2013-01-30

Paywall Or Not, Advertisers Are Being Fleeced

Conflict of interest disclaimer: this blog generates about $80 a year in advertising revenue.
Lazy Greedy Ad Agencies
Many Canadian households have digital video recorders and most have the Internet. So why do companies still pay premium dollars for TV and newsprint ads? Part of the problem is laziness on the part of ad agencies. Buying a full page ad in the local newspaper is easy and expensive. If you get payed on commission based on a percentage of the advertising dollars spent, there is an obvious incentive for big buys. At the other end of the spectrum, buying radio ads is cheap and time consuming. From an advertising agency point of view, its a no brainer.

Confidence
Internet advertising has the additional issue of confidence. Not only is real fraud a problem, but the potential for fraud is there. As an advertiser, chances are you won't even see your Internet ad. As a car dealership owner, there has to be some reassurance involved in hearing your spot on the radio and looking for your ad in the morning paper. Even if customers don't show up, you know the ad was there, and at least one person saw and heard it. On the Internet, there are Russian bots, Chinese cheap labour, slide shows and video auto-play. 

Influence
Journalists know who pays their salary. Presumably they read their own newspaper and occasionally watch their own shows. I've been to a couple of talk show recordings, and they actually play the ads in the studio, even thought the show is recorded! Advertisers are probably not getting their money's worth if they are trying to influence content producers via TV and print ads, but perhaps that plays into the value assigned to those forms of advertising.

Pandering to advertisers on the Internet is quite difficult. Not only are the ads you see here, for example, different based on your physical location, they are also affected by the device (mobile vs. full site) and your browsing history. And they are automatically generated! I could bash Canadian Tire all I want and Canadian Tire could still have ads on this blog. That's not to say companies don't use online advertising to punish "bad" content. Digital Home, for example, was apparently boycotted by Rogers after the site owner complained about their digital TV compression rates.

Cost
TV and newsprint ads can actually seem cheap. The problem is nobody measures the number of people who saw the ad. They just measure if people are watching the show or reading the paper. Newspapers have vastly different rates based on the location of the ad, so there is at least the acknowledged implication that most people don't read the newspaper cover to cover. TV and newspapers also extract a premium because some people actually seek out advertising. When I had a dvr, for example, I'd press play whenever an Apple commercial appeared. And people look in their local paper for sales on anything from furniture to peanut butter.

When you advertise online, you might have to fork over 30 cents to get someone to click on a link to your furniture site. That might seem steep if you are under the delusional assumption that a high percentage of newspaper readers will see your ad and that DVR owners are too lazy to press fast forward.

Advertising Works, Probably
Hershey, the milk chocolate company, used to depend on word of mouth. Now they make their chocolate in Mexico, use milk powder and sell quite a bit of dark chocolate. Oh, and they advertise, alot. Even if advertising does work, at the very least it is more art than science. In most companies, dealing with advertising agencies is the responsibility of the marketing department. Marketing departments are generally populated by people who are bad at science, math and creativity. They are like illiterate lawyers. We'd replace them, but we are to busy doing stuff that is actually useful. However, as a business owner or been counter, advertising online is an easy way to cut costs and increase profits, even if the advertising agency you hire has to work for a change. 


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