Consumer Strategies Report February 2005/Media

Internet advertising is hot again, and naturally, you've very likely heard that rates to advertise online are creeping up. But claiming that "rates" are increasing is meaningless unless you analyze who's setting the rates and for what. In a new analysis by al berrios & co., we review the rates offered by online media representatives, and discover that rates can, in fact, be had at lower-than-reported levels. Don't buy until you've reviewed these findings.

If you're a marketer working with a media buyer, and your buyer is telling you that rates are moving up across the board, consider that they typically have relationships directly with publishers, and most of these publishers are the Yahoos! and MSNs of the world, offering high-demand space in their most trafficked pages, and with the aid of expensive technology, drilling so far down, you're able to target consumers with no yogurt in their fridges. These are not the rates discussed in our analyses and definitely not the only ways to reach your consumers online.

Of course, that's why search engine marketing sparked what's now a whole conflagration for internet ads, because it was cheap and it worked. As a result, Google made a $1 billion last year, and everyone, including people without doctorates in statistics, is rushing to write algorithms that search everything from news, reference materials, and even video, to capture some of those search marketing dollars. But still, this is not the only alternative to reach your consumers online.

Because not every marketer has the funds to work with a buyer and because not every buyer is large enough to have relationships directly with a sophisticated publisher, and because not every buyer and publisher is sophisticated, but still reaches someone, there exists ad reps. These companies aggregate tier 1, 2, 3, and even 4 publishers together in a loose network to package and resell adspace (and email databases) in category verticals to advertisers. These companies rarely offer metrics compatible with metrics from other campaigns you're running; don't actually own any inventory, selling on a first come, first serve basis; and rarely have a media kit, and if they do, aren't ready to give it to you. Ad reps are, in effect, brokers, who don't always have (nor require) sophisticated training or technology to sell what they're essentially saying is a commodity - eyeballs online. As many as 83% of the companies we analyzed even claim to be able to reach any consumer in any geographic target, regardless of the tier they're selling in.

Our analysis reviewed 30 of the top ad reps and the first thing that immediately jumps out at you is that a startlingly low percentage of firms, 6%, provided all the information critical to making an investment decision. The top data point provided was rates, but only 77% of our ad reps provided it - the first opportunity for negotiation. Of those that provided rate information (excluding affiliate-type programs), the top method of payment is still CPM with 29% of the firms offering this option; CPC came in second at 24%; CPA, and derivations of, came in at 17%. As you'd expect, no firm offers any of the three solely.

Despite a buyer's size, the buyer maintains pricing power as prices change daily. In fact, most reps request that "you set your budget and the price you're willing to pay" or "adjust your pricing to what you want to pay." Further, the marketplace is so hyper-competitive, that if a buyer demonstrates any indication that they're going to look elsewhere (or is just "browsing"), the rep is generally willing to be flexible enough to close a deal.

A buyer should note that when an ad rep claims that they can provide everything (any ad size at your requested price), the likelihood of their not actually representing any inventory at the time of your inquiry exists. The rep may actually seek to sign inventory after a client is ready to buy. In our opinion, this does not constitute a risky investment on the part of the buyer with the proper checks and balances and compatible, standardized reporting.

Finally, buyers should note that based on a rudimentary review of the sites listed by some reps (33% of the ad reps provided lists of sites in their networks), buyers may not be buying quality; they'd be buying reach. We do not believe that a lack of a media kit equates to potentially poor quality and service. However, more supervision of execution may be required. In fact, it is even suggested to collaborate closer with ad reps and publishers in their networks to enhance their publisher selection criteria (to prevent kid brothers' from being part of the "run of network"), ad placement protocol (to avoid being in rotations with erectile dysfunction ads), and ad serving and tracking technology, consequently securing preferred client terms.

Disclaimer: The recommendations, commentary and opinions published herein are based on public information sometimes referenced via hyperlinks. Any similarities or likeness to any ideas or commentary from any other sources not referenced is purely coincidental. al berrios & co. cannot control any results occurring from advice obtained from this publication nor any opinion(s) conveyed by any reader of this publication.

(c) 2005. All Rights Reserved. al berrios & company, inc. Published by al berrios & co. This Report may not be reproduced or redistributed in any form without written permission from al berrios & co., subject to penalty.

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