“Advertising Is The Price You Pay For Having An Unremarkable Product Or Service.”

The headline above is a quote from Jeff Bezos at Amazon.com’s annual shareholders meeting on Thursday.

According to those in attendance, it caused the audience to go silent.

I’m wondering if those in the ad industry will also remain silent in regards to the quote.

At its core, there’s an element of truth to it.

That said, most of the products that Mr. Bezos sells at amazon.com have been advertised somewhere before.

In other words, without advertising, Mr. Bezos company wouldn’t exist. Amazon.com, more than most companies, is a complete by-product of the advertising machine.

In fact, it could be argued that amazon.com is nothing but advertising. Go to amazon.com and the Kindle is available for purchase on the home page. Where, by the way, you can read 3,828 customer reviews about the product. And, where there is an adjacent video, also known as an advertisement, promoting the Kindle.

Which means, at least according to Mr. Bezos, that the Kindle must be an unremarkable product. Of course, I don’t think that's what he was proposing.

What I do think Mr. Bezos was trying to say is that the way we get information about products is changing. And today, those 3,828 reviews might be more impactful that 3,828 advertising impressions.

With so much information so easily available about so many products, advertising has been reduced to the status of an opinion. And, because it is an opinion that’s being expressed by the manufacturer of the product, it’s taken with a grain of salt.

Other equally valid opinions are now also readily available. In the case of Kindle, 3,828 of them.

Which is why I think that what Mr. Bezos meant to say isn’t that advertising's not important anymore.

But rather, that the definition of what advertising is, and how it works, has changed forever.

It's an easy assertation to prove for yourself. Just go to amazon.

How 3rd Party Analytic Companies Can Start To Differentiate Themselves

I’ve recently had meetings with the top five 3rd party analytic companies in the advertising industry.

What became obvious through these meetings is that these companies are in desperate need of differentiating themselves in the marketplace.

Having spent time with each, I realize that each company is more alike than different. In fact, there is one weakness that they all seem to share - thinking that their data is media related only.

The recent news from Coca-Cola that they are going to start paying their agencies on a performance basis has changed the landscape for all those that gather data.

The reason is that advertising consists of two parts and two budgets.

There is the production budget for creating the work.
And, the media budget for distributing it.

Both budgets have their own ROI associated with them.

The immediate ROI on a production budget is time spent with the message. If the advertiser pays to have thirty seconds produced, they damn well want people to spend time with all thirty seconds.

To advertisers, a good Return On Involvement is equal to a good Return on Investment. Which is why the question that advertisers are now asking is how long did I get viewers to spend with my message?

The immediate ROI on a media budget is impressions. How many viewers did the advertiser expose their message to?

Because time spent did not used to be measurable, the industry used to stop asking questions at exposures. Now that time spent is measurable, advertisers are starting to ask about it.

Bascially, they are asking what the hell do they do with that piece of data.

To be able to offer advertisers that answer is where analytic companies can start to differentiate themselves from one another. While at the same time, adding value to their own product offering.

Were the analytic companies that I talked with thinking along these lines?

One, yes.

Fox Remote-Free TV, Redux

Awhile back, Fox launched, with big fan-fare, what they called Remote-Free TV.

At the time, we mentioned that it wouldn't work.

Now Fox seems to be agreeing, as they're limiting its use. According to Jon Nesvig, president of sales for Fox Broadcasting Company, "We are not giving up completely on 'Remote-Free TV.' We are going to use it strategically and potentially on a number of different shows over the course of the season."

Strategically? Yeah, right.

Now they're offering something called "Alive Air." According to Fox executives, "it's a commitment to add spontaneous elements, original elements throughout our schedule to keep the engagement up throughout the commercial pods."

The chances of this working?

Even lower than Remote-Free TV.

That said, you have to find the name interesting — "Alive Air."

Guess Fox is implying that the air is dead when commercials run in the space.

Wonder if "Alive Air" will cost more than "Dead Air?"

I know, stupid question.

How Can And Should Engagement Be Interpreted And Measured As Value?

This was the question asked in a recent interview with Waikit Lau, co-founder and president of ScanScout. Lau was attempting to define how best to simplify online video targeting.

Lau doesn’t believe that there will ever be one uniform metric for engagement. And, perhaps Lau is right. Engagement may well be too complicated a concept to be defined.

But, then again, perhaps the answer is as easy as asking viewers.

In fact, it could be argued that viewers are already telling us. It comes down once again to control. As viewers gain ever more control over what they watch and when, they, not us, define value through their actions.

If they stop watching something, it is probably due to the fact that it has lost value for them.

What does this mean for advertising and the current in-vogue, value-based compensation thinking being touted by Coca-Cola?

If Coca-Cola wants to pay based on value delivered, then length of view of a commercial seems to serve as an objective measure of value. If so, then perhaps Coca-Cola should consider paying for commercial creation based on length of view.

The longer viewers watch a commercial for, the more the agency would get compensated. The opposite would also hold true.

Such compensation models already do exist.

But before these models become mainstream, it will require advertisers to understand that “value” is not just an end product, measured by sales. Value is added, or not added, throughout the selling process.

Each commercial adds value. Or, not.

When viewers watch more of a commercial rather than less, then that commercial had value for those viewers.

Advertisers should pay accordingly.

Should The Worth Of A Commercial Affect The Cost Of The Commercial?

This seems liked a logical question to ask in lieu of Coca-Cola going to value-based compensation models.

Advertisers currently pay for commercial creation and production based on effort – time spent to craft the commercial – in the form of hourly time sheets.

As Coca-Cola has mentioned, they want to start paying based on outcome.

The first immediate outcome with any commercial – way before sales results come in – is did anyone pay any attention to the commercial? And, if so, for how long?

A commercial’s ability to hold an audience (time spent) is now measurable on digital platforms.

We define "time spent" as an impression in the control of the viewer. If the commercial seems worthwhile to the viewer, they will continue to watch. If not, they leave, moving on to something else.

In other words, time spent measures a commercial’s worth in the eyes of the viewer.

Now what if Coca-Cola paid their agencies based on what the commercial was actually worth to those that it was targeted to, rather than the amount of time it took to create and produce the commercial?

Value, in this case, would be decided by the viewer. Not the agency. Nor, the advertiser.

There are many who continue to argue that it is impossible to qualify value. Their argument goes along the lines that value is subjective.

Hardly.

When a viewer stops watching a commercial, that’s the point where that commercial lost value for that viewer.

Measurable?

Yes.

Monetizable?

Yes.

According to Ad Age, 72% of marketers are planning to cut production budgets while 68% are looking at reducing agency compensation.

Why?

If the worth of a commercial can be measured, then why not let the worth of a commercial affect how much the agency gets paid for concepting and producing that commercial.

In other words, give them a chance to earn their fee.

I know a few agencies that will gladly play this way.

If your agency will not, give me a shout.

How Much Time Are Viewers Spending With Your Online Commercials?

Maybe a better question is does it matter?

If your answer is yes, then what are you doing about it?

You know how many impressions your $5 million dollar media buy purchased for you. Do you know how much viewer involvement you were able to secure for that same $5 million?

Or, doesn’t the length of an impression really make any difference? According to media agencies, not really.

Recently, a VP at the industry’s largest media agency had this to say about involvement/engagement with a message. “There’s a consensus that engagement is going to be how we hold online advertising accountable from now on, but we’re still grappling with how to tie it back to real business results. Like how many ‘engagements’ does it take to drive purchase intent?”

How many?

How many is such analog thinking. Advertising has shifted into the 3^rd dimension. Reach and frequency—how many and how often—have served their purpose.

How long—the 3^rd dimension—is what digital advertising has evolved to.

A thirty-second spot, in which 300,000 viewers each watch only ten seconds, isn’t as valuable to the advertiser as a thirty-second spot in which 300,000 viewers watch all thirty seconds.

In the first example, the media buy delivered the advertiser three million seconds (34.72 days) of involvement with their brand.

In the second example, the same media buy delivered nine million seconds (104.17 days) of involvement with their brand.

Difference in media costs for an additional 70 days of involvement with the brand?

Zero.

Is more involvement with the brand better than less involvement with the brand?

Most would argue yes. Unless, of course, you’re arguing with your media agency.

Right now, they get paid for delivering the message. Period. Whether anyone pays any attention to the message or not reflects little on their fee.

And, the last thing they want is for this fee arrangement to change.

But, the fact is, a commercial’s ability to hold an audience is now measurable. It’s called depth.

Which means shallow advertising will no longer work.

And, I'm afraid to say, the same goes for the arguments put forth by most media agencies.

VideoEgg Keeps Pushing The Egg Forward

Gotta love those guys and gals at VideoEgg. They’re all over this time spent thing.

AttentionRank is their newest offering. What it does is optimize ad placements on publishers' sites.

Here are a couple of VideoEgg’s findings in regards to users engaging with an ad.

More time on page is better than less time on page.

Bigger ads are better than smaller ads.

Above the fold is better than below the fold.

Uncluttered sites allow ads to be noticed better than cluttered sites.

All of these “findings” are pretty much common sense. Nothing especially earth shattering here.

(Interestingly enough, what VideoEgg has also discovered, and which is somewhat revealing, is that targeting has little to do with a user engaging with an ad. This is rather important with all the money being spent by people trying to “sell” behavioral and contextual targeting.)

VideoEgg goes on to explain that AttentionRank is not about creative, but about increasing performance by optimizing media placements. They also say that AttentionRank identifies where and when users are most receptive to a brand’s message and delivers ad impressions to maximize attention and/or engagement with that message.

All well and good. But a few things are still being left unsaid. And I think the confusion starts with the word “engagement.”

“Engagement” is a very misunderstood word if only for the fact that actual engagement is a sum game. Ever since engagement became the “buzz” word in the ad industry, everybody has been trying to claim that they’re the ones that deliver it best.

Sorry. But it doesn't work that way.

For example, VideoEgg claims they sell engagement. What they really are selling is the number of people who click on the ads they place. Because they don’t sell pre-roll or mid-roll, VideoEgg basically sells a cost-per-click model. Whether people watch all of the commercial, or ten percent of the commercial, the cost is the same to the advertiser.

To me, at least, that isn’t engagement.

I see commercial engagement as a three-part process:

Impressions + Viewer Initiation + Involvement.

The three parts must work in that order. The viewer must first be exposed to the commercial. Then the viewer must initiate the interaction with the commercial. And then, the viewer must become involved in the commercial.

Only then has engagement actually taken place.

VideoEgg is trying to make the second part—viewer initiation—work better. Kudos to them for that. And kudos to them for understanding the value in time spent with commercial messages.

After all, if branding is ever going to take off online, we need to remember that branding is about building relationships. And relationships are built on time spent together. That’s why time spent is the critical component to the online branding equation.

As I have stated in previous posts, it is my belief that we'll soon be discussing how share of time leads to share of market.

VideoEgg is right to say that impressions are insensitive to performance. But, that doesn’t make impressions unimportant. Impressions are necessary if only because viewers first need to be exposed in order to be able to initiated the interaction with the message.

I think that what VideoEgg is trying to imply is that impressions, by themselves, are not enough anymore to prove the value of an ad campaign. And, while that's true, they still play a vital role.

Media agencies are still responsible for delivering the best and most relevant impressions possible. Publishers are responsible for allowing viewers to opt-in to messages of interest. And, the creative agencies are responsible for involving the viewers in the message.

Once we can agree on the delineations of responsibility, then the publishers and agencies can get paid based on the value that they actually offer.

Coke, as we now all know, is pushing for value-based compensation models. But to do so, they first need to understand who is responsible for what when it comes to engagement.

Accountability is certainly possible. But only if agencies have control over what they are being held accountable for.

How Should Agencies Define “Value” In A Value-Based Compensation Model?

Ever since Coke declared that they were going to be switching to a value-based compensation model with their agencies, there’s been much discussion as to how best to define value in a way that both sides can agree to.

Traditionally, the agency was the one that defined the value of an assignment, basing it on the number of people and the hours needed to fulfill the assignment. Under their new model, Coke is going to determine the value that the agency delivers.

Any agency profit will now be contingent on outcome rather than effort.

And while we can’t argue with what Coke is doing—value-based compensation will soon be the norm—we don’t think that agencies should give up their right to define what the value is that they offer their clients.

As long as that value is based on both outcome and effort.

And, as long as that outcome is based on something that the agency has control over. After all, no one should be held accountable for something that they can’t control.

Which leads to the question, what do agencies actually have complete control over in terms of outcome?

Sales? Hardly. Sales are contingent on many factors, only one of which is advertising. How about brand awareness? Or brand consideration? Or brand preference? Or purchase intent?

Traditionally, these have been fine measures of value, back when advertisers actually had one agency of record. But that’s no longer the case. When five or more agencies – creative, digital, media, point-of-sale, etc – all having a say in how a brand is perceived, and, whether it’s ultimately purchased, how can any one agency be held accountable?

While agencies cannot really control business results, the one thing they do have tremendous influence over is how long viewers spend with the commercials that they create. This outcome is in direct correlation to their creative capabilities. And, since an advertiser sees value in viewers watching more of their commercial rather than less, view duration seems to fulfill the value parameters for both sides.

Obviously, it requires advertisers to free up the reigns when it comes to how involved they are in the production itself. If they want their agencies to be accountable, then they will need to back off when it comes to producing the commercial.

Once they okay the script, advertisers have to turn the production over to their agencies. Granted, it requires a higher level of trust between agency and advertiser. Not to mention, a willingness from both parties to share risks and rewards.

Some advertisers won’t want to work this way. For that matter, neither will some agencies. But for those agencies that have a confidence in their ability, Coke, and the other marketers that follow down the path of value-based compensation, have just done them a tremendous favor.

Branding’s job, after all, is to increase sales over time. If so, then isn’t it time that advertisers started to pay their agencies based on how much time they actually create?

Media Agency Paranoia

The following is based on actual events – although the names of the players involved will not be mentioned.

A package goods company wanted to find out what the average view duration was for the commercials it was running online.

Their assumption was that time spent with the commercial would reveal some measure of ad performance and/or quality. This was not to second-guess the efforts of the media agency. Rather, it was to evaluate the ad’s performance – in other words, the marketer was looking at using “time-spent” as a creative quality check.

Not a media quality check.

To do this, the client needed the ad ID’s and titles of five or six commercials that recently ran online.

You would think would be a simple request to fill, wouldn’t you?

The result? All hell broke loose. A confidential email sent to one person at the media agency was forwarded to dozens on the media agency side.

Rather than fulfilling the request, the stonewalling began. The excuses went from it’s too difficult to get that information (not true), to that information isn’t of any importance (since when is it the media agency’s place to say a request from the client is unimportant?).

Finally, the media agency said they could get the information but it would only make sense to do so as part of a larger research project. In other words, information that others can get in five minutes, would take this media agency three to six months.

The truth is, it’s not that the media agency doesn’t have the data. And, it’s not that they couldn’t deliver it to this client in five minutes. The reason they were hesitating is that they saw no upside in divulging this data.

In the past, an impression was an impression. Whether an impression lasted for thirty seconds or two seconds was irrelevant. Basically, this was due to the fact that view duration wasn’t measurable.

Now that it is, advertisers have come to realize that all impressions aren’t created equal. Impressions are no longer just about how many, but also about how long. A commercial’s ability to hold an audience is now measurable.

Not surprisingly, since this data is now available, advertisers want access to it.

The media agency’s paranoia lies in the belief that if viewers don’t watch the commercial, this will reflect negatively on their efforts. That’s the hurdle that needs to be overcome.

Media agencies have to realize that they deliver just one of the building blocks that makes up this thing called engagement. Their job is to expose as many relevant people to the message as possible for the dollars allotted.

But once a viewer clicks in to watch the commercial, accountability for length of stay transfers to the creative agency.

Whether media agencies will ever believe this or not is another matter.

Which is why our company is now helping advertisers broker time spent with their commercial messages on digital platforms.

Media agencies broker impressions.

We broker involvement, measured as time spent.

Advertisers shouldn't have to wait six months to get information that is currently available on a 24/7, real time basis.

At least, that's the way we look at it.

How about you?