March 7, 2007

Bidding for Ad Dollars

Bidding for Ad Dollars
A New Media Buying & Selling Paradigm?

By Gene DeWitt,
Chairman, DEWITT MEDIA STRATEGIES LLC


Media buyers traditionally have asked the media for availabilities in the form of proposals and then negotiated with the sellers for the best configuration of ad positions, pricing and other ‘added value’ elements. In this approach, the buyers function as supplicants, with a great deal of control over pricing and proposal elements in the hands of the media. One result has been the development of a kind of secret media marketplace in which only the seller knows for sure what the lowest possible cost is for a given media schedule. This is clearly not to the benefit of advertisers although it works to shield media buyers from a definitive documentation of their negotiating achievements.

It’s been kind of a sport over the years to watch as media buyers obfuscate this absence of accountability by redirecting advertiser attention to the insignificant detail du jour, whether it is the possibility that miniscule DVR penetration and usage will undermine advertising effectiveness or whether completely useless Nielsen disinformation about commercial ratings should be taken into account in media buys. The bottom line, however, is that this media emperor is naked.

I’ve recently been kicking around an old idea that we used in spot buying years ago. Here’s how it worked then. We’d tell the local stations in a market that we had a budget for the following week and that we’d award it, all of it, to the one station that offered us and our client the best media schedule. Simple and clear directions to the stations kept the playing field even and minimized wheelspinning. One result: we could put the stations’ proposals side by side and see costs declining and quality of schedules increasing, over a period of weeks, as each station vied to ‘win’ each week’s buy.

We dusted this idea off a few months ago and implemented in a few local markets. Here’s what we saw in terms of costs per rating point after seven weeks of buying:

Index of costs/rating point by week
Week 1: 100
Week 2: 87
Week 3: 79
Week 4: 71
Week 5: 67
Week 6: 65
Week 7: 66

A reduction in cost of about 35% seems to represent the pricing bottom, at least in this market.

By the way, the planning cost benchmark for this market was approximately 20% above the first week’s cost so the actual performance vs. benchmark is nearer to half the planning cost.

One concern about this strategy might be the concentration of all weight on one station, particularly if the same station ‘won’ the buy week after week. That hasn’t happened as the sales people at each outlet work even harder to get schedules as each week passes. And, since viewers watch programs not stations, there is little likelihood that ad reach will suffer over time.

Another issue may be whether it is necessary to buy in this manner over an extended period of time if the bottom rates are determined so quickly. It’s too early to tell but what we’ve been working on is increasing the quality of the buy while keeping rates down. One recent result was an exclusively primetime schedule in several of the highest-rated programs on television.

We all know the saying about old dogs and new tricks. Perhaps it’s worth wondering if the new dogs need to re-examine some old tricks.

1 comment:

David Reich said...

Sometimes the old tricks still work well.

I'm bloggin' too now, Gene. Check it out.

Best regards.