Friday, September 17, 2010

Now That There’s A Hedge Fund For Media, Why Not A Hedge Fund For Creative?

The announcement this week that Brand.net is releasing a buying platform that will allow advertisers to pay a certain amount for page views at specific prices ahead of time is a form of hedging.

Brand.net sets the price today, not knowing down the road, when the ad actually runs, if the going rate will be higher or lower. If lower, Brand.net pockets the difference. If higher, Brand.net pays the difference.

In other words, Brand.net is hedging their bets that they’ll win more than they lose.

Is there such a system for creative? Should there be?

As it works now, the advertiser pays “x” amount of dollars for production not knowing if viewers will watch all of the commercial or, only part of it.

There’s no hedging of their bet whatsoever.

So what would happen if advertisers said we’ll pay direct production costs, but hedge our bets on mark-up and profit until we see how well the commercial actually involves the viewers?

The more of the spot that viewers watch, the more the agency and production company will make. The less of the spot that viewers watch, the less the agency and the production company makes.

Basically, it’s a model that tells agencies and production companies that failure will no longer be lucrative. For them.

It’s a model that admits that commercials aren’t commodities, that a commercial’s value goes up or down, depending on how well the agency and production company did their job. And, that from here on out, the agency and production company will be paid based on how well they did their job.

It’s a model that allows advertisers to hedge their bets when it comes to the overall cost of creating a commercial.

It’s a model you would think that advertisers would like.

Fortunately, it’s a model that already exists.

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