Wednesday, February 04, 2009

Failure Should Not Be Lucrative

President Obama today capped the salaries of the senior executives responsible for our distressed financial institutions. He said that Americans are upset with “executives being rewarded for failure.”

I would think that the same would hold true for advertisers in regards to their ad agencies being rewarded for failure. How many times are TV commercials created only to be ignored by those they are targeted to?

Accountability, which is a four-letter word to most agency executives, is becoming more feasible in the digital world. Especially in regards to TV commercials.

The reason?

View duration is rapidly becoming a standard measurement across all digital platforms. What this means is that advertisers will know if the thirty or sixty seconds that they paid good production dollars for to be produced, delivered any return.

Was it a 10% return or a 100% return on production dollars spent? In other words, did viewers watch only 6 seconds out of 60 or 60 seconds out of 60?

Yes, you could call it a Return On Involvement on dollars spent. But a good Return On Involvement leads to a good Return On Investment when it comes to production dollars.

After all, a produced second that is watched is more valuable to an advertiser than a produced second that isn’t watched.

Now, take it a step further. What if advertisers demanded that their agencies be paid on this basis? In other words, the longer the agency involves the viewer in the commercial, the better the advertiser’s return on production dollars, so the more the advertiser would pay the agency for their efforts.

These performance-based compensation models – where the performance being measured is involvement - have been worked out. Up to now, advertisers have said that sales, not involvement, is the only performance that they are interested in.

But that was before view duration became so readily available. It’s going to be difficult for an advertiser to have the data that indicates that only 10% of their commercial was watched and still feel comfortable paying full fare for the 90% that wasn’t.

Especially if their CFO also has the data.

Agencies have always claimed that the commercials that they craft are so wonderful that viewers will be glued to every second. And, up to now, we had to take them at their word.

Well, it’s time for them to put their money where their mouths are.

Because in the digital world, failure will no longer be lucrative. Success, on the other hand, can, and should, be handsomely rewarded.

As President Obama said, “This is America. We don’t disparage wealth. We don’t begrudge anybody for achieving success. But what gets people upset, and rightfully so, are executives being rewarded for failure.”


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