Tuesday, January 10, 2012

The Cost of Failure

According to the 2010 Executive Summary of The 4A’s Television Production Cost Survey, the average cost to produce a 30-second national commercial was $324,000.

This comes out to $10,800 per second.

Let’s say the advertiser first runs this commercial on the digital platform and finds out that most viewers, on average, only watch five out of thirty seconds. This means that this advertiser is wasting $270,000.

Most advertisers would pull the spot and start making changes before spending the big bucks on television.

But a few are getting ahead of the game and realizing that instead of paying full fare up front for production, they can pay based on how long viewers are actually engaged in the commercial.

After all, the longer viewers are involved with the commercial, the greater the chances are that the commercial will motivate them to consider the product.

This new model of production compensation is called View Duration Compensation.

The theory behind it is that instead of paying for the agency’s and production company's time and effort, the advertiser pays for production based on outcome. The outcome in this case being how well the commercial holds a viewer’s attention.

We now know that attention is the most evasive thing that a brand can attempt to earn online. While in the past, the model used to be share of voice = share of mind = equal share of market, today’s fragmented digital platform makes obtaining share of voice much more difficult to do.

Which is why many are thinking that a new model of effectiveness needs to be considered. Somethng along the lines of share of time = share of mind = share of market.

Fortunately, we can now measure share of time. The old saying is that what can be measured can be monetized.

View Duration Compensation allows advertisers to monetize the share of time that their agencies and production companies create for them.

Of course, advertisers can continue to waste $10,800 per second.

But now that they don't have to, why?

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