Hidden Media Costs Associated with Online Advertising (Ad-tech) – Some Real Good Data

In the Spring of 2006 TruEffect participated in the Ad-tech IMPACT conference TruEffect presented on the Hidden Media Costs Associated with Online Advertising.  These are the costs associated with managing online advertising as an agency or as an advertiser.  This article dives into the costs that are out of control and provides some insight as to what you can do about bringing things under control.

If you can take anything away from this article it is the following:

Measure something when managing online advertising.  Not everything, but something.  Establish a benchmark so that you can recognize where progress is being made.

Educate your client.  If you are an Agency, don’t keep your client in a bubble.  Educate them about your process so that they come to respect the complexity of what you do.  Treat various aspects of your internal business units as a client as well if you are a marketer.  IT needs to understand your business needs to better help you get your needs met.  Educate.

Acquire and retain quality talent.  Sounds simple but its vital.  When you develop expertise, protect it.  If you need expertise acquire it.  I will talk about human capital management a little bit more later.

One of our client’s was quoted during a focus group as saying: “The biggest frustration with online advertising is that it is hard to focus …there are so many choices that it is confusing.”  This is something we can all agree with.  Let’s look at some of the data that we collected during our research:  In comparison to the 1700 TV channels, 1400 newspaper dailies, 13,000 radio stations and 18,000 magazines to choose from when advertising, there are 76 million web sites and 8 billion Google-indexed web pages.  That’s a lot of options when planning for online media.

Meridee Alter, Senior Vice President, Media Director at Rubin Postaer and Associates (RPA) said “…the process of planning, buying and creating for interactive media campaigns has only gotten more difficult as our budgets increase. It still requires more agency resources than any other medium even though spending is still well below that of TV, for example.”  This is a spiraling problem.  When online spend was 1-2% of billings it was one thing, but now it is 5,7 maybe even 10% of the budget and the costs to manage it have grown exponentially.

What are these costs?

There is a failure in the process to make information readily available and repurposable.  Performance reports are static and require constant reformatting.  Historical performance data is ‘locked’ by third party vendors and can only be accessed through their interfaces.  If access to this data is lost, or if reports that have been formatted have been lost there is a breakdown in the decision-making process.  The amount of time spent in developing reports and re-formatting data is HUGE.  I will demonstrate that for you in a minute.

Costs of creative are another area that are out of control.  What do you pay to build an ad banner?  How about a flash component.  Eyeblaster, Pointroll?  Now think about the creative you build and never use?  These are hidden costs.  Or not so hidden.

The most significant source of hidden cost in our industry is WASTED TIME.  IDC conducted a study to quantify costs that are difficult to measure, costs of wasted time by information workers – YOU.  They examined 600 companies and individuals whose average salary was $60,000/yr and a 40 hour work week.  The study found that as much as HALF of your time is wasted!  Look at four out of the six categoried examined:

–  6.2 hours a week is wasted reformatting reports (i.e., data downloaded from an ad server into Excel)
–  3.5 hours a week wasted searching for data or reports that should be readily available to you
–  3.0 hours a week recreating content (i.e., reports) that someone else may already have that 
   you do not know about
–  2.2 hours a week on version control (i.e., figuring out whether or not you have the most accurate information)
–  5.1 hours a week on other

When the dollar values out of the annual salary were overlaid on these figures:

–  $9,302 reformatting reports
–  $5,251 searching for data or reports
–  $4,501 recreating content
–  $3,300 version control
–  $7,646 other

This data shows that only $30,000 of the $60,000 salary or HALF is going towards productive work in the online advertising information worker space.  

So in the beginning I said that you need to measure something.  I did not mean that you need to measure something campaign-wise, I meant measure something operationally.  Obviously campaign measurement is a requirement.  But measure your operation as well.  KPIs for your management practice will help you figure out where your burn is.  How much time people spend in the areas I described above will help you figure out where you can improve.  Are your procedures fragmented or organized?  Does every media planner have their own way of doing things or is it uniformed?  How efficient is the trafficking process and how efficient is reporting?

That brings me to talent.  What is your burn on talent.  Do you hire entry level and have them start as traffickers and reporting people and then promote from within?  Do you bear significant training costs associated with managing multiple ad servers, search engine management tools and analytic platforms?  Can you consolidate platforms and incentivize people to stay in positions longer?  Can you hire people that are already trained on platforms to cut training costs?  Again, measure to figure out where the burn is coming from.

What about the utilization of time?  Do you have a media planner who is paid $60,000 a year – let along a lot more – formatting reports manually?  Do you want to be paying this person $9,000 a year working on spreadsheets or would it be more cost-effective to bring on an intern?  Breakdown how these people allocate their jobs and look at productivity or hours.

Retention of people stems from a combination of aligning job satisfaction with adequate compensation.  If people feel like they are getting compensated for a job that challenges their skill, they will stay longer.  Its common sense.  So spend the time making sure that they are not working on menial tasks.  Spend the time making sure that you are not training people for another job somewhere else.  Spend time making sure that people are excited about a career path in your company.  Develop your talent or acquire talent from someone else.  Let’s face it, in the agency world someone is stealing someone from someone else every day.

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