The ongoing challenge of comparing the cost and true value of traditional and digital media
The media industry is one of the most exciting and challenging places to work in the UK. The constant changes in consumer media behaviour presented by the rise of digital media represent an awesome challenge and I’m genuinely excited about the ever expanding array of opportunities that digital media present to all marketers.
However, I believe that the lack of a common comparable currency and language across traditional and non-traditional media is maintaining a divide between digital and non-digital advertisers to the detriment of our progression as an industry that should be focused on effectiveness.
My job as a strategist is to recommend the right channels at the right times for the right audience for my product. However all of that has to include the qualifier – “at the right price”. If I don’t understand that, then I can’t do my job. This thought piece is my attempt to rectify that.
Two theoretical options for an AV campaign
Imagine you are any brand advertiser with the following brief: a media budget of £500,000 to drive awareness and interest around a new product with a typical audience of men aged 25-44. You have developed a 60” piece of video that sells the benefits of this product in an entertaining way.
With that budget you could plausibly be presented with the following 2 options.
Option one: 5 million views of your video with 90 per cent being men 25-44
Option two: 50 million views of your video with 15 per cent being men 25-44
In case you can’t be bothered doing the maths – in option one you will have 4.5 million impacts against men 25-34 and in option two you will have 7.5 million impacts against men 25-34.
This would seem like a no-brainer right? Although option two is clearly less targeted, the total volume of impacts means that your actual cover of your target audience is significantly higher. PLUS in option two you get to reach all the other audiences that don’t convert as highly for your product, but some of whom might still be convinced to buy.
However, when you understand that option one is a digital video campaign (with a combination of YouTube Trueview/Facebook video/pre-roll/ VOD pre and mid-roll), whereas option two would be running on traditional TV, this stops being a no-brainer for some advertisers.
At £500,000 many advertisers would consider that they don’t have the budget for TV, but instead are happy to invest the money in what would appear to be a much lower reach digital video campaign.
Now on the surface there is some (semi) sound reasoning behind this.
1. Whatever your budget, particularly if it is small, you should look to maximise its return by focusing on the audience most likely to buy your product. The data available for digital video means that you can much more precisely focus on your audience and not buy people who aren’t relevant.
2. With a smaller budget, you can’t rely on high frequency of message to generate understanding and persuasion, so you need to make sure that every impact counts. With online video, you have a better chance of guaranteeing that people are watching your advert as it appears immediately before a piece of content that someone has actively selected to view. On TV your audience may have got up to go to the toilet or you could get missed in the bank of adverts that appears in TV advertising.
The problem with these two arguments is that they are basically just an argument about wastage – the idea that an advert might fall on either empty space, or an audience that isn’t relevant. This wastage argument in favour of online video only stacks up if the price is right. It only makes sense to focus on a more expensive but more targeted and more highly engaged medium if your total engaged reach of your target audience is the same or higher. That can only happen if the pricing is in some way equivalent, but in too many media solutions that I have encountered it simply is not.
AV pricing – not even playing in the same league!
Typical TV CPTs for all adults are around £3-£7 depending on station, daypart, programming etc. Typical online video CPTs (whilst often quoted in “pence per view” to possibly avoid comparison) are between £20 and £100 CPT again depending on platform, targeting etc.
(Some people would suggest that you compare a specific target audience CPT on TV with that target audience CPT on online video, but that forgets that there is still significant value in a large proportion of the 85 per cent of the impacts on TV that are not bullseye target audience, but with online video you only get what you buy.)
This means that in order to prefer option one above, you need to believe that one view on online video will generate the brand effect of anything from three to 30 opportunities to see on TV!
But if it works then that’s OK…
For such a disparity, you would expect to see a wealth of evidence that shows how much more effective digital video is vs TV. As a comparison, Pearl and Dean and DCM presented compelling evidence that a cinema ad was up to eight times as effective as TV (depending on your KPI). This was a key contributor to cinema media owners being able to maintain their considerable price premium over TV.
However, having searched for such evidence, the only robust study I found was this – Disney’s attempt to understand the relative value of their own advertising formats across different platforms. It provides strong evidence that for some products with certain objectives online video is up to 20 per cent to 30 per cent more impactful than TV.
Now, don’t get me wrong – I think it is quite impressive that the same piece of video content can vary by up to as much as 30 per cent in effectiveness depending on the delivery vehicle, but a 30 per cent improvement obviously doesn’t justify up to a 3000 per cent premium. I have found no research that would suggest anything like the incremental effectiveness that would be required to justify the cost premium for digital video for your average brand campaign.
Alternative thoughts on effectiveness
One other argument that is used to justify online video’s presence on an AV plan is that it can generate incremental cover at a lower cost per cover point than if you were to buy more TV.
This is a valid argument if total 1+ cover for a given burst is a clear strategic objective, (eg to advertise a time-limited offer). However studies have shown that maintaining your average awareness over time is usually more valuable than having heavy bursts of activity and so most brands usually benefit from being on air longer rather than heavier. This means that the best way to improve your effective coverage would be to buy an additional week of activity rather than concurrently use a more expensive additional medium.
So what is going on?
So if this is all true, why do online video ads appear to cost so much compared to TV ads?
Hypothesis one: It is an issue of supply and demand – for all that online video viewing is booming,it still represents only 17 per cent of all video viewing hours (see below), with standard TV representing over 70 per cent. Of that 17 per cent, a huge amount is either ad-free (BBCiPlayer), behind an ad-free pay-wall, (eg Netflix) or surrounding content that is not suitable for advertisers (most of YouTube’s user generated content, or the 5.6 per cent of hours that is porn!)
This means that despite the rapid growth of penetration of online video, the actual available inventory for brand advertisers is much more limited than you might think.
This ratio might be OK if the only advertising on online video came from a small percentage (say 5 per cent) of the AV advertising budgets of TV advertisers once they have reached heavily diminishing returns on TV. However the opposite is true. There are a huge number of small advertisers (that perceive that broadcast TV is beyond them) that are buying very tightly targeted direct response online video campaigns as their only AV medium. They can afford to do this because as a direct response advertiser they can optimize heavily and quantify the return without having to invest at high levels to do so.
This means that supply is far outstripped by demand from these smaller advertisers. This in turn pushes the price up and so when large broadcast TV advertisers come to the digital video market they have to pay heavily inflated prices just to get on the screen.
Digital Video pricing – starting from a completely different anchor
Hypothesis two: Media pricing is subject to behavioural economics like anything else, and in this case the “anchors” of digital video and TV are at opposite ends of the media spectrum.
When TV first arrived it was competing with the dominance of radio and press – two well-developed broadcast advertising media that defined the advertising paradigm. As such, TV had to be competitive with those well-established media and so CPTs could never get too high.
Online media, however, originally aimed to compete not with display advertising of any sort, but, led by search advertising, it competed with classified and DM media that were previously assessed on a cost per lead basis rather than a cost per view. These media tended to be much more expensive per unit, but could be justified on an ROI basis as advertisers could identify the exact value to their business. This difference in origins means that TV and digital video were not compared directly until relatively recently and so their pricing structures are almost incompatible.
This theory is reinforced by this article on The Drum which quoted Google’s CFO who felt that it was necessary to “concede on its quarterly conference call that it was yet to convince brands to shell out as much for YouTube ads as they do for its search ads.” As a strategist I find this bizarre – why should PPC search listings be the reference point for the pricing of YouTube video ads? They are surely designed to achieve a completely different objective with widely varying KPIs. Yet this comparison is happening and is skewing the relative pricing in the industry.
So what can the industry do about it? Back to basics
Advertising is a numbers game, it always has been and always will be. We hate to admit this, but advertising is a gentle force that rarely persuades people to do anything that they didn’t already want to do. But when you do it at scale, when you talk to enough people enough times with a message that is interesting, engaging, compelling and memorable, then you might just catch someone in the right mindset that makes them more amenable to buying your product than someone else’s.
This means that we have to view advertising media as a commodity which can be compared across formats, media types and platforms. For this we need to create a common currency or at least a common language.
It certainly isn’t helpful that YouTube pre-roll ads are sold on a pence-per-view basis, whereas TV is bought in TV ratings or cost-per-thousands. But that shouldn’t be an insurmountable obstacle (although few people bother to do the maths). It is clear that the challenge to a common currency is more complex than multiplying by 1000.
For all that the video content may be the same, it is clear that the context and the vehicle does have an effect on the impact, so they are not directly comparable: one view of a solus video in front of a two minute YouTube video clearly should have a different value to a video that runs as one of six adverts in the middle of an ad break on TV when the viewer might well have popped out to put on the kettle. One is a (virtually) guaranteed view whereas the other is simply an “opportunity to see”.
The problem is that we don’t have a measure to assess exactly how much more it could be worth, so this disparity is justified by conjecture and opinions rather than facts and figures.
Maybe we could learn from the outdoor media industry – for a number of years, (in both POSTAR and Route planning tools) each and every outdoor panel in the UK has been given a score and therefore monetary value according to a visual eye-tracking study that has identified the statistical likelihood that a particular panel will be viewed by an individual based on its size, location, angle, illumination and elevation.
Could it not be possible to do a similar job for all video media? Can we not put to bed the arguments about ad avoidance and engagement once and for all and start trading video media from a common base?
I, for one, would love to see what could be done and I think that industry needs it.
Dan Plant is group strategy director and real-time planning director at MEC