Here is the expert answer from Jeff Dickey, Founder/VP Business Development, SeeSaw Networks (sent by email):

“While standards have yet to be agreed upon, one emerging currency for digital signage buys is CPM, where the impressions are determined using the combination of a validated traffic number multiplied by an awareness number. This formula truly brings an apples-to-apples comparison to digital out-of-home media buys that span multiple digital out of home networks.

National advertisers are reluctant to buy on flat rates simply because not all locations are equal, even within the same network (different demos, different traffic, etc.). Some networks have gotten away with requiring nationwide/network-wide buys, but those days are numbered as the advertisers push toward more specific buys with greater and greater levels of targeting.

If the research is available to support the demographics of female, Hispanic, or age groups — even better if the demographic data can be day-parted — a premium can definitely be applied to the better opportunities the advertiser has to reach their target audience.”

Jeff Dickey, Founder/VP Business Development, SeeSaw Networks

RG: Love this question – right in line with the type of mature answer
buyers need. Here’s the long answers:
Media formulae – there’s no one size fits all…and that’s part of the secret…our medium is NOT a commodity, nor is it a “rate card”. A bunch of Omnicom clients (execs) I deal with relate this space to TV/Broadcast and feel it’s a trailer buy to a TV spend, which is measured against a quasi GRP. On the other hand, some of the guys I deal with in the WPP camp throw it in to outdoor, as a subset, which is measured on……..something (perceived passerby traffic)…
Others think it’s a subcomponent of online digital advertising, especially with the rise of online video.
One of my advisors probably had the best comment when he said: “your medium is everything BUT TV. It has the dynamic nature of the Internet, the recency/FMOT of point of purchase, the localism of newspaper, the frequency of outdoor, the POTENTIAL relevance of magazines, the qualitative measurement capability of none of them with none of the problems of TV”….FYI, he was one of the instrumental characters in launching a large number of specialty channels on TV. This, of course, brings us to our industry identity crisis problem..if we’re something of every medium, but none of them at the same time, what are we? (this is another discussion and part of why media buyers have such a hard time understanding what we are/can provide – and we don’t explain it well).
End of the day, everything in our space can be boiled back down to 2 baseline common denominators:
1.) CPM Audience (cost per thousand “impressions” on gross audience)
which is a 30+ year old metric. Regardless of how old or irrelevant
this number is, it’s STILL the baseline for COST comparison across media
- TV = $17-$27/CPM on survivor (40 million gross on monthly =
$500K+/spot). Magazine = $15 CPM on readership of 10 mil’ish. Digital
Signage = $5/CPM at C-Store….makes it easy to compare COST but not ROI
or performance or impact.
2.) CPM Ads Served (Cost per thousand ads served) – New School
Internet ratings. Works as an ROI comparative but means little on media
evaluation/effectiveness. Great for quantitative analysis on media
impact or “pseudo-efficiency” on spend. Using the above mentality; TV =
$500,000,000/thousand (1 ad = $500K), Magazine = $50,000,000/’000 (1 ad
= $50K). Digital Signage $50/’000 (1 ad = 0.05) – we’ve run campaigns
that serve 5 million ads in 4 weeks for very little…it gets a little
silly.
EVERY other metric can be boiled down to one of these two. What we should be striving for is a pseudo comparative metric close to GRP, which every other traditional, measured medium tries to emulate. This will take a couple of years and, quite frankly, can’t be accomplished by 1 network on its own or one category of network (e.g. just pharmacies) -
it’s completely dependant on the needs of the campaign.
Once you know this, you can reverse engineer everything else. We don’t really care what people need to evaluate on so we provide them everything….down to cost per ad served per gross audience reached. It’s a little overboard, but it means a buyer can evaluate a $ figure immediately based on what they need to evaluate it on to prove a good
buy to their client.
So what does that mean to your network, taking learning from above? As I’ve said before, Media buyers care about 3 things; Efficiency, Effectiveness and Reach. I won’t go into all of them but the big one is TARGETED reach.
So to the questions:
“Can you charge a national advertiser a flat ad-spot rate/per month/per
location?”
Yes.
It boils down to CPM Viewers, whether you like it or not. Let’s take $200/venue/month/spot. And let’s pretend we’re talking about a Convenience store chain that sees 2000 ppl per day/venue on average. (60,000 gross audience per month/venue). If you’re charging the above $200/venue, you’ve effectively saying to the advertiser that your media is worth $3.33/’000. Now let’s say that you’ve got 500 Convenience stores on that average (30,000,000 gross audience). You’re still charging $3.33 at $200 a month per spot at 500 locations.
Realistically, 30,000,000 is worth a hell of a lot more than 60,000, especially if you want to start competing with the measured mediums, but Digital Signage isn’t mature enough as a holistic base to command that yet, nor do buyers trust it as a viable mass alternative or placeholder.
What’s more valuable?…a single, 1 day, $30,000 full page ad in the financial section of a newspaper that has a full paper “readership” of 1.2 million or a $60,000 Digital signage spend that serves 800,000 ads in 2 weeks in urban financial targets on various networks with a gross audience of 4,000,000 (targeted/net audience of 740,000)?
Give it 2 years and price inflation will occur naturally based on demand and finite inventory. Now, to top this off, you have to remember that the real value is in the actual TARGETED reach that an advertiser can get through the access achieved with your network. You should always really be selling on audience access as opposed to venues because that’s all a buyer really cares about…the more targeted your network is to their needs, the more likely they are to buy on it.
Where the REAL power comes in is with frequency. How many times can we make that audience on average see that ad without media fatigue? Does your audience come to your venue once a day or once a month? It’s a bit of a science and it gets really complex when you decide to merge 10 different categories together in one campaign (C-Stores, pharmacies, grocery, bar, etc).
Q: “As a network grows do advertisers hesitate to pay more based on network
growth?”
No. actually, agencies and brands WANT more growth. 500 locations means nothing to them in the grand scheme of things. They can moan as much as they want (and trust me they will) but if you follow the above and your demo is what they want, you end up holding the cards. As above, if 30% of those 30 million gross audience are EXACTLY who they need to reach, you’re in the driver’s seat. Don’t fall for the “I reach X on TV”
argument either…realistically, if you know the stats, less than 46% of people even stay in the room (or change channel or start chatting or look at their laptop) during a TV commercial and of those 46%, the recall is 21% versus a 35%+ recall on Digital Signage.
In addition, TV’s “ad acceptance rating” is very low whereas I have studies that show acceptance on Digital Signage up to 60%. And of that TV audience, that’s GROSS…not really even targeted based on the GRPs they’re buying. End of the day, each brand only has so much dough, however….you need to make sure your content is relevant and up to date, otherwise the impact of your ads is zero because there’s nothing for the audience to look at or be entertained by.
Lastly, the media agencies aren’t buying because of scale. If they’re making 15% on this and you’re trying to sell them a 50K program, they make $7500 for a ton more effort than buying a newspaper spot (which is a phone call away). The media agencies want the networks to grow too to buy on 10,000 locations because it means the buy gets into the millions and they start making some real money based on their efforts. As hard as they push you down on price, the harder they push the less they make for their efforts (we sell on gross not net).
Q:”What about niche audiences for example women-only, Hispanics, African American networks, do they garner higher rates based on tighter targeting”
RG: This is my favorite question. Yes and No is the best answer I can give, however. North American brands and media companies are disasters when it comes to targeting minorities or economic subsets. There’s been some great articles on ad age about this recently. They (we) aren’t very good at understanding how to effectively speak a different language other than “BRAND”. And a brand means something different to each targeted group. We’re learning, slowly, as the population changes and there are certain brands and agencies that have learned to capitalize on this trend.
Reality is, however, that you have to be smart about your sales efforts on this question. Despite the fact that they’ll deny it left, right and center, “Coke’s” media company will not see value in paying more for your “targeted” network of 500 locations versus someone else’s based on profiling of that nature. They’re VERY smart statisticians and very good at what they do, but it’s too small to be on their radar to have impact if they decide to target a particular group.
On the other hand, there are other brands who are second tier who LOVE the ability to get to this level, based on their product, service or campaign that no one pays attention to but are so perfect for Digital Signage (e.g. a inner city doctor’s network).
They also will realize more out of advertising with you than “Coke” will so…. Longer term, you can charge them more and, if you get enough of them, you get to turn down the “Coke’s” of the world on cheaper pricing, as attractive as they are, because your network is more effective for others and you don’t have to cater to their needs….the “A” list clients aren’t always what they’re cracked up to be. The old saying that “beauty is in the eye of the beholder” still holds true. If you have a niche that is attractive to a particular advertiser, they’ll chase you if you can prove value and effective returns.

Let’s not forget that digital signage is still in the non-traditional category in the media industry. Whatever is left after the traditional buys are made is all that’s available for not just digital networks but a slew of other mediums in the same category. In this case, it’s usually about your environment. Where you are and who you reach. If the client wants your environment, you have a chance. if they don’t, you’re out of luck.

Let’s not forget about another reason tv gets so much of the revenue for agencies. Production! Producing tv spots is very expensive…huge amounts of money that the agency collects a % on. They also get a % on every buy. This amounts to big revenues. The costs of producing radio spots, digital, print ads and others is minimal meaning less revenue for the agency. It’s simply the nature of the beast.

And yes, I am glad Dave is now with us!

There are 6 key points of pain that every buyer has to deal with. If any of these “points of pain” exists, it automatically gives them a reason to say no…and they will say no if they can because it means less work for them .

1.) Planning
The ability to actually buy on a consumer profile instead of a network profile and only pay for what you want. E.g. most buyers buy for a campaign which has a particular objective. E.g. I want to reach males, 18-34 in these 10 DMAs on these 27 FSAs (areas determined by postal code). The “Planning” pain also includes reach and scale. If you can’t provide them with enough audience in enough places, it’s just a waste of their time. e.g. 20 venues x 100 ppl per venue per day x 30 days = is a gross audience of 60,000, of which only 30% might fit your target market for a campaign. at a $5 CPM, that’s $300. It’s just too small to matter when they’re buying 1 full page media spot in the newspaper for $30,000 that has a gross reach of 1.2 million for 1 day. remember that the media companies make a % of the media. If they get 15%, that’s $45 for a buy that takes them more time than buying traditional media

2.) Buying
As alluded to by Ian, if you make a buy across 40 networks individually, negotiating 40 deals is too time consuming and drawn out for them to bother. It’s also quite frustrating to the buyers who end up, as you say above, having to deal with sales people who aren’t media professionals. They just don’t speak the same language or have an understanding of what the buyer really wants to accomplish. We’ve actually consolidated all of that in our platform and I can have a full vetted blended vanilla quote back to a buyer in 24 hours on unlimited Networks.

3.) Creative
4.) Distribution and flight guarantees.
5.) Reporting
6.) Billing

Our platform and service has been built to accommodate all of these areas.

That’s the basic topics. I could go a lot further into this but it would take up a few pages That’s a surface view. 20 locations are still valuable though! If I’ve got 20 Networks of 20 locations a piece, I can sell that because it roles up into 1,200,00 people a month and starts to become relevant (although still small)

On what we sell on, I’ll say “everything”. We don’t do a rate card approach because every campaign is different and the selected venues change all the time based on their relevance to a buy and each brand/buyer may evaluate on a different $ metric. So when our system generates a quote, it spits out about 7 different realtive costs…they’re all based on the same thing really. That way a buyer can just look at the number they want.

Never underdeliver. Buyers don’t want to (and shouldn’t have to) pay for media you promised but didn’t deliver…and it always happens..someone unplugs a machine, etc.. So when you’re budgetting, always budget over on the # of spots you deliver. You won’t get paid for them, but you’ll have a happier customer and won’t get into squabbles when pay day comes around.

Cheers!

Rob
http://www.adcentricity.com