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The next disruption in magazine advertising: risk sharing

Like Natalie, one of the research respondents from the latest UK study of tablets (IAB UK Tablet Ad Formats Study, July 2012), I too “love my iPad”. Natalie says “it is so important to me, I take it everywhere with me and go on it everyday and most hours of the day. It has changed my life!”. I wouldn’t go that far, but I didn’t expect to need to carry around  a Blackberry, an Android AND an iPad, but for about a year now I have been doing so. (So much for convergence as a trend, but that’s another blog).

The same IAB research also says that 30% of UK consumers have a negative overall opinion of adverts they have seen on tablets in the past. This has provoked headlines in the trade press and does beg the question, if tablet advertising is not living up to consumers’ expectations, does this mean it isn’t any good?

I do not know what is disappointing the IAB’s respondents. I do know what good advertising is. There are only two ways of judging if advertising is any good: Does it successfully create demand and desire amongst customers?  Does it efficiently harvest that demand?

So the brilliant VW Polo advert “Dad“ does a fabulous job of creating demand and lots of brand warmth, but as my eldest daughter has a year or so to go before she learns to drive, it is likely that that this specific demand will remain latent for a while. In my case, the demand cannot be harvested immediately. Clearly there are other people on the brink of buying cars for their daughters who will be right onto the Polo website.

Demand harvesting, or direct response advertising, has long been judged against a different set of Key Performance Indicators (KPIs) from demand creation advertising. For demand harvesting advertising, cost per acquisition or cost per quote are longstanding metrics and conversion figures of less than 1% are entirely workable. Since Google began charging by cost per click, i.e. if the consumer doesn’t click on the ad then there’s no cost to the advertiser, this side of the advertising business has been transformed by adding the element of shared risk to the trading of such advertising.

Of course, it is not logical or even useful to judge demand creation advertising on a digital platform solely by the click-through KPIs or by response rates of less than 1%.

What we can do to accelerate change for demand creation advertising on digital formats is to create a shared risk model, where advertisers pay for guaranteed audience views or click through, or even improvements in measured brand warmth, as opposed to the heritage print practice of paying for speculative audiences that research shows have seen the magazine issue on average in the last few months. We have pioneered this kind of deal at MediaCom, but it is time for it to become the driving force of the industry overall.

Shared risk between media owner, client and media agency is the next necessary disruption for the industry. It will ensure that the best advertising successful generates brand warmth in the medium-term and fulfils KPIs in the long-term. 

In truth, this shared risk model should apply not just for tablet ads, where there will be an immediate step change, but for advertising across all media – whether digital or not. This would also have the advantage of every issue of each medium having regular real time audience data which in turn would drive best practice attribution modelling and cross media comparisons, without which we continue to operate in the 20th century business dark ages.

To fuel this change for magazines, we need transparency of each issue’s print circulation, as well as for tablet editions. We need shared-risk models of trading and we need logical and consistent KPIs.

We will then be entirely clear about what “good” advertising is.