Tuesday, July 1, 2008

Counting grains of sand with your fingers

One of the knotty problems with the proliferation of media choice these days is how in the world the media can count viewers and/or listeners. And how can advertisers know if they are paying the right amount to reach those folks. That's what the entire advertising business is based on--ratings or other research that becomes the "currency" of buying and selling advertising.

With hundreds and hundreds of TV channels available on most television sets these days, with satellite radio and Internet streams galore challenging over-the-air radio broadcasters, and with the coming ubiquity of the Internet literally placing a browser on every desk, hip, and dashboard, it becomes almost impossible to measure smaller and smaller numbers of media users--counting grains of sand with your fingers!

That's a wonderful metaphor found in this very interesting article by media-watcher Erwin Ephron.

Now, you say, that doesn't affect me one way or the other. Yes, it will. I firmly believe the daily newspaper as we have always known it will soon disappear. Most cities now are down to one daily paper. That old standby when you needed a plumber or litigation attorney, the Yellow Pages, are not long for this world. Bill Gates gives them five years. The nightly network newscast on TV is a dinosaur soon to be covered over by the volcano ash of 24-hour-a-day cable news channels. You older folks might remember magazines such as Life, Look, and The Saturday Evening Post. No more. Remember when TV Guide and Readers Digest were neck and neck for highest circulation of any magazine? Not now.

We cheer having cable channels dedicated to golf, video games, gay people, sappy "Hallmark" stories, and cooking. It's wonderful that we can subscribe to magazines totally focused on the most esoteric pursuit or interest. And websites created for the most exotic and tiny audiences we could imagine--or maybe not even be able to remotely comprehend.

But as the users of these narrowly targeted outlets become a smaller and smaller subset of the total population, the more difficult it becomes for the operators of those media outlets and the advertisers who support them to determine the size and demographic makeup of those audiences. Advertisers don't like to spend money on anything they can't measure. Also, there is risk that the listeners, viewers or readers will become such a small number that advertisers will no longer want to use them for their commercials. Or the price that the outlet is able to charge for its space or time is too small to cover the cost of generating and distributing content. Then the medium simply goes away.

Interesting times! You may want to hang onto that copy of the Yellow Pages. It may be a collector's item soon.

Don Keith N4KC


Len Anderson said...

"Grains of sand?" From which desert? :-)

Well CHANGE HAPPENS. As long as we embrace capitalism, there will be some form of advertising in front of everyone.

I am old enough to remember the ads inside the commercial bus I rode to high school in 1950, heard the radio ads (we didn't have TV in town yet), read both the Readers Digest and Saturday Evening Post, even read the Chicago newspapers from 90 miles east of us then. One could say "that was Zen, this is Tao" or something snappy (?) like that.

Yesterday (5 Jul 08) my wife and I watched the NASCAR races at Daytona over DTV in amazing clarity plus a deluge of below- and above-screen ads, commercials interspersed when cautions on the track happened, and constant voice-overs. The latter was not really needed. A newspaper just couldn't DO that. It isn't, was never LIVE.

Do we NEED newspapers or the printed word? Yes, I think so. Where would I be without the ubiquitous Fry's Electronics ad on the back of the L.A. TIMES sports section? [Fry's is a chain of consumer electronics supermarkets out here...some really good bargains in new electronics is possible through them and Office Depot, Best Buy, etc.] Memory isn't perfect and one can carry a full-page Fry's ad into the local store. We have to print out an Internet page...and can't really prove that it is original once we do it (if the store gives us problems).

Yeah, I suppose the advertisers have a PROBLEM. But I don't think it is the consumer's problem. Well, yes, WE consumers have a problem in paying extra for goods, the increase necessary to amortize the ad space bought. Spend too much on ads and the price of goods has to be raised to cover it and that can make it non-competitive.

I think the main problem we consumers have is in BELIEVING what the advertisers say. Ain't always so, indeed some of it is just plain #$%@!! stuff. :-) WE have to keep an open mind to keep our accounts from going into debt.

Life will ALWAYS change. We, and the advertisers have to change with it...if we want to survive. I'm just not going to side with any advertiser who demands I ALSO support them so that I "get what I paid for." :-)

Excuse me while I hitch up the buggy and mosey on down to the General Store to buy a copy of the Farmers' Almanac so I can figger out what the weather is going to be like next week.

Anonymous said...


Agreed on all counts. One of the several ways that I make money to support my three most expensive habits--amateur radio, eating, and having a wife--is by running an advertising agency. I've been in media and advertising since I was 19. No way could we afford to pay what it would cost to televise the Daytona race if it was not for advertising. Instead, because those folks wanted to get a message to a targeted audience, advertisers were able to pay Fox what they asked for their precious time and space. And Fox was able to pay NASCAR what they wanted for the rights to televise the race. And there were cars to run the race because sponsors were willing to cough up millions to have their logos all over the car, the driver, the flag that marked the pit.

That's all good. Everybody benefits. But wait, you say. Don't I as a consumer pay more for those products advertised? Not really. When a company develops a product, they factor in the cost of advertising as a cost of doing business. They still have to price the product competitively or make it a whole lot better or they won't win, no matter how clever the ad or catchy the jingle.

It all works well. Or at least, it has. My interest is how changes in media and how people use it will affect that system that has worked so well for hundreds of years. As media becomes more and more fragmented, and as it becomes more and more difficult to measure how many people are watching, listening, clicking, or absorbing, it becomes more and more a crap shoot.

It is going to be interesting to watch. I'm just glad I'm no longer in the radio business. Or selling space in the Yellow Pages.

Thanks for visiting and posting, Len.

Don Keith N4KC

Anonymous said...

Well, "crap shoot" or not, we consumers are still paying for the ad space wherever it may be. For example, food supermarkets. For years I've been told that supermarkets only have a markup of 18 percent (as if that is gospel). Just today we (wife and self) did our mid-week food shopping and got some specials at 33% off their normal list price. Somebody has to do a real spin-job to tell me that a big supermarket chain is going to go 15% in the loss category to sell goods. Sorry, don't buy that.

On furniture (not a big market mover), the store typically mark up their list prices 100% over their purchase costs. So, now they can market a 10 or even 20 percent "saving" to the consumer and convince them they are getting something for nothing. :-)

One of the most irritating ads on local TV is from a bedding company of about 16 stores constantly saying "I'll beat anyone's price or your mattress is freeeee!" Of course it would be since they just aren't going to give away anything.
Irritating though that ad may be it isn't provable. Unless some other bedding store is actually giving away mattresses, the company (Sit-N-Sleep) just doesn't need to worry about "giving away" anything. Just the same, it isn't quite any ethical fault, just a very clever way of trying to influence the public. That sort of thing could be promulgated on the public in just about any medium besides TV.

The bottom line is that NO ONE is really getting what they pay for and we all have to pay for the sellers' marketing costs, hidden or overt. If a new medium comes up with a cheaper solution...and passes the savings along to us consumers, then I am happy.

73, Len AF6AY

Wanda said...

As Gomer says:"suprise suprise suprise" also :"hey to you and yours"
I believe I have now seen more than I never wanted to know about Ham Radio.
Have fun and I will look for the new book....

Anonymous said...

Hey, Wanda! It's good to have you drop by the blog. And Len, if I had the time and the stamina, I could, I think, prove to you that the price you pay for advertising actually lowers the price of goods and services. It has been proven time and again, comparing countries where advertising is virtually unrestricted to those where it is either heavily controlled or not allowed at all.

How much cheaper do you think a Chevrolet Impala would be if not a cent was spent to advertise it. Think about whether or not it would even exist!

Don N4KC

Anonymous said...

Don, in all fairness and logic, the thing that lowers prices is COMPETITION, not advertising. Advertising is a means to be competitive.

Having owned a Chebby Impala (a convertible, no less), I had a choice of models from Ford and some others way back in 1961. Ads led me to a Chevrolet lot and the terms at the time were reasonable for me.

Would it have cost less without the ads? No. Chevrolet has to COMPETE with other makers. Had my Impala been the ONLY convertible available, it would probably have cost more. [the 'only game in town']

Extreme opposite case: I recently bought a 2 GB Flash Drive from Fry's Electronics for $16 over-the-counter price with a $10 rebate...for a total cost of $6. Friday a Fry's ad had the very same model on special sale for $14 and with the same $10 rebate. Judging from the movement in those models visible on the shelves, Fry's couldn't move product so they dropped it a couple of bucks to lure more buyers.

Fry's Electronics is a HUGE supermarket of consumer electronics out here in the west and there is one just a mile and a half from me...easy to check them out. When I say HUGE in all-caps I'm not kidding. They have over 30 check-out stands for purchases at the store. They sell everything from computer stuff to DTV flat-screens to appliances of all kinds and toys and WLAN networking goodies and softwares and radios, even some electronic test equipment. They stock BIG and Move Product and need the customers to come in an be influenced to BUY. A small item is nothing to them in light of getting customers INTO the stores and buying big. The 'come on in' ads serve the purpose of getting folks INTO the store and buying much-less-discounted more-expensive items.

Advertising is a necessity in selling but the costs of it come out of the profit margin a seller has to impose to make a profit. The same thing can be said for the folks that make the store signs that show where a store is. Fry's has a medium-large one that might otherwise be overlooked next to Burbank's Bob Hope Airport...but the cost of it is amortized over a much longer period than a month or so. By contrast, the Hewlett-Packard Headquarters sign at Page Mill Road and Hanover in Palo Alto, CA, is smaller and HP has budgets easily 100 times larger than Fry's. I don't see any movement to raise the importance of sign makers. :-)

Advertisers like to praise themselves as a general rule. They are in the business of doing that for their clients and it would be natural to have that bleed over into talking about their own efforts. But then we should also praise the newspapers and magazines for selling ad space to make publishing a business, yes? Note I said SELLING ad space...which means that someone has to BUY ad space and that ad buying has to come from somewhere. The 'somewhere' is out of the margin between the sellers price for their products from a manufacturer and the projected cost to a sellers customer.

It is a big looping complex equation but the only thing that is important in my opinion is that someone has to MAKE a product first to be sold. Generally the maker is ALSO in competition with other makers of similar products. Ain't just one thing that is the most important in all that math.

73, Len AF6AY
Just a guy retired from having done all those making-creating-costing estimates for dozens of years.