The pricing facet of advertising has always intrigued me. It is one of the few premium industries that seems to have an uncapped potential regarding what entities are willing to pay for a return on investment. Sometimes I look at what my clients are spending for a small banner ad on one of our global e-commerce sites and I just am still astounded that those numbers are real money!
Of course there are many tiers of advertising spends, and while TV has almost always dominated the top tier it has quickly had to compete with the large dollars that companies are allocating solely into digital. I’ve recently caught glimpse of an approaching turn of an era for advertising. This is not only for the types of ads that will continue to provide value to the consumer and a true ROI back to the advertiser, but also a turn in the level of money that companies spend. The blog below from Ad Age covers this topic with a fantastic overview of how consumers are no longer at the mercy of advertisers in all outlets. As advertisers, not only do we have to recognize that the consumers hold the power more than ever of what they view, but we also have to understand how we can stay ahead in reaching them with rich and uncompromised value.
Enjoy the article below. Where do you think the industry is headed? Do you agree with the predictions about Ad Rates? Let us know what you think!
In an Era of Mega Agencies, Ad Rates Are About to Soar
Thanks to Technology, There’s a New Factor in the Negotiations: the Consumer
For most of its history, the assumption in the advertising industry has been that the larger an agency becomes, the more money it has to spend on media, the more leverage it has in negotiations with publishers and networks, the less it will have to pay those outlets for time and space.
This explains the widespread expectation that lower rates will result from Publicis-Omnicom’s giant presence in the advertising marketplace. In the short run that surely can happen, but don’t expect it to continue over the long term.
When advertising rates result from a two-party negotiation — media buyer and media supplier, as has typically been the case for decades — buying power helps to drive down prices. But scale doesn’t have the same clout with interactive media.
Traditionally as advertisers focused on driving down the price they paid to get people’s attention, media publishers have had a choice: reduce the cost of content (giving the consumer less value), or put in more advertisements. This is one reason why TV is eight minutes of advertisements for every 22 minutes of content.
Today, however, technology is providing the alternative for individual consumers to pay to remove advertisements, rather then give their attention away for pennies. Increasingly, the market for consumer attention will not be a negotiation about the leverage of media buyers over media publishers, but rather a market in which each consumer can decide what his time and attention are worth to him, independent of media buying power. Eventually, the pain of too many ads, with too little value, reaches a point where it is a very easy choice for a consumer to pay for content rather than see ads. More than ever, consumers are buying their way out of advertising, effectively outbidding the advertisers for their own attention.
Think consumers buying their own attention is an abstract idea? What about the $10 per month that consumers pay for their DVRs? What about the PandoraOne? Spotify Premium? Netflix? HBO? Showtime? Sure it’s great content, but it’s also a better experience, in large part because of a conspicuous lack of advertising.
As technology continues to make media more malleable to the individual consumer’s whims, the price of bought attention (advertising) will have to reach the proper equilibrium with how consumers value their own attention. This means advertisers will have to value people’s time and attention at many multiples of the current rate card.
The good news: exponentially higher prices for consumer attention should not scare advertisers. Targeting, measurability and, most importantly, a new age of interactive story telling and advertising creativity will make advertising with more impact and more than compensate for the increased price. Advertising that is precisely targeted and measurable will result in far fewer ads, so publishers can focus on better consumer experiences, instead of artificially generating a large volume of meaningless metrics.
All of this is to say that the biggest question facing advertisers in the Publicis-Omnicom, mega-agency era will not be how to drive the price of advertising down, but rather how leverage their vast resources to generate ROI on much higher priced ads. Solving for this will allow premium publishers to better balance between subscription and ad-supported revenue and make ad-supported premium content a viable option. This will be the number-one topic for the media and advertising industry for the next five years.