A recent press release on Mediabids -
This story from the Financial Times on Facebook's effort to ensure that agencies do not excessively mark up the cost of their advertising outlines a significant problem, not only with online advertising but also in print. Too often, agencies take a disproportional percentage of discounts given by publications - failing to pass along that savings to customers. It is a short-sited tactic, creating a scenario where overcharged advertisers are less likely to find their advertising expenditures effective. Which is why at Mediabids.com we mark up only 8.5%, no matter how great the cost savings realized, a far cry from the 30%-40% routinely charged by agencies selling "discounted" ad space.
Facebook is pushing advertising sales agencies to be more transparent about how they charge for their services, in an effort to protect companies who market on the social network.
Facebook believes that by improving transparency companies will have a clearer idea of what proportion of the money they give to agencies goes directly on ad spending, rather than on service fees.
Facebook advertising is still so new for companies, she said, that most of them were unable to negotiate effectively with the agencies representing them.
“The brands aren’t at a point where they’re smart enough to know the difference between the good guys and the hucksters.”
Facebook has been trying to bring more order to the social advertising market since bolstering its roster of advertising sales partners in August. Stepping up enforcement of its transparency rules could boost the social network’s revenues ahead of an initial public offering.
Grady Burnett, Facebook’s vice-president of global marketing, said: “The primary thing we care about is making sure people understand when they’re paying for media on Facebook and when they’re paying for something else.”
The different ways agencies charge has made it harder for brand-owners to assess the effectiveness of their social media advertising, according to critics.
For example, some agencies charge a direct percentage of the ad purchase, while others charge a fee for every time a user clicks “Like” on a fan page. Because a “Like” is such a new advertising metric with no settled market value, a company could charge a flat fee of $2 per Like, then spend $1 on a Facebook ad to drive the traffic that will generate the Like, keeping a hefty 50 per cent margin for itself.
Advertisers do not like these sales agencies “making loads of margin”, said Simon Mansell, chief executive of TBG Digital, one of Facebook’s ad sales partners, which charges clients a 15 per cent cut of ad spending on Facebook.
Advertisers would rather see more dollars go to Facebook, and so would Facebook, he said. Facebook’s transparency policy could facilitate that.
The rules require agencies to share their margins with clients up front, and to store Facebook account information for each client separately, so Facebook can see how much each company spends on Facebook ads.
“You have to tell Facebook your spread,” Mr Mansell said.
Facebook has been pushing agencies to comply with the policies in the last several months, according to agencies, after it began accepting applications from more of them to become advertising sales partners. So far, it has approved 25.
We deal with a lot of publications here at Mediabids on behalf of thousands of customers and, based on his earning statements, I don't think that McClatchy CEO Gary Pruitt understands what goes on at his own papers. In his earnings report Pruitt said that the digital side of his products was growing but that print upsells (a combination print and online buy) were dragging down earnings. I suspect there is some creative accounting going on to arrive at this conclusion. Publications will tell you (McClatchy publications included) that they can give enormous discounts on print but they have to keep the online rate card intact. So if you buy a combination for, let's say $1,000, you think you are pending $600 on print and $400 on online, but when they generate a bill they will make it $900 online and $100 print (I am using these numbers as an example but propotionally they are pretty accurate). That doesn't mean that the advertiser only wanted to spend $100 in print or that they would have spent $900 online but publications bill out in that way to give someone like Pruitt a happy story to tell. I hope they don't believe that advertisers are actually willing to pay their online rates without the print side discounts.
Here is part of the story, from paidcontent.org:
After
posting an online revenue decline of 2.9 percent in Q2, McClatchy (NYSE: MNI)
was able to reverse that trajectory to see digital revs rise 3.1 percent in Q3.
As print continues to decline—and McClatchy chairman and CEO Gary Pruitt didn’t
surprise anyone on the Sacramento company’s earnings call by saying print would
fall further in Q4—online is showing signs of more stability and, most
importantly, more independence from print. “As online grows, we’re less
vulnerable to print declines and we’ll be less burdened by print costs,” Pruitt
said.
Unfortunately for McClatchy this time out, print upsells remained a particular drag on its web ads. Pruitt told investors that a little less than half of McClatchy’s web ads are pure online sales, not tied to print. It’s hard to say if it’s improved online sales on its own—plus its 14.4 percent stake in web recruiter CareerBuilder—or the decline of print, but just over 50 percent of McClatchy’s online help wanted revenues are directly from the web. Once the economy rebounds, that tilt in favor of online and away from print is expected to accelerate.
Full story here
Using a tracking mechanism in your print ad is extremely important if
you're using your magazine or newspaper advertising for direct-response purposes.
Some ways to gauge response include using unique URLs that correspond to an ad in a specific publication, using unique 800#'s in each publication (A reliable service with comprehensive reporting is CallSource), SMS code or using a promo or coupon code that people can use at registration or check-out. There is also currently a 2D barcode service being explored for which a user can use their cell phone even further go retrieve more information about an ad that they see, but it is not yet readily available.
A new study of 833 print ads in seven magazines conducted by the Magazine Publishers of America - in conjunction with VISTA's print effectiveness rating service - revealed that when a URL was included in a magazine ad, response rates increased markedly. To read the context of the study and the full MediaPost article, Click Here
To read an informative article about developing unique URLs for your print ads, Dr. Ralph Wilson wrote something helpful a while back.
If you are interested in using 800#s to track your advertising and have a direct-response product, we'd encourage you to take a look at our Per-Inquiry advertising program.
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