Wednesday, January 06, 2010

Will Advertising Go The Route Of Network Programming?

The 4A’s recently released their annual summary of commercial production costs for 2008. Nineteen agencies participated, including most of the top 20 U.S. agencies.

Not surprisingly, the average cost of producing a commercial dropped from 2007 to 2008. What is surprising is that it dropped only 5%, from $318,000 in 2007 to $302,000 in 2008. Over half of the national commercials, in fact, 62%, cost on average $342,000 to produce. This does not include the agency fees to come up with the commercial.

When viewing audiences for TV programs were greater, it was easier to justify the cost of creating great advertising. After all, it’s much easier to swallow a half a million dollar price tag for a thirty-second commercial when you know it’s going to be seen by 20 million viewers.

It’s a tad more difficult when the viewing audience is two million.

As viewing audience numbers have dropped, so too, have advertising dollars. As advertising dollars have diminished, so has the money to create great programming content to bring in more viewers. Instead, we have reality shows.

Inexpensive to produce. Tedious to watch.

Which puts the ability to create great advertising between a rock and a hard place. As TV viewing audience numbers continue to drop, CMOs will be hard pressed to sign off on large budgets for TV commercials. Which means the quality of those commercials will also decline.

And, if TV is any example, declining viewership of commercials will soon follow.

Basing the cost to produce advertising on the number of potential viewers has never made much sense. But, it was the best we could do.

Today the digital platform allows advertisers to measure not just how many see a commercial, but also how long they decide to engage with that commercial. And isn’t that last measurement really the only one that matters?

Advertisers should simply pay for the amount of time that a commercial is viewed. This isn’t a media issue. Media is about exposure to the message. This is a creative issue. Creative is about engagement in the message.

Instead of basing the costs of production on possibility, how many will be exposed and then might in fact, watch, why not base it on actuality? Of those that started to watch, how long did the creative actually engage them for?

The longer the engagement rate, the more the agency and the production company will make.

Will it make agencies more accountable? You bet.

But it’s perhaps the only way that agencies will be able to continue to create great advertising as viewing audiences continue to get smaller.

The naysayers, of course, proclaim that agencies and production companies will never work this way.

And they’re right. The mediocre ones won’t.

But the good ones are another story. After all, they don’t see this as an accountability model. They see this as a model that allows them to stop being a commodity.

All any one with any talent ever wants is the ability to be paid based on how good they are. That time is here.

Happy New Year.

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