Friday, March 20, 2009

From Analog Pennies To Digital Dollars

NBC's CEO, Jeff Zucker, made quite a splash when he first uttered his now much quoted phrase that the TV business can't survive by turning analog dollars into digital pennies.

Recently, Mr. Zucker upgraded the value of the web from digital pennies to digital dimes. An improvement, yes. But, still not enough, at least according to Mr. Zucker.

The problem, as I see it, is that Mr. Zucker is still looking at the digital platform through analog glasses. Which means he still sees everything as it was, rather than as it is.

He's not alone. Many are still guilty of this. They're still looking at the web as a reach platform. It's easier that way. After all, reach is what the industry knows how to buy and sell. Unfortunately, that's not what the web's about.

The web isn't about building reach. The web is about building relationships.

And, for a relationship to grow, time needs to be spent. Need proof?

Go ask your spouse.

If Mr. Zucker were to look at the future through digital glasses, he would realize this. And he would see that the future is less about trading analog dollars for digital pennies then it is about trading analog pennies for digital dollars.

The fact is, TV advertising has been traditionally sold by the penny. How so? Well, a $20 CPM means that each impression is worth 2 cents.

But because the digital platform is less about reach and more about relationships, less about how many and more about how long, it can be sold less on an impression basis and more on a per second basis.

How much is a second worth to an advertiser? Well, that's where it gets interesting.

When it comes to producing a commercial, a second is worth a lot to an advertiser. The average :3o commercial costs around $360,000 to produce. Which means that each second is costing the advertiser in the neighborhood of $12,000.

Now how much to you think an advertiser would pay to make sure that the $12,000 they're putting down for each second is being well used? Or, in other words, watched by the viewer.

Would $1.00 per second be too much to charge for the digital data that says whether viewers did or did not watch every one of those very expensive produced seconds?

I would argue that paying $1.00 to insure the success of a $12,000 invesetment seems a bit low. It would mean that for only $30, an advertiser could insure their $360,000 investment.

What advertiser wouldn't do that?

At $50 per second, it means the advertiser would be paying $1,500 to insure a $360,000 investment. Still a very good deal for the advertiser.

And, at that price, also a good deal for the publishers that have the data.

After all, what it offers publishers is a secondary revenue stream to help make up for the price of online CPMs which seem to be heading south faster than AIG's reputation.

Impressions would still be bought and sold on a CPM basis. But involvement in the commercial would be bought on and sold on a second-by-second, view duration basis.

Since both impressions and involvement offer value to the advertiser, both impressions and involvement should offer value to the publisher.

It's not an either/or deal. It's a value add deal.

Focusing just on impressions (reach) on the digital platform is a form of nearsightedness that advertisers and publishers need to quickly get past. And, they will, once they see how much advertisers are willing to pay for relationship-building.

The digital data is there.

All that's missing is the foresight to turn that data into dollars.

1 comment:

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