Monthly Archives: March 2011

Is Facebook your brand’s friend?


Have you ever wondered what a truly strange deal a Facebook Page is for your brand? Bank of America, for instance, serves 1 of every 2 U.S. households … yet its Facebook Page has only 8,282 “Likes.”

1. You build a Facebook Page in a standard layout.
2. One-third of the page’s visual real estate (everything not in a red box above) goes to Facebook content, not your brand’s content.
3. Facebook runs ads for products other than your brand, on your brand’s page.
4. Your URL starts with Facebook and ends with your brand name.
5. You can spend your own ad dollars to promote the Facebook URL.
6. If people visit your site, typical usage will take the users away from your brand content and elsewhere inside the Facebook ecosystem.

But you need one, really. Because everyone else is doing it.

Squeezing Mad Men for more ads. Oh, the irony.


One of the great debates inside advertising circles is how much is too much? The typical American has the TV on for 5 hours and 9 minutes each day, of which 27% is paid advertising. Do the math and that’s 1 hour and 23 minutes of TV spots per day, or at 30 seconds per spot, 166 commercials a day.

Enter Mad Men. The Daily is reporting a catfight between the creator of the show, Matthew Weiner, and Cablevision executives, who are said to want to trim the length of Mad Men by 3 minutes to insert, yes, 6 more 30-second commercials. The AMC cable channel, you see, is part of Rainbow Media Holdings, a gem that Cablevision reportedly hopes to spin off soon in an IPO. Improving the financial performance of a business before going public is standard procedure, so what’s a few more spots?

Alas, Mad Men’s beautiful content would have to be cut. It is hard to believe that back in the 1960s U.S. TV viewers only saw 9 minutes of commercials per hour, vs. today’s 16-18 minutes. We love advertising, yes we do … but with 166 TV spots hitting you each day, how many more can possibly work?

Ben Kunz is vice president of strategic planning at Mediassociates, an advertising media planning and buying agency, and co-founder of its digital trading desk eEffective.

The Daily’s clever price decoy


Quick, which of the “subscribe now” offers above is a good deal?

Neither. It’s all a game of price decoys from The Daily, Rupert Murdoch’s flashy news magazine designed specifically for the iPad. Decoys are a form of price framing, in which consumers are given a somewhat bad-feeling deal that is meant to steer them to the second-best thing.

Decoys work because most of us want to feel smart, and yet all of us are inherently bad at judging value. Is a leather jacket worth $400? You don’t know … until someone tells you it’s marked down from $650, then it feels great! And if you haggle the price down more to $350, you walk out of the store a self-proclaimed hero. But you just shelled out $350 for a piece of stitched animal skin … perhaps truly worth only $70. When consumers are offered a “better deal than X,” or “20% off Y,” they can more easily satisfy the childish Id’s need to negotiate at every possible turn whether or not that process achieves true value.

Let’s watch how The Daily does it. If you download The Daily’s iPad app, you’ll get to read the magazine for about a week, and then a window pops up warning you, oops, you’re going to have to subscribe in seven days. Two green boxes give two choices:

Option 1: Only 99 cents per week to subscribe! That sounds low, so people bad at math might leap at that. (Bonus revenue for The Daily, cleverly raising rates on the portion of their audience self-selected for low IQs.) Like an ugly house a Realtor shows you before taking you to the house she really wants to sell you, this subscription offer is the price decoy.

Option 2: Only $39.99 a year! This is actually $12 less a year than Option 1, so people good at math will take this as the better offer. A-ha, you think, I’ve outsmarted The Daily, and I will go for Option 2, a better deal!

Of course, the pricing for either option is absolutely arbitrary. The Daily has already gotten you to download the app, and it has no incremental cost to distribute one more copy daily to your iPad, since you are paying for the Wi-Fi or 3G signal that delivers it. But by giving you a choice, The Daily has slowed you down enough to check out each offer, and to try to determine which is the better value. Since one price must be better than the other, you’ll feel good no matter which you pick. Right?

Ben Kunz is vice president of strategic planning at Mediassociates, an advertising media planning and buying agency, and co-founder of its digital trading desk eEffective.

Modeling how NYT’s paywall will survive, in 6 steps

As newspapers face plummeting circulations and an audience reluctant to pay for any online content, erecting a paywall is risky business. The New York Times announced just such a wall this week — a careful gambit in which it will continue to give readers 20 free articles a month (or more if you land from Google search), but for the 21st article on you must subscribe at $15 per month for web and phone access, $20 for tablets, or $35 for all combined gizmos.

The question on everyone’s mind is: Will NYT get creamed by fleeing readers? Curious, we modeled scenarios for how the Times might actually profit without killing itself. These are guesses of course, but let’s play the game through.

Step 1: Take 10,000 NYT online readers and divide into 10 equal deciles.

Here’s what a sample portion of the Times’ audience looks like, with 10,000 readers apportioned to 10 equal groups of 1,000 (deciles). For each step in the following analysis, we’ll track the movement of readers and revenue from the starting point of these first 10 deciles.

Step 2: Estimate how many articles each group reads.

The Times keeps its online readers’ behavior a trade secret, of course, but we know that within the 10 customer deciles, some are light readers and others are ravenous for news. Let’s assume that the bottom half (deciles 1-5) read fewer than 20 articles a month, and the top half (deciles 6-10) read more, with each tier having heavier usage. We’ve estimated the most ardent readers of the Times read 180 articles a month, or about 6 pieces per day. So far, so good.

Step 3: Estimate the current online ad revenue.

We know The New York Times charges about $15 to $20 CPM (cost per thousand impressions) for ads. Assuming it can average $15 CPM (on the conservative end, since ad networks often allow buys in the Times for CPMs below $5), that’s $15 per thousand ads served — or 1.5 cents per single ad presented to each reader. Let’s also assume each article carries only 8 ads, 4 per page on 2 average pages. So at 12 cents in ad revenue per article, and our guess above on how many articles readers access, we can model the total revenue from 10,000 readers. Higher reader tiers with heavier usage obviously generate more ad revenue. Average estimated online revenue per reader per month in this scenario is $5.93.

Whoa! Only $5.93 per reader per month? You can see why the Times is interested in making money from online subscription fees. Next, let’s forecast what happens to this merry reading crew once the paywall goes up.

Step 4: Estimate the audience shift after paywall.

WHAT? YOU WANT US TO PAY?! Now, no one knows how the audience will respond, but the Times has been clever. Half the readers won’t feel any pain at all. Everyone gets 20 articles a month for free, and the paywall only looms for the most fervent fans of NYT’s coverage, most likely to be forgiving. So let’s assume true losses — customers ticked off enough to leave the Times forever — are minimal at about 5% of the readers in the top half of usage deciles. So the Times overall would lose only 2.5% of all readers for good. Let’s then assume that about 25% of the high-reader groups, or 12.5% of all online readers, subscribe, and the remainder “shift” to tier 5, the group that caps out at 20 articles a month unwilling to pay for more. The resulting readership composition looks like the bars above.

Step 5: Estimate revenue after paywall

The subscription fees will hit only deciles 6-10, readers above 20 articles. If we guess the average fee is $16 per month, we can add subscription fee totals to the remaining ad revenue. Yep. The Times makes less money, with average revenue per reader falling in our estimate from $5.93 per month to $5.34 — a 9.9% decline.

Step 6: Model how the Times gets to break-even or beyond

The New York Times isn’t stupid, of course, and has had McKinsey-level MBAs crunching numbers to see how it can make more money from its readers while not damaging the ad revenue. Readers who sign up for paid subscriptions have huge value — they’re more loyal, less likely to leave, provide more information about their demographics, and most important give the Times opportunities to charge advertisers more for access.

And that’s the key. If we assume the Times pushes its pricing a bit for this new subscriber base — say, upping CPMs on online ads, or charging more for tablet and mobile advertising that has heaviest usage among the top readers — it could surpass the pre-paywall revenue levels. The table above shows this scenario, with a 50% push on ad rates only among subscribers resulting in average revenue per all readers rising from $5.93 pre-paywall to $6.25 post-wall — a 5.4% gain. In addition, the new subscriber model may lower future reader loss rates, since it’s hard to leave once you pay.

It is possible for the Times to come out ahead with more money from fewer readers. Like an airline, NYT is charging only its best customers higher rates, and the love from that audience may ameliorate the bitter pill. And the beauty of the Time’s partial-payment model is it should scare customers into defection slowly. If readers begin fleeing in droves, the Times can always tear that paywall down.

Ben Kunz is vice president of strategic planning at Mediassociates, an advertising media planning and buying agency, and co-founder of its digital trading desk eEffective.

Black swans


As the sorrow sweeping Japan deepens, we grow speechless. Today at the SXSW Interactive conference we watched a panel of several Japanese mobile business executives talk about trends in wireless. The big takeaway from Japan, which of course leads much of the world in technology adoption, is social media dynamics are becoming embedding in almost everything: games, photos, music, books, anything that could be digitized and shared with your human network in a Charlene Li like-air way. Afterward we had lunch with Edward Boches, who shared another panel’s concept of lowering international shipping operation costs by giving end consumers point systems as reward for offloading their orders from peak “Black Friday” demand periods, which would even shipping cycles, save energy, shave pollution, and potentially become a source of retailer “green” bragging rights.

The stories of technology knitting humans together continue here at SXSW. But nothing builds a community faster than seeing a real live human being, a Japanese mobile executive, ask for help with tears running down his face on stage.

Ben Kunz is vice president of strategic planning at Mediassociates, an advertising media planning and buying agency, and co-founder of its digital trading desk eEffective.

Japan shocks and the last-second decision


We’re at SXSW Interactive in Austin this weekend exploring 1,400 panels, and everyone this year is searching for the next big technology. It ain’t here. Last year it was Foursquare and location-based services, and a few years before it was Twitter; this time, nothing new has risen (except for me-too startups flaunting cloud-based web editing, Groupon coupon knockoffs, etc.).

So a suggestion: What about a service that uses consumer location and mobile to influence buyers right at the moment of decision? If you want to see a rare example of this last untapped land of marketing influence, check out mGive, an innovative mobile service that helps consumers give money instantly with a text-this-to-that on their cell phones. Many orgs raising funds for the devastation in Japan use it (you can find a list of reputable aid groups for Japan here.) What’s fascinating is the simple dynamic steers consumers to a close based on a snap judgment, a dynamic most marketers can’t achieve.

Think of the opportunity: A man in a wine store, confused over labels, about to approach the checkout. A woman buying soccer cleats for her daughter, looking at the rack of 100 Nike and Adidas models on the wall. Today there is no way to touch those people just as they reach for their wallets. To pull off a signal consumers might respond to would require vast integration — of LBS, store inventory, customer preference data, observation of consumer modality (“the woman is approaching the Nike shoe wall…”), push notification, pre-staged marketing offers or price framing, and perhaps even near field communication that turns mobile handsets into faux credit cards. But if you did that, you could personalize an offer just as Sally Smith reaches for the sneakers. Advertising could become truly relevant, helping a buyer nearing commitment make her confusing decision. We might raise even more money for Japan.

Ben Kunz is vice president of strategic planning at Mediassociates, an advertising media planning and buying agency, and co-founder of its digital trading desk eEffective.

Explaining Charlie Sheen and spiking gas prices


If you wonder why Charlie Sheen went viral almost instantly to millions, consider the more blasé case of rising gas prices. Humans, you see, when facing uncertainty about oil rigs or riled celebrities, react like a giant massive brain making a snap decision.

Let’s start with oil. There is no apparent reason why a disaster on an oil rig or sudden revolution in the Middle East would make the price of gasoline spike today at your corner station. After all, that gas was produced weeks ago, when the price of oil was lower — so why does it suddenly shoot up 50 cents today based on news that won’t affect future production until next month?

Ah, but that’s where the giant human hive mind kicks in. Economists call it “storage arbitrage,” and here is how it works. Say the guy at the gas station was planning to sell his gasoline for $3.00 a gallon — but suddenly he believes it will shoot up to $3.50 soon. It would make no sense to sell it now, so he plans to hoard it a week or so until the price reaches $3.50. But everyone else, in a game-theory standoff, tries to do the same thing — so suddenly, instantly, there is a gas shortage, causing a scramble in demand as consumers try to find pumps that will sell, until the price magically settles on the future, higher price of $3.50 — today, not next week. As economist Hal Varian once noted,

“That is the price necessary to induce those who have gasoline to sell it now rather than to wait till next week. This argument does not depend on whether you think the gasoline market is a paragon of perfect competition or an evil oligopoly. All it requires is that you believe that people who own gasoline, like just about everybody with something to sell, prefer to receive a higher price rather than a lower price.”
Which brings us back to Charlie Sheen. Information about culture, say, gossip about celebrities, is a commodity that has value. When new news breaks, that bit of information is more valuable because consumers are hungry for it. Even if you wanted to withhold the tidbid, your competitors (tuned into a supply from The National Enquirer or People magazine) have the same information, and the rush of demand causes everyone to tip the news into the stream. The value of gossip, of course, is not pegged to a dollar amount but rather a currency of social relevance, and that currency spikes suddenly, instantly in value to sate the market.

Oil commodities, gasoline prices and celebrity gossip tend to be wildly volatile, because everyone has cars and everyone loves to hear the latest snarky news. Price spikes, like viral memes, tend to fade eventually, however. Someday even Sheen will run out of gas.

Ben Kunz is vice president of strategic planning at Mediassociates, an advertising media planning and buying agency, and co-founder of its digital trading desk eEffective.

Image: Caffeina

TED’s loooong ads worth spreading

Conventional wisdom has it online video spots need to be short, 15 seconds max, because most users click away in impatience if you go longer. Media buyers prefer to stick such ads before the video content users really want, in a format called “pre-rolls,” so users have no choice but to sit through them. So it’s interesting TED has pushed back by promoting ads 2-3 minutes long that run after its online video content … so good, apparently, that users will not only watch but share the spots with others.

Noteworthy because TED is smart, and TED has a rich audience. Since its launch in 2006 TED has become a global conference juggernaut, expanding from a California elite speaking club with the likes of Bono, Bill Clinton and Jane Goodall to 750 subbranded “TEDx” events held annually around the world. TED.com’s free replays attract a fine demo: 50% of TED.com viewers are age 50+; 33% have incomes $100k or higher; and 23% have gone through grad school. If you’re selling BMWs, TED is your ticket.

What does it mean that an intellectual portal attracting the wealthy and educated is pushing long-form video? Perhaps if your content is good enough, audiences have the patience to pay attention.

Bonus round: If you want to taste TED’s speakers, don’t miss the brilliant Sir Ken Robinson.

Ben Kunz is vice president of strategic planning at Mediassociates, an advertising media planning and buying agency, and co-founder of its digital trading desk eEffective.