainly be drawn.
Recently, Google’s CEO, Eric Schmidt, mentioned that “Brands are the solution, not the problem” to sorting out some of the content issues one finds online. And yet, Google, perhaps more than any other company, has through it's search platform, helped to turn the Internet into a direct marketing vehicle.
Maybe Mr. Schmidt needs to focus on letting advertisers know that search is more of a branding tool than a direct marketing tool. If nothing else, it would allow him to tap into the 90% of marketing budgets that are not allocated to direct response.
The future of advertising, which coincides with the future of the Digital Marketplace, lies in monetizing intent. Not the advertiser’s intent. That we can already do.
What we need now is a way to monetize the viewer’s intent.
Not only will it prove to be far more lucrative. But, chances are, more honorable as well.
Sunday, October 12, 2008
Branding’s Death Seems A Bit Premature
Last week in the trades, branding was declared to be DOA.
The reason? With the economy tanking, advertisers will want to only spend against accountable forms of media that deliver immediate results, i.e. sales, rather than attempting to build long-term relationships , i.e. branding.
In other words, in this economy of accountability, branding is dead.
My problem with this argument is that it’s based on an assumption that branding isn’t accountable. Doesn’t this depend on how one defines branding?
According to some, myself included, branding is about building a relationship over time. Fortunately, the one thing that can be measured on the Digital Platform is time. Not just time bought by the advertiser, mind you. But rather, time-spent by the viewer with individual brand messages.
If time must be spent to build a relationship, and time-spent with brand messages can now be measured, is it not fair to assume that an advertiser’s brand-building efforts can now be quantified?
This aspect of measuring time-spent is allowing marketers to capture the return on their production dollars spent. If a marketer creates a sixty-second spot of which more is watched rather than less, the return on that effort is greater than the spot in which less is watched.
In other words, every commercial has its own gross amount of time that an audience can experience the brand. The amount of time that the advertiser nets from viewers is where brands are built. You can consider viewer net time spent as a form of ROI, or Return on Involvement on production dollars incurred.
Clearly, how the audience reacts to that brand message is also important. But, in the Digital Marketplace, it's becoming clear is that this is not the only thing that matters anymore.
By trying to equate the success of branding solely on sales results is a form of analog thinking in a world that has gone digital. We now have more precise ways to measure success.
Including the success of branding.
The reason? With the economy tanking, advertisers will want to only spend against accountable forms of media that deliver immediate results, i.e. sales, rather than attempting to build long-term relationships , i.e. branding.
In other words, in this economy of accountability, branding is dead.
My problem with this argument is that it’s based on an assumption that branding isn’t accountable. Doesn’t this depend on how one defines branding?
According to some, myself included, branding is about building a relationship over time. Fortunately, the one thing that can be measured on the Digital Platform is time. Not just time bought by the advertiser, mind you. But rather, time-spent by the viewer with individual brand messages.
If time must be spent to build a relationship, and time-spent with brand messages can now be measured, is it not fair to assume that an advertiser’s brand-building efforts can now be quantified?
This aspect of measuring time-spent is allowing marketers to capture the return on their production dollars spent. If a marketer creates a sixty-second spot of which more is watched rather than less, the return on that effort is greater than the spot in which less is watched.
In other words, every commercial has its own gross amount of time that an audience can experience the brand. The amount of time that the advertiser nets from viewers is where brands are built. You can consider viewer net time spent as a form of ROI, or Return on Involvement on production dollars incurred.
Clearly, how the audience reacts to that brand message is also important. But, in the Digital Marketplace, it's becoming clear is that this is not the only thing that matters anymore.
By trying to equate the success of branding solely on sales results is a form of analog thinking in a world that has gone digital. We now have more precise ways to measure success.
Including the success of branding.
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