Silly advertisers

A story in today’s New York Post exposes the silliness, stupidity, the strategic blindness of advertisers, who insist on creating scarcity — and higher prices — where it does not exist (probably because that’s how their agencies get paid):

It’s a conundrum for advertisers: even as ratings fall, ad prices on network TV are soaring.

Although it seems counterintuitive, it’s the law of supply and demand. As the TV audience shrinks, advertisers have to buy more ads to reach their target number of viewers. But that increased demand for ad slots creates scarcity, which in turn leads to rate hikes.

This year, a number of factors conspired to drive up ad prices, in particular for advertisers that waited until the last minute to shop for ad time on the open “scatter” market rather than buying spots in advance.

In the fourth quarter, advertisers on average paid 18 percent more for primetime “scatter,” or spots purchased on the open market, compared with the year-earlier period, according to SQAD Inc., a media research firm that tracks TV ad costs.

At the same time, the average rating sold in the fourth quarter, when retailers are eager to reach holiday shoppers, was down 14 percent from a year ago, the figures show.

Of course, there are no end of new ways to reach that audience — and reach a more targeted audience. But that would require advertisers — and their agencies — to work a little harder and move past the one-stop-shopping of TV and upfront to putting together networks online. Actual work? Heaven forbid.

I screeched about this two years ago when advertisers complained about a shortage of inventory on Yahoo’s home page — when most people ignore home pages today. And the other day, I complained about newspapers still insisting on selling to big advertisers instead of creating an infrastructure to sell to a mass of small advertisers.

It’s their own damned fault, paying higher prices or missing new revenue. They keep assuming that the essential structure of media economics is unchanged. Silly advertisers. Stupid media. Nothing’s the same.

  • Jeff, has your blog been hacked? There’s a bunch of spammy links in your code to this post — they show up in Google reader and you can see them if you use View Source to look at the source code. Invisible in regular browser viewing, though. Weird.

    Hope you have a merry Christmas!

  • yep, Jeff, it showed up in my Google Reader as well — “cheap cialis” and the like. It’s bad. Better check into that.

  • thanks. i’m hoping it’s fixed now. rss may be cached still. please do let me know. thanks much.

  • Hey JEFF. Nice Blog, i’m a first time visitor. Surely I’ll be back.

    Merry Christmas

  • T

    The problem with big companies is that it’s easier to just keep doing things the way they’ve always been done and flying beneath the radar then sticking your neck out by rocking the boat and pointing out a solution that requires actual thinking and change, even if that solution makes perfect sense.

  • One can’t blame TV for raising rates in the face of increased demand. But in the long run, it might hurt them. Any increase in TV ad rates is good for the Web because it increases demand for lower-cost options. Advertisers who would have been slower to consider the Web become more likely to try now.

  • Scarce ads are rising for the same reason Manhattan condos are so high – it’s the economy stupid.

    TV ad rates have been a function of general economic health more than anything else. In fact, they have been rising for years amidst shrinking audiences. It’s got to be near the end though, IMO.

  • Uh, nut, the audience isn’t scarce. In fact, there are more ways than ever to reach them. What’s scarce is the old way and that is the only thing artificailly raising prices: advertisers’ stupidity (or rather, agencies’ hopes they remain stupid so they can still charge high percentages of high prices).

  • Three simple reasons, in my opinion. Jeff touched on a couple: 1) the symbiotic relationship between ad agencies and media. An 18% increase in TV rates is usually an increase in either revenue or ad budget to the agency. 2) Senior corporate managers still love to see their brands on television. And most senior corporate managers are, at best, uncomfortable with new technologies, or at worst, tech illiterate. 3) The relationship between marketing directors and their agencies. This relationship is often built on business given with one hand while goodies are received by the other. (Remember the Wal-Mart marketing fiasco?)

    I don’t think anything is going to change anytime soon. Which is good news for those marketing folks willing to work a little harder.

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