Wednesday, 8 August 2007

Fragmentation and Advertising Value

So I listened to the Cameron Reilly interview with Geoffrey Bowll, Managing Director of Melbourne based ad agency Starship today. Excellent interview! Two intelligent guys, not afraid to call a spade a shovel. Definitely give it a listen. And thanks to Jake to bringing it to our attention :)
One thing Geoffrey Bowll was talking about in the podcast was, with the decline in TV audiences and increasing media and audience fragmentation, how this could be used by advertisers and marketers to their advantage.

Consider a simple (crude example). Suppose a clothing manufacturer has two choices to advertise their products;
TV ads and Podcast sponsorship.

TV ads: cost of ad airtime = $20,000 for 1,000,000 views or eyeballs.
So, disregarding notions of brand awareness and loyalty etc, for this ad to just break-even (at an industry standard 10% EBIT return on Sales) it would require $200,000 worth of sales. If we assumed each purchase for a person was approx. $50, that would be 4000 customers, from that one ad, that would need to be compelled to purchase the product to achieve an acceptable ROI on the advertising expense.
To break-even:
TV ad rate of return per set of eyeballs is $0.2 (each person who sees the ad needs to spend approx 20 cents on your product to break-even)
TV ad conversion rate needs to be 0.4%, which is the percent of people who saw the ad that need to buy the product to break-even, (given an average purchase price of $50 per person).

Podcast sponsorship: Now let’s consider the alternative. Suppose there was a podcast dedicated to fashion. This podcast has a modest audience of about 30,000 listeners. Rremember people who are listening to a fashion dedicated podcast are most likely fashion enthusiast, industry people and early adopters - a marketer’s wetdream.

Ok, so the audience is small but the cost of the sponsorship will be small also. Let’s say the cost of sponsorship is $1000 per podcast episode (this is an upper range estimate - the rate for most popular podcast is $25 per thousand listeners / downloader’s).
To break-even the podcast ad would need to generate $10,000 worth of sales. This gives us the following to break-even figures:
Podcast ad rate of return per set of eyeballs is $0.33
Podcast ad conversion rate needs to be 0.67%

If you are aiming to get 4 people out of every 1000 people who see your TV ad to purchase your product (with the likely TV audience a scattered demographic), getting 7 out of every 1000 people who hear you podcast ad, with an audience that you know is interested in a similar topic, likes to support the "free podcast” they are receiving and are generally early adopters, seems like a walk in the park.

My advice to anyone considering moving from traditional media advertising to new alternatives: Give it a try on a small scale. Build in tools and applications that enable you to track results. The small cost of new media makes it a small risk in which you can easily track the results.

And for those that think fragmentation and the shift from traditional media is not happening, check this article on Afterworld. Afterworld is the first television series to be made available on mobile phones and the web simultaneously, created by three-time Emmy-nominated producer Stan Rogow.

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