In case you don’t know who I am, I am Bruce Goerlich, Chief Research Officer at Rentrak, the global standard in movie measurement and your TV Everywhere measurement/research company. I have been in the research end of the marketing business for over 30 years primarily on the ad agency side, with my last stint prior to Rentrak being President, Strategic Resources Zenith Optimedia North America. Somewhere along the way I morphed from young Turk to old fogey. Now that I have grey hair and am horizontally-challenged I can speak with some authority on advertising and research issues—which I will do from time to time on this blog.
It’s spring and the advertising industry is marching into the upfront, a market place where ad inventory is purchased for up to 18 months in advance. Programs are sold by the networks in packages, where there is a mixture of schlock and high quality shows. Pricing reflects the degree of the mix. But whatever the cost per thousand ($ paid divided by estimated audience in thousands), the audience delivery is guaranteed if bought in the upfront.
However, as Erwin Ephron has noted there is a bit of smoke and mirrors here in how success is defined for a client, “Buyers will settle for buying better than the market. This leads them to commit dollars for the guarantee of a lower than average percent increase.” It is a somewhat strange way to define success. Look at the simplified scenario below. For this client, there was a 12% increase in the CPM from year 2 to year 1. This is deemed successful because the market place went up by 13%, so the client beat the market by 1%. What drove the success? Well the client spent more money than poured into the market, a 1% increase in spending for the client versus flat marketplace dollars. So the win wasn’t because of out of pocket savings. The client “won” because it appears to lose less audience than the market as whole. The client’s guaranteed audience fell by 1%, compared to the estimated fall of 3% in the total market.
So success is, “I spend more money, I lose audience, but because I didn’t do as bad as the other guy I win!”
And don’t get me started, okay I will, on both the fragility and the relevance of the audience metrics employed in the upfront. The total market $ and total audience have to be estimates. There is only limited knowledge on both the buyers’ and sellers’ sides of how much money is in the market. The total audience estimate is based projections for up to 18 months in the future, derived from a small sample with built in high levels of statistical variation. And, the audience metrics of age/sex are so broad in scope as to be highly uncorrelated with actual product consumption. So clients are resting their definitions of a winning marketplace on unreliable and irrelevant metrics. Onward!
Thanks for reading this. Remember, just because “we always did it this way” doesn’t make it right.