COMPARING THE COST OF MEDIA


One of the primary requirements of a media planner is to understand the relative costs of different advertising media in order to determine the most efficient and effective use of the budget to achieve the desired results. This blog post will not go into dimensions like reach, frequency, readership audits, viewability, etc... which are used to evaluate media opportunities, but instead looks at the relative cost of different media themselves and why the costs of these media channels can be so divergent.


CHEAPER MEDIA IS NOT BETTER MEDIA:

Buy low, sell high? Not so fast. The cost of media can be deceptive if you don't understand why those prices can be different. So before looking at the relative costs of media, its important to understand how these prices are established; which is (usually) based on the good old law of supply and demand.


THE SUPPLY SIDE:

What does 'supply' mean in advertising media? If a publisher, television network, billboard company or any organization selling advertising space has a lot of that ad space they want to sell (supply) and very few advertisers to pay for it (demand) the price will be low (or lower). The motivation from the ad seller is to make what they can because each day that ad space goes unsold means lost revenue. The logic here is that some money is better than no money.*


THE READERS/VIEWERS - AND HOW THEY USE MEDIA:

The supply of ad inventory is additionally augmented (made more valuable or more finite) based on other characteristics. Here are the three that I believe are some of the most important:


  1. The viewers or readership: A publisher with a very broad readership or viewing audience is going to have a more difficult time charging an advertiser more for their readers because, being that they have a general audience, advertisers and media planners can find these same readers in other publications or media. On the other hand, publications or programs with a very selective audience or readership, like IT directors, school principals, consistent voters, frequent game purchasers, etc... are less common and are more difficult to separate from the general population and thus are worthwhile for the advertiser to pay more to reach because a higher percentage of the people who will see the ad are more qualified than a publication with more general interest.

  2. Finite supply: Another important factor is the limitation of the number of ads that a seller can create. Theoretically a seller could create an infinite number of ad slots, but that is self-defeating because at some point, people will tune out. This factor is essential for electronic media like radio and television, where there is only a certain amount of time for ads to run. Once those seconds of ad space are sold its difficult to just 'create' more ad space.

  3. Engagement/Intrusiveness: A really important, and somewhat more subjective, factor is the degree to which an audience consuming a particular medium can ignore or miss the advertising. Banner ads, for example, are often found on the edges of a web page, or near the bottom, which can be easy to miss. Most social media advertising, outdoor, and print ads also have this challenge for some similar reasons. This is why creative is so important so that your ads stand out and capture the attention of the reader. Pre-roll video ads, television or radio ads, are much more difficult to 'miss' and thus are more intrusive and can theoretically be assumed to have a better chance of being noticed by the viewer.


There are many other factors, but to keep this short (err...shorter) those three are good places to start to begin to accurately evaluate and compare relative media costs.


COMPARING THE COSTS OF MEDIA:

The below chart (courtesy of data collected by the Peter J Solomon Company) shows the relative cost per thousand (CPM; which is the cost of showing an ad to 1,000 people) of different mediums. CPM is a conventional method of evaluating the costs of media for comparison across wildly different formats.


While this data is a few years old, it illustrates the divergent prices of placing ad ad in front of a thousand viewers or readers. The TV example comparing 'spot' with 'prime' illustrates this: In each case its the same 30 second TV ad, yet the cost to run that same ad in primetime rather than during other times of the day is three times as expensive. Is that good or bad? It can be good if you understand that during prime time its not just that more people are watching, but people who are watching during prime time are those who don't watch TV at other times (see #2 above). At least, that's the theory. If you don't need to reach the audience that watches less TV, it might not be as efficient.


Banner ads are interesting to review from a cost perspective. Note that 'premium banners' are shown as 5 times more expensive than a 'normal' banner ad placement. Premium banners are not explicitly defined in this data set, but we can generally assume that this 'premium' is based on a guaranteed display of banners on specific pages and placements of a website. That may sound attractive to a media planner, but the important consideration is whether or not this 'premium' placement is worth a 5x premium. Will the viewers of premium banners be 5 times more likely to click or buy than visitors who might see the non-premium banner? That can be a tough sell.


And to prove that technology does not always allow for lower prices, the relative CPM of 'digital billboards' compared to non-digital billboards is 6 to 7 times more expensive!


But, perhaps because the cost of traditional billboards does not include the expensive and required production of the vinyl or paper required to post on the billboard, so it may not be as much of extreme divergence as it may seem.

The data is unfortunately showing a its age as it doesn't include two essential forms of digital media which are far more relevant and important to marketers today than media like banners. These are paid search and social media.


In respect to social media, the CPM's shown above for both banner digital video ads are adequate proxies for social media.


Paid search is very different and itself is a fascinating comparison. More than any other medium search is on the extreme end of all three factors driving price as outlined above: Search ads are only shown to persons entering in a keyword or phrase, thus the audience is well qualified, engaged, and is consuming a very finite amount of potential ad space. For this reason, the CPM's of paid search can easily reach heart-stopping CPMS of $100 or more!


So how useful is this information, really? Its incredibly valuable when attempting to determine the best way to allocated a marketing budget. A good media planner should not compare the absolute cost of an ad, but the value of showing the ad to the right audience at the right time. There is also seldom an easy formula, which is why a good strategy can often involve a combination of both very targeted, and high CPM media, with a less targeted, more broad reach (lower CPM) media. Combining television with billboard advertising for example.


But media cost is only one factor defining the strategy. The actual production cost of creating ads is an important component. Television ads can be expensive to create, but social media posts are much easier. There are different reasons to prefer different production strategies which will be the focus of a future blog post.


The price of media doesn't assure that the media planner avoids another potential pitfall: spreading your ad dollars too thin across too many media. This reduces the concentration of your ad dollars and may dilute the all important impact of repeated exposures of an ad with the same audiences. But this leads to a conversation about ad frequency and its partner reach, which is another topic for another day.


Thank you for reading! Feel free to drop me a line if you have any questions or comments!


* There are many exceptions to this. It may be a lack of understanding of how pricing or effective yield monetization actually works (hint: don't let emotions get in the way!) but it can also be the case that a publisher sets a price floor to try and maintain some minimum price threshold for its advertising prices ( I would argue that it would be better for the seller to reduce their supply of ad space rather than implement an artificial price floor, but that's another blog post).

CONTACT!

SEND A MESSAGE!

  • Facebook - White Circle
  • YouTube - White Circle
  • LinkedIn - White Circle
  • Twitter - White Circle
  • Instagram - White Circle

PRIVACY POLICY: This site uses cookies to collect data for analysis and marketing purposes. By using this site you agree to the collection of this data.  Click here for the complete Privacy Policy

© 2017 by MESMERO