Why The iPad Will Revolutionize Advertising

There is much discussion about whether the iPad will be a commercial success or not. Analysts and investors are making their projections as to how many iPads will be sold this year and into the future.

And while sales are certainly one measurement of success, “how many” isn’t the only way success is measured on the digital platform.

Equally important to the iPad’s success is its ability to measure “how long” people decide to engage with sites, ads and commercials that the iPad will be delivering.

Apple, as reports have indicated, is set to roll out its “redefined” mobile advertising model – iAd - a few days after the iPad becomes available.

Coincidence?

Doubtful. Steve Jobs is too smart to allow his marketing strategies to rely on coincidence.

He’s also smart enough to know that as reach and frequency lose importance, view duration gains in relevance.

With the iPad, the length of time spent with a print/text ad can now be measured. As can the length of time spent with a website and with a commercial.

In other words, the iPad measures the length of time spent with a brand through the brand’s messaging.

Is time spent with the brand of importance to advertisers?

You bet.

What the iPad offers Jobs is a mobile way to measure and monetize time spent with a brand.

C’mon, nobody’s going to buy time spent, right?

Right. Just like nobody would ever buy individual songs for 99 cents.

Chalk Another One Up To Research

The research results were as follows.

The reason most online viewers – 71% - watch shows on the Web is that they missed a recent episode on TV. Sixty-seven percent of viewers say they watch shows on the Web because it’s more convenient.

Only 38% of online viewers said their motivation for choosing to watch shows online over watching them on TV was that shows that ran online had fewer ads.

The conclusion by the researchers?

Web video audiences are OK with more ads. Which means sites like Hulu and Fancast would be smart to start streaming more ads then they currently do.

This is what happens when we let researches call the shots.

Rentrak. Stickiness. And, Comercials.

Rentrak has a “Stickiness Index.” It’s been in operation for about eight months. What the index measures is how long viewers stay engaged in a TV program.

According to Bruce Goerlich, chief research officer at Rentrak, the value in this for advertisers lies in the fact that the longer a person watches a program, even when controlling for exposure, the more likely they are to recall the commercials.

As Bruce puts it, “That’s what ‘stickiness’ is: It’s the percent of a program watched on an index basis.”

My question is, if Rentrak can measure the “stickiness” of a program, can they also measure the “stickiness” of a commercial?

“Stickiness” is measured on a second-by-second basis. The way that Rentrak determines “stickiness” is to take the average percent of a program viewed, divided by the average percentage viewed for all programs of that duration – 30, 60 or 120 minutes.

Rentrak’s data comes from some 4.5 million set-top boxes in 2 million AT&T U-verse TV homes.

So why can’t Rentrak’s “Stickiness Index” also work for commercials? After all, logic seems to indicate that if recall for a commercial increases the longer a person engages with a program, the same must surely hold true for the commercial itself.

In other words, the longer a viewers engages with a commercial, the better the recall of that commercial.

Couldn’t Rentrak determine a commercial’s “Stickiness Index” by taking the average percentage of a commercial viewed, divided by the average percentage viewed for all commercials of that duration?

Of course they could.

The question then becomes, how is that of value to an advertiser?

Well, going back to yesterday’s post, what it could do is help the advertiser determine their ROPE – Return on Production Expenditures.

“Sticky” commercials, after all, deliver a better return on production dollars spent than “non-sticky” commercials.

If an advertiser pays for 60 seconds to be produced, it’s because they want 60 seconds watched. If they only wanted 15 seconds watched, they would have produced a 15-second commercial.

The talk these days is all about value-based compensation models. If there is value in stickiness, then why don’t advertisers take Rentrak’s data and start paying their agencies accordingly?

But that’s a question for another post.

What’s Your ROPE (Return on Production Expenditures)?

Everyone’s talking about ROI these days. How much did the advertiser make from sales versus how much did it cost to obtain those sales?

Which is all very well and good. But a part of ROI that most people seem to be forgetting about is ROPE – or Return on Production Expenditures.

The reason is simple. ROI focuses on where most of the money is spent. And most of a marketer’s money is spent on media. Generally, media takes 90% of a marketing budget while production of the creative gets the remaining 10%.

But according to a recent study by comScore’s ARS unit, creative is four times as important in determining sales outcome as the amount of media spend.

Four times.

Which seems to indicate that if advertisers want to improve their overall ROI, a good place to start is by improving their ROPE.

So how do advertisers actually measure their ROPE, when and if they become so inclined?

The first goal of any commercial is to be watched. After all, it’s rather hard to convince someone that one product is better than another if the commercial isn’t watched.

The length of time that a commercial is watched by viewers can be measured second by second on the digital platform.

The advertiser pays for either fifteen, thirty or sixty seconds to be produced. If the average cost of creating a thirty-second commercials is $366,000, then it costs the advertiser a little over $12,000/second to produce that spot.

If the data comes back saying that on average, only five seconds are watched, then the advertiser is getting a rather poor return on investment on $306,000 of his production dollars.
If all thirty seconds are watched, then the advertiser’s ROPE Is 100%. And if the advertiser’s ROPE is 100%, then chances are, their overall ROI is going to be higher as well.

Of course, just because a commercial is watched doesn’t mean that it’s going to be persuasive in the marketplace. How persuasive a commercial ends up being can best be determined by sales.

But a commercial’s ROPE can certainly start to serve as a precursor to persuasion. As well, ROPE offers advertiser a way to start to hold their creative agencies accountable for the actual creative.

To do this, advertisers just need to tie part of an agency’s compensation into ROPE. The higher the ROPE, the more the agency gets paid. The lower the ROPE, the less the agency gets paid.

This will do two things. It will allow those brilliantly creative agencies to finally be paid based on how good they actually are.

While at the same time, giving those mediocre agencies just enough ROPE to hang themselves.

“I Want The Truth.” “You Can’t Handle The Truth.”

The above was, of course, the famous exchange from the movie “A Few Good Men.”

Tom Cruise played Kaffee and Jack Nicholson played Jessep. The actual dialogue went something like this.

Jessep: You want answers?
Kaffee: I think I’m entitled to them.
Jessep: You want answers?
Kaffee: I want the truth?
Jessep: You can’t handle the truth! Son, we live in a world that has walls. And those walls have to be guarded by men with guns.

Now, you take the gun part out and you pretty much have the type of exchange that could be going on between advertising agencies and advertisers.

The advertisers being Kaffee. And, the agencies being Jessep.

Advertisers want complete transparency. Agencies are trying to hide it. The available of data is going to change all that.

Advertises want answers. Are they ready to handle those answers?

Because along with answers comes accountability. And the big question that no one's answering is who’s accountable for failure? The agency? Or, the marketing director?

As it currently sits, failure is lucrative. At least for the agency. I remember one media director a few years back being asked a question from someone in the audience. The question was, “Is there any waste in advertising?” The media director laughed to himself and then responded. “Waste? Hell, yes. How do you think we make our money.”

Right now, we run campaigns without any real measure as to whether people pay attention to the advertising or not. We know most of advertising dollars are wasted. There's a lot of money in waste.

That’s changing rapidly. Now we not only know if people pay attention, we also know how long they pay attention for.

Who’s accountable for getting people to initially pay attention? And are these the same people responsible for maintaining someone’s interest?

Let's say that the Chief Marketing Officer runs a spot. Data comes back saying that no one engaged in, or with, the spot. Is the Chief Marketing Officer responsible? The media agency? The creative agency?

That needs to be answerered. Because the one truth in all this is someone's responsible.

The old saying is be careful what you wish for, because you just might get it.

“I want the truth,” advertisers say.

Okay.

But, really, can you handle it?

Engagement vs. Environment

A study was recently conducted by VideoEgg and comScore among 14,000 Web users to determine the effectiveness of banner ads with video versus banner ads without video.

The study also looked to see what affect site environment, or contextual relevance, played in how well ads performed.

Not surprising, video ads proved to be more engaging than non-video ads. Also not surprising, the more engaging the ad, the better the ad performed in terms of aided and unaided awareness.
What was surprising was to find out how little impact the environment in which the ads ran had on performance.

At least according to VideoEgg’s president, Troy Young.

Now keep in mind that VideoEgg commissioned the study. And, of course, the results back up what they’re selling – an expandable ad unit that takes over a portion of the Web page, so it’s almost impossible to ignore.

That’s how VideoEgg “engages” people – through an expanding ad unit.

If you click on the unit to watch the video, VideoEgg says that you’ve "engaged". That’s how they define engagement. Whether the viewer stops watching after 3 seconds or after 30 seconds, the engagement rating stays the same.

If I were an advertiser, I’d say those two engagement levels are very different.

It’s difficult talking about things like “engagement” when everybody has different definitions of what “engagement” actually is.

Some people refer to “engagement” as having clicked in to start the video. Others say engagement ties into time spent with the video itself.

Those are two very different things.

Just engaging with the ad format, i.e. clicking on the ad to start the video, is of little value to an advertiser if the viewer doesn’t hang around to watch the ad.

Engaging with the message of the ad is very different than engaging with the ad format to start it.

I don’t know if the VideoEgg/comScore study had any results that linked length of view with performance. But common sense seems to indicate that the longer people are engaged with the ad’s message, the better the chances are that some sort of persuasion will actually occur.

VideoEgg doesn’t sell persuasion. After all, they sell ad formats, not ad creative.

That’s why they define engagement as clicking-in and not length of view.

Length of view is the responsibility of the creative agency. Not the media agency.

To me, engagement is a sum game. The formula looks something like this.

Initiation + Involvement = Engagement

Advertisers need to start holding media and platforms responsible for the “initiation” aspect, i.e. how many click in.

But once that happens, then responsibility for how long viewers stay engaged with the ad – involvement - falls on the shoulders of the creative agency.

Why Metrics Will Save Creativity In Advertising

This post is in reference to the viewpoint that ran in Ad Age – Why Metrics Are Killing Creativity in Advertising.

The viewpoint was that metrics are killing creativity because brand preference is built on emotional connections. And metrics can’t measure emotional connections.

I’m not so sure.

I’m assuming that the writer of the viewpoint believes that emotional connections can be created through someone watching a commercial. And, that the longer viewers stay engaged in the commercial, the stronger the connection will be.

Interestingly enough, metrics, in the form of second-by-second data, can measure whether a commercial was watched in its entirety. Or, if only ten percent of the spot was watched.

If viewers watch the whole spot, and the creative is properly crafted, then the chances are greater that an emotional connection has been made. In fact, it could be argued that the stronger the emotional connection, the more time viewers will want to spend with the commercial.

In other words, using metrics to measure the view duration of commercials can offer marketers a fairly good proxy as to whether their commercials are making an emotional connection or not.

So, how will metrics save creativity in advertising?

Simply by having creative agencies agree to base part of their fee on view duration metrics. The longer viewers are engaged in the commercial, the more the agency makes. After all, the longer viewers are engaged, the better the spot will have presumably worked for the advertiser. So, the more the agency should make.

Of course, the opposite will also need to hold true.

In return for working this way, marketers will have to agree to give their agencies more leeway in crafting the message. In other words, loosening the reins on the creative process. Letting good agencies do what they do well.

Be creative.

And then, paying them accordingly.

This form of performance-based compensation is now possible.

The reason why?

That's right. Metrics.

Dear 4A’s. What Transformation Were You Referring To Exactly?

The 4A’s just held their annual leadership/media conference in San Francisco, ironically called “Transformation 2010."

I say ironically because there wasn’t that much that was transformational about it.

Oh, they did do something different this year.  They invited 8 people with different ways of looking at things – so-called “transformers” - to speak to the contingent.

The conference went on for two and half days.  The two full days went from 8 in the morning until 5:00 in the afternoon.  The half day from 8:00 to 11:30  That’s twenty-two hours in total.

The so-called “transformers” each got five minutes to offer ways in which the industry could start to transform itself.

Five minutes. 

Eight presentations of five minutes each.  Forty minutes in all.  Out of 1,320 minutes total running time for the conference.

In other words, for a conference that called itself “Transformation 2010,” only 3% of the time was spent talking about actual transformation.

And who says this industry is in trouble?

Better Results At Lower Costs? How Dare They?

Marc Goldstein, Chair of the 4A’s Media Policy Committee and outgoing North American CEO of Group M seemed perplexed in his speech at the 4A’s Leadership and Media Conference in San Francisco yesterday.

He wondered how marketers could have the nerve to expect better results at a lower price.

Mr. Goldstein referred to it as “schizophrenia.”

Which means I’m schizophrenic.   After all, the other day I was asking the contractor who is putting a new roof on my house for better results at a lower price.   In my opinion, I was asking for ways in which he could be “smarter” or “more creative” in doing what he was doing.

In Mr. Goldstein’s opinion, I’m exhibiting signs of schizophrenia.

I don’t agree with Mr. Goldstein on that account.  But, I do agree with one thing he said.   That we need to consider new benchmarks for return on investment because CPM is constantly evolving.

As information becomes more precise, we can continue to target more precisely.  To put it another way, there are fewer wasted impressions.

According to Mr. Goldstein, “reducing waste means we’re lowering the absolute number of people who see our ad, thus increasing CPM.”  In other words, better targeting costs more.

That’s true.  But what Mr. Goldstein failed to mention was that media agencies have historically made their fortunes on wasted impressions.

Advertisers have always recognized this.  But there was little they could do about it.

Now they can.  And, now they are.

Which means that for the first time in a long time, media agencies can be paid for results rather than waste.

And that could indeed lead to schizophrenia.

Not for the advertisers mind you.

But rather, for the media agencies.