The Future of TV Advertising

Tracks trends in traditional television ad sales and the impact of new technologies, new competition.

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Proven senior level executive with over 25 years of leading turnarounds and startups of software companies in media, finance, energy and business intelligence. See more at Linked In.

Friday, July 21, 2006

Will Media Buying be Commoditized?

Last week, Cory Treffiletti raised the question: "Will media buying be commoditized?"

A brief review of history says yes.

20 years ago, large buyers gave advertisers a "haircut" by buying for $15 and selling to the advertiser for $20.

Soaring levels of inventory and increased advertiser vigilance have forced increased transparency on the purchasing side, especially with national advertising. At the local level, smart advertisers are lowering their commissions to buyers, to as low as 2%!

A SVP at a major rep firm tells me that she meets buyers at a local Starbucks for a sales call, as buyers increasingly work at home for their 2%.

To hold onto historical prices as ratings decline, tea buyers are wide open to subtle "bribes" from the sell-side to keep the flow going. A trip to Europe, a week in Cancun, or a week at Disneyland ... Are all perks that are a substantial non-taxable income to a buyer who might only be making $40,000 a year.

However, this inducement to keep TV ad dollars flowing has a hard time competing with on-line facts and data, and with the on-going debate about who is watching the TV show.

The TV product needs to come clean to compete in the new environment, and as their margins and revenues slide, surely some will be enlightened remove the "friction" (as the economists call it) in the system, and give advertisers a transparent and reliable means to buy TV advertising, especially at the local level.

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