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How Much Does Advertising Really Cost?

Ads are everywhere. 8 of every 30 minutes on TV, approximately one ad every 41 seconds on Facebook, up to 14 ads on each Google mobile search results page, and countless other impressions and clicks notched on all kinds of channels every day. Advertising is the leading way that most brands engage with their consumers, and all indications are that brands can’t buy enough advertising to satiate the demand they seek from consumers.

For consumers, however, advertising is more often than not seen as a limiting aspect of how they experience content, even if the content is effectively subsidized by advertising. Many are “cord cutting”, turning to subscription services, jumping over paywalls and doing a variety of things to “buy their time back” from the brands that are seeking it out.

Amidst all this, it’s apparent that consumers can also simply ignore the ads they see. With that consideration in mind, while brands may want to buy as much time as they can get their hands on, it’s important for brands to consider what amount of advertising they need to buy before they experience significant diminishing returns, and think about how to instead make the most of that time where they do actually capture consumer attention.

Consumers are accelerating their consumption of OTT (over-the-top) subscription services and cutting out their regular cable bill - a clear move away from the advertising they receive. Source: Convergence Research & Variety.

Consumers are accelerating their consumption of OTT (over-the-top) subscription services and cutting out their regular cable bill – a clear move away from the advertising they receive. Source: Convergence Research & Variety.

Advertising Media Costs for Brands

30 seconds of TV time on Sunday Night Football often costs between $650,000 and $700,000 dollars. Other leading prime time television shows cost brands between $200,000 and $400,000 for a 30-second spot. A full page color ad in Time Magazine costs $265,000. One ad on the front page of the New York Times costs $50,000. A billboard in New York City can cost $20,000 per month. The average CPM is $9.06 on Facebook, $6.70 on Instagram and $5.76 on Twitter. Snapchat Discover Ads start at $50,000 daily, and the average podcast sponsorship costs between $15-$25 per 1,000 listens.

To return to the concept of “buying time back”, this all amounts to an average 30-second broadcast ad cost of $30 per thousand impressions. This adds up to 3 cents per impression, and over the course of an hour, $3.60 for each consumer’s time. Sure, we don’t pay attention to ads, we don’t watch them, we don’t care, we tune out, we multitask, but if we were to fully focus on any given ad that we’re already presented, we would gladly buy our time back rather than spend more of it on brands that don’t value it.

The real cost here is not only what a brand spends on media exposure, however. Brands have things like agency costs, production costs and research costs that add up to 40% of overall advertising costs and 20% of marketing costs overall. Adjusting for this, a brand might be spending $12 per hour of a consumer’s time they earn, inferring that media costs are about 30 percent of a brand’s total marketing costs. Given that that’s about half of the average hourly wage in the United States (approximately $23 dollars an hour), it makes sense that consumers have dipped their toes in purchasing ad-free experience, but haven’t completely given up the passive consumption of ads (and what entertainment they do provide).

The real cost for brands here is in opportunity cost. While there is always comfort in an established “way of doing business”, without fully leveraging consumer attention, earned media, individual insights and real customer relationships, only a handful of brands will ever realize their full potential – that’s just a bare fact. What many brands are hiding from, bad as it is, is the fact that many of their dollars are being recycled into brand awareness campaigns based on the presumption that there is no difference in the attention granted by the impressions a consumer gets of a brand.

This means that brands aren’t differentiating the value of their CPM. In most cases, they are hoping that getting as many messages out there, as often as possible, will encourage the most consumers possible to pass the “threshold” at which they decide to make a purchase. This is by nature untargeted, doesn’t even hope to create truly personalized experiences, and is thus a situation where most brands find themselves talking past consumers and not truly engaging them.

A substantial portion of consumers dislike most ads, but is there potential for advertising to give them more value?

A substantial portion of consumers dislike most ads, but is there potential for advertising to give them more value?

How Can Brands Overcome Diminishing Returns?

“If I had asked people what they wanted, they would have said faster horses.” – Henry Ford

Within this model of consumer attention, the challenge isn’t so much making the best ads possible, but in making the most of the attention that consumers do offer. This is nary an easy task. It requires a change in our preconceived notions of what consumers really want. Instead of modelling brand messages as opportunities to reach as many relevant consumers as possible, brands need to look at advertising as conversation starters, and then give their consumers an actual way to continue the conversation directly with the brand.

If a brand is spending a majority of its marketing budget on advertising production and distribution costs, it’s liable to fall behind on the significant – but not burdensome – technology investments needed to make one-to-one connections with consumers. Even in the digital advertising, the overhead cost of media buys can be exorbitant, and yet it’s “what you do with the traffic” that really counts.

For instance, what are brands doing to enhance the experience on their websites? Are they providing real-time assistance and support on social media channels? Do they consider a consumer’s individual needs when they retarget them or send them emails? Many may do these things, but many more don’t, and too few are giving their consumers a way to message them directly so that their interactions are as frictionless as possible when brand messages finally do get through.

Consumers are often overwhelmed by the choices available to them. Without offering guidance and recommendations, brands risk losing out. Source: Accenture.

Consumers are often overwhelmed by the choices available to them. Without offering guidance and recommendations, brands risk losing out. Source: Accenture.

In all these cases, spending more on advertising equates to a brand marketer asking for a “faster horse” when what they really need is a car – something motorized, automated and easier to feed and maintain. Interactive marketing sort of accomplishes some of these goals, but too many of the most successful campaigns are simply experiential, temporal or entirely temporary, and don’t really start purchase conversations – never being able to do so at scale. To overcome this, brands need to maximize their use of technology to engage consumers beyond the impressions they generate, but they also need to consider repeatable, scalable technologies that enrich every brand-to-consumer interact.

 

Making the Most of the Ads You Do Buy

This isn’t an argument for interactive advertising above all other forms, but rather an argument for where to default your spend, and what kind of interactions you seek to generate from your marketing.

For a brand, this is a new step. Business-to-business companies, usually the ones with a high annual contract value, seek out every and any way to generate an incremental lead – quizzes, white papers, handbooks, lead generation documents and interactive tactics – all ultimately lead to an ongoing, steady conversation with a real, live salesperson. Brands in financial services, the automotive industry and similar sectors may be able to follow a similar path because their representatives build real relationships with their customers, but how often do those consumers reach out unless they already want to be sold to?

That’s why conversations are critical to encouraging consumers to buy, before they really know what they want. If you’re able to draw them into these kinds of interactions, no matter what kind of ad you do offer, you’re not only increasing the amount of engagement you generate with your consumers – you’re also crowding out the masses of other brands competing for your consumer’s limited attention. In particular, with conversational AI leading to 4-6 minutes of engagement per interaction, usually this means that you’ll keep your customer’s attention so long, you may even surpass the length of your last commercial break.

The orthodoxy around customer engagement needs to change - brands now have the complex technology and attribution available to created one-to-one relationships with consumers. Source: eMarketer.

The orthodoxy around customer engagement needs to change – brands now have the complex technology and attribution available to created one-to-one relationships with consumers. Source: eMarketer.

Getting Consumers to Give Your More of Their Time

Consumer behaviour is changing, and this is leading to a variety of new channels that are ripe for engagement with consumers and disruption by forward-thinking brands. It could be display advertising, voice search, web and social media experiences, or even broadcast advertising – almost every channel that consumers are circulating on today can now offer sophisticated conversational experiences that make an impact on consumer decisions.

For brands, the question is not how to get in front of more eyeballs, but how to get time in front of the eyeballs that matter most to you. You should not be thinking about how to interrupt a consumer’s content and experience, but how to generate multi-minute engagements for which consumers willingly volunteer their time. When you offer consumers the ability to connect instead of one-way messaging, they appreciate the experience – it makes them smarter, more satisfied and, above all, a happier customer.

 

Automat builds Conversational AI for Brands that leads to more engagement, consumer insights and sales lift by offering consumers guidance, recommendations and instant, personalized responses to the questions they have throughout their customer journey. Contact Automat to learn more about making the most of your advertising.