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Internet spawning new ways to determine exactly what an ad is worth. Could determine which media will be preferred by advertisers. 7/13/07

Posted by Steve Boriss in Advertising revenues, Measurements.
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For decades, newspaper and TV advertisers have been tangled-up in buzzwords for the measurements that determine what an ad ought to cost, such as circulation, penetration, reach, frequency, and impressions. But the big picture is much simpler. Every dollar that advertisers spend has but one purpose — to make a sale. If an ad’s ability to produce a sale could be measured, it would become almost obvious how much an advertiser ought to spend for an ad, and advertisers would feel they were getting their moneysworth.

But the problem with newspaper and TV advertising is that advertisers cannot see a direct link between exposure to ads and sales being made. So instead of measuring sales, they measure things about the ad that are very weak proxies for a sale. Newspaper ads are largely priced based on “circulation,” which is essentially how many households at least had an opportunity to see an ad, while TV ads are priced based upon households reached, which is a parallel concept to circulation. And that’s the way it’s been for decades. Until now…

The Internet is introducing revolutionary new measurements that bring advertisers farther along the spectrum toward measuring an actual sale. “Page views” provide a better measurement of the total number of individuals who have actually seen an ad than has ever been provided by newspapers or TV. Nielsen has just announced that they will also be measuring “time spent” on each page to provide another helpful measurement, as Scott Karp notes. Progress is also being made with “unique visitors,” although that one is tricky given that people visit the Internet using multiple PC’s and devices. And of course, there’s the Google approach, which is providing advertisers with something pretty darn close to the measurement of a sale — an indication-by-click of how many want to learn more.

John Duncan correctly notes that unless newspapers start to pursue their own alternatives to their circulation measurements, the Internet will ultimately be far more appealing to advertisers. And if that day comes, it will be the newspapers’ days that will be numbered.

Comments»

1. Lucas Grindley - 7/14/07

The Web offers more specific measurement tools for advertisers. That’s true. It’s also true of television, radio and magazines. Most mediums can’t offer the level of detail the Web can. But few people are talking about their doom as a result.

The Web can’t take down all of those competing mediums simply because it offers specific information for ROI.

2. Steve Boriss - 7/14/07

Lucas, perhaps I am one of the few who sees doom in this. Keep in mind that I am looking at a 5-15 year time frame and am predicting convergence of just about all media to the web. So, in the future, when advertisers can purchase either/both paper and online versions of a newspaper’s news services, of which they can only be sure of the value of the online version, they could drop the paper from their ad budget. At the very least, they’d need a very compelling reason to supplement their online buy with a paper buy.

3. Making Money out of Online Video: Paradigm Shift Required - 7/20/07

[…] How to build a business out of video online? The Streaming Media Training program (Via Lost Remote) in Valencia, Spain, was all about this question. At the core of it, at least from a “traditional media” point of view, we find advertising. The problem is that, video online is such a new medium to broadcast to that even the basics aren’t all that clear. For example, what is an ad worth? […]


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