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News From Audio Graphics:
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Devaluating the Impression |
For those on the selling side of advertising there's no more bothersome action than to see the worth of your product decline. With the basis behind inventory pricing being how much to charge for reaching 1,000 persons, the thought that now reaching millions of persons is easier than ever should cause eyebrows to raise. It's simple supply and demand economics.
In trying to determine the value of an online radio audience years ago, I set out to calculate the average CPM broadcasters were getting at that time. The answer I came up with was $17.50 CPM for a leading station in a mid-sized radio market.
I'm not sure what answer those same calculations would deliver today, but I feel it's safe to say that figure would be lower.
And, in a few years, it'll be lower still.
Analyzing an advertising campaign's expense versus return is not something that's done in the radio industry, television, or print today. Locally, as I've found after producing more than 10,000 broadcast commercials, in many cases just having advertisers' friends tell them they've heard (or seen) their ads satisfies the clients. That's fortunate, because the math to figure out if advertising in traditional, local media is paying off is not available. Too many variables are left unanswered.
That's not the case with new media, and it's the reason why we are seeing an increase in new media spending on the local level increase dramatically. The Wall Street Journal is quoted saying the increase in local ad revenue will be "48% next year to $12.6 billion."
Here's a slight demonstration why. What's below represents the cost and response attributed to a $24,700 ad buy, using Google Adwords. The ads were distributed through search keyword buys and through content distribution (shown on web sites delivering content desired by the advertiser's targeted group).
For traditional media sales reps, the thought that this advertiser paid a campaign CPM of $0.38 and can count the number of customers that converted (167) should be frightening. Add this to a precise Return on Investment (ROI) calculation of 202.9%, and there is strong argument why media buyers are increasingly looking towards new media buys.
This "accountability" is not something that's outside the realm of the radio industry, TV, or print to deliver today, though it can only be used on a limited basis. I have already conducted a similar analysis on a radio campaign placed last summer, using a radio ad whose sole purpose was to drive the audience to another client's web site.
The accounting of response (or lack thereof) in an ad campaign is a growing reality.
Impressions can be bought anywhere today, at a rate which those media that depend on impression delivery will find not viable within a few years.
CPM is falling. Accountability is growing. Combining these two items means that if the radio industry, TV, or print want to keep profit margins within reasonable levels, they all will have to alter current ways of selling.
New media is going to force old media to change its ways or, eventually, those that don't will fade away.
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