greetings, I need 4 full pages for this. Ensure no plagiarism and the work must be of good qualityChoose a television/visual advertisement (International or American based) that has caught your atten

CHAPTER

Using Electronic Media: Television and Radio

Learning Objectives

To present the important factors advertisers need to evaluate when considering the use of radio and television in the creative mix. Each medium has its own characteristics, advantages, and drawbacks. Advertisers must be able to compare their merits and understand the most cost-effective ways to buy advertising time.

After studying this chapter, you will be able to:

LO14-1 Describe the advantages and drawbacks of broadcast television as an advertising medium.

LO14-2 Discuss the advantages and drawbacks of cable television as an advertising medium, and explain how it differs from broadcast television.

LO14-3 Explain the process of buying cable and broadcast TV time.

LO14-4 Evaluate the different types of television advertising available.

LO14-5 Describe the process of TV audience measurement.

LO14-6 Discuss the main factors to consider when buying television time.

LO14-7 Analyze the pros and cons of using radio in the creative mix.

LO14-8 Explain the major factors to consider when buying radio time.

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Source: Hyundai Motor Co.

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Source: Hyundai Motor Co.

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In early 2009 the economy had been depressed for nearly four months and consumer confidence was at an all-time low. Most car companies were pulling back their ad funding in hopes the saved dollars could afford them a longer runway during the unsettling times. However, a few companies saw this as an opportunity, a chance to take down the historically aggressive spending U.S. automakers and the highly popular Japanese automakers. One of these companies was Hyundai Motor America, the same company that just 10 years prior was the afterthought of the auto industry. Because of durability and reliability issues, sales plummeted in the United States in the mid- to late-nineties. Rather than abandoning the American market, Hyundai invested heavily in new product designs and overall quality and reliability. However, just making the product better wasn’t going to win over a now-jaded consumer. In fact studies done at the time suggested that although quality had improved, public perceptions had changed very little. ■ The automaker had to take action, and it did by shocking the automotive world with an unprecedented, 10-year, 100,000-mile warranty. Rightly dubbed “America’s Best,” the Hyundai Advantage, covered all major components for the entire fleet, going far beyond any other car company’s offerings. “We thought an improved warranty would make a statement about our quality and get us on more people’s shopping lists,” Finbarr O’Neill, chief executive of Hyundai Motor America, said in an interview.1 ■ The next challenge was convincing American consumers. Their launch pad was Super Bowl XLIII. Luckily for Hyundai, that night the Super Bowl was highest-rated game of all time with 98.7 million viewers.2 With agency partner Goodby, Silverstein, they planned a three-tier onslaught. First they unveiled the brand-new 2010 Hyundai Genesis Coupe. Next up was a brilliant ad showing fictitious executives from the major luxury automotive brands around the world yelling angrily in their native tongues, with the only understandable word being “HYUNDAI,” in response to the Genesis winning North American Car of the Year by J.D. Powers and Associates. Actor Jeff Bridges intones: “Win one little award and suddenly everybody gets

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your name right. Hyundai, like Sun(day).” ■ They could have stopped there and most people would have thought, great advertisement, but was it worth the estimated $3 million price tag? They didn’t stop, and the last of the ads sent shockwaves through the industry. Hyundai realized that in troubling times the last thing that anyone wants, after losing a job, is facing creditors. As a result most consumers were not buying cars. Hyundai’s idea was simple—take away the risk. So the Hyundai Assurance program was born. If you lose your job after you buy a Hyundai, the company will allow you to return the car with no fee or penalty and be exempt from all final payments. ■ That the ad was unprecedented is probably an understatement, and it worked. Year- over-year sales for February 2009 were actually down 1.5 percent; however, when the industry as a whole was down 37 percent to start the year, that number looked pretty good, especially when it represented a 25 percent increase in sales volume from January 2009.3 ■ The Super Bowl is a big, and expensive, stage. Many companies produce over-the-top, elaborate spots designed to entertain. Hyundai took a different approach, use television’s biggest ad buy to announce something important. The results, literally, were a game changer for the brand.

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The Medium of Television

LO 14-1

Back in 1950, U.S. advertisers spent $171 million, or only 3 percent of total U.S. advertising volume, on the new medium of television. It didn’t take long, though, for the nation’s advertisers to discover the power of this new medium to reach mass audiences quickly and frequently. TV offered advertisers unique creative opportunities to imbue their brands with personality and image like never before. In 2015, advertisers spent nearly $68 billion on cable and broadcast TV, ensuring it remains the largest category of spending in the industry.4 Exhibit 14-1 lists the top network television advertisers in the United States and their annual expenditures.

Today, television is available to advertisers in two principal forms: broadcast and cable TV. Broadcast TV reaches its audience by transmitting electromagnetic waves through the air across some geographic territory. Cable TV reaches its audience through wires, which may be strung from telephone poles or laid underground.

Broadcast TV

Until the advent of the Internet, broadcast television grew faster than any other advertising medium in history. As both a news and entertainment medium, it caught people’s fancy very quickly. From its beginnings after World War II, broadcast TV rapidly emerged as the only medium that offered sight, sound, and motion. People could stay home and still go to the movies. As TV’s legions of viewers grew, the big national-brand advertisers quickly discovered they could use the medium efficiently to expand distribution across the country and sell products like never before. Not only that, the medium was ideal for building an image for their brands—even better than magazines, which had previously been the image-building medium of choice. It didn’t take long for marketers to switch their budgets from radio, newspapers, and magazines. Today, broadcast TV still attracts the largest volume of national advertising, over $26 billion in 2013.5

Exhibit 14-1

Top 10 network TV advertisers in the United States (2013).

Rank

Advertiser

($ in Millions) 2013

Procter & Gamble

$1,852

General Motors

1,267

AT&T

1,239

Toyota

959

Comcast

901

Fiat Chrysler

900

Berkshire Hathaway

833

Verizon

811

Ford

797

General Mills

775

The United States now has 1,390 commercial TV stations. About 35 percent of the U.S. stations are VHF (very high frequency, channels 2 through 13); the rest are UHF (ultrahigh frequency, channels 14 and above).6 Stations in the United States operate as independents unless they are affiliated with one of the national networks (ABC, NBC, CBS, Fox, CW). Both network affiliates and independent stations may subscribe to nationally syndicated programs as well as originate their own programming. However, increasing competition from cable TV is taking viewers from the national network programs. To compensate, some networks invest in cable TV systems or starting their own. NBC,

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for example, started CNBC and MSNBC, and ABC (owned by Disney) has an 80 percent interest in ESPN.

Cable TV

LO 14-2

For more than 30 years, broadcast TV, especially network TV, was the dominant entertainment medium for most Americans. Today, other electronic media have dramatically changed that dominance. Chief among the challengers is cable television.

Cable TV first appeared in the late 1940s. Initially, it carried television signals by wire to areas with poor reception such as mountainous regions. But in the 1970s, the advent of satellite TV signals, the proliferation of channels, and the introduction of uncut first-run movies via pay-cable channels such as Home Box Office and Showtime made cable TV more attractive to all viewers, even people in urban areas.

At first, subscribers valued cable simply for the full array of regional channels and access to premium services such as HBO. But once this novelty wore off, subscribers wanted more. A variety of advertiser-supported cable networks soon appeared with specialized programming in arts, history, sports, news, and comedy, along with diversified pay services and many more local shows. As the number of cable customers grew, viewers began abandoning program on the big broadcast networks.

In the last three decades, cable’s growth has been extraordinary. In 1975, only 13 percent of TV households in the United States had cable. By 2010, cable reached almost 90 percent of all homes.7 Although cable subscribers may receive more than 100 channels, most households watch only 15 to 20.8 The My IMC Campaign 14–A guides you through the planning process for all of these choices for TV.

Most channels are privately owned and commercially operated. These include local network affiliates and independents, cable networks, superstations, local cable system channels, and community access channels. The cable fees represent about one-third of cable TV revenues; advertising makes up the remainder. Networks such as CNN, USA, the Discovery Channel, Arts & Entertainment, Lifetime, Comedy Central, and Spike TV now compete for advertisers’ dollars, each selling its own niche audience.9 For an additional price, subscribers can receive premium services such as HBO, Showtime, and Cinemax and see special events such as first-run films, championship boxing matches, and sports (through pay-per-view service).

There are now more than 900 cable networks in the United States. Exhibit 14-2 lists the most widely carried ones.10 There are also a handful of superstations, local over-the-air TV stations whose signals are delivered via satellite to cable systems across the country and that carry some national advertising.

DTV

On June 12, 2009, as mandated by Congress, the United States made the switch to digital television (DTV). DTV sends and receives moving images and sound by digital signals, rather than the analog signals of terrestrial (broadcast) TV. Congress authorized the distribution of an additional broadcast channel to each broadcast TV station in 1996 so the stations could begin to broadcast in digital format. It was later decided that June 12, 2009, would be the last day of the simultaneous broadcast and that all full-power stations would broadcast in digital format only.

Digital TV has many benefits. As stated on the Website www.dtv.gov, consumers will benefit because digital broadcasting allows stations to offer improved picture and sound quality, and digital is much more efficient than analog. For example, rather than being limited to providing one analog program, a broadcaster is able to offer a super sharp “high definition” (HD) digital program or multiple “standard definition” (SD) digital programs simultaneously through a process called “multicasting.” Multicasting allows broadcast stations to offer several channels of digital programming at the same time, using the same amount of spectrum required for one analog program. So, for example, while a station broadcasting in analog on channel 7 is able to offer viewers only one program, a station broadcasting in digital on channel 7 can offer viewers one digital program on channel 7-1, a second digital program on channel 7-2, a third digital program on channel 7-3, and so on. This means more programming choices for viewers.

Exhibit 14-2

Most Viewed Cable Networks in 2014.

ESPN

2.28 million

USA

2.18 million

TNT

2.04 million

Disney

1.94 million

TBS

1.87 million

History

1.86 million

Fox News

1.73 million

1.45 million

Discovery

1.41 million

AMC

1.36 million

Source: Rick Kissell, “ESPN No. 1 in Cable Ratings for 2014,” Variety, January 2, 2015 (retrieved at: http://variety.com/2015/tv/news/ratings-espn-tops-cable-for-year-own-hallmarkwe-tv-among-few-gainers-1201391036/).

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My IMC 14–A

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Planning and Buying TV and Radio

Media planners use a variety of syndicated and proprietary research tools to plan and buy both TV and radio ads. Primarily, these tools help identify the larger concentrations (composition) of a target audience in specific programming, and the cost associated with those audiences. The complexity of TV and radio arises from the need to build plans that cost efficiently reach a target audience with an effective frequency. The currency for these two media is a rating point, which represents 1 percent of the target audience a media buyer is trying to reach. Both TV and radio, therefore, are bought based on demographics. So when certain prime-time shows have a rating of 14 for A25–49, it means that a particular program reaches 14 percent of all adults between the ages of 25 and 49. A buyer’s cost per point (CPP) is her way of determining a vehicle’s (program’s) efficiency in delivering her target audience. As this chapter will explain, ratings points are additive. Therefore, two spots on shows with 14 targeted rating points means that advertiser has purchased 28 gross rating points or GRPs.

Most of you will not have access to the types of tools that help you plan and optimize broadcast media plans, so your focus should be on the merits of each of these media in achieving your marketing and advertising objectives and how they match your overall media strategies. (Refer back to My IMC Campaign 9 for a refresher on building media strategies.) First we will discuss the advantages and nonmonetary value of TV and then of radio.

Television

TV is still the largest mass medium; 115 million homes in America have at least one TV set. However, it is becoming a fragmented marketplace. In fact, the average home receives 117 different channels. While the average viewer watches only 15 channels on a regular basis, those channels may not be the same 15 channels as the ones his neighbor watches, making the media planner’s job that much more difficult in building mass audiences.

Besides the large audiences, the other core benefit of TV is that it builds awareness relatively quickly. If you are launching a new product or trying to gain a high level of awareness in a relatively short period of time, TV is your medium. While TV will take up a large portion of your budget, its dynamic nature and its ability to include sight, sound, and motion in the advertisement, make it a great story-telling medium.

Last, TV is still the best medium to generate excitement around a brand, whether that is with internal constituents (employees) or external audiences. As stated in Chapter 9, the medium is the message, and no medium, to date, gives people the same perception of legitimacy as a well-produced TV advertisement.

Radio

Like TV, radio is a broadcast medium, but its ability to generate mass awareness immediately is different. The radio formats appeal to more specific targets, giving it less spillover than TV, which can be both good and bad—good in that your audience is the only one that hears the message, bad in that an advertiser may not extend out of its target market and hit markets it wasn’t aware would be receptive to its message.

So why do advertisers use radio? One reason is that radio is much more efficient than TV; CPPs are sometimes one-tenth those of TV. Radio also is much less expensive to produce; in fact, typically all you need is copy and talent, making the lead time to go live with radio as short as one to two weeks. It also happens to be more promotional in nature—stations typically have a loyal audience following, and advertisers can usually be a part of any local station events and get the station personalities to endorse the brand. Testimonials, and especially personality testimonials, can be very valuable to advertisers that are looking to build legitimacy in themselves or their product.

So while you think about what your TV and radio ads will do for your brand(s), it is important to reflect on what part of the objectives and strategies each will fulfill and how they might work in concert with each other. Think of starting a new advertising campaign with TV messages and the support of radio. The TV will generate awareness and legitimacy immediately, and the radio will allow you to get out of the higher cost media quickly while allowing for long-term continuity of messaging at a more efficient rate.

Further, DTV can provide interactive video and data services that are not possible with analog technology.

TV Audience Trends

As a way to reach a mass audience, no other medium today has the unique creative abilities of television: the combination of sight, sound, and motion; the opportunity to demonstrate the product; the potential to use special effects; the chance to develop the empathy of the viewer; and the believability of seeing it happen right before your eyes (see My IMC Campaign 14–B, “The Pros and Cons of Broadcast TV Advertising”). As Exhibit 14-3 shows, over half of viewers believe TV is the most authoritative advertising source, compared to only 15.4 percent for newspapers, 10.8 percent for magazines, 8.6 percent for radio, and 4.4 percent for the Internet. Television was also rated as the most influential, persuasive, and exciting medium.11

LO 14-3

The heaviest viewers of broadcast TV are middle-income, high school–educated individuals and their families, so most programming is directed at this group. People with

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My IMC 14–B

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The Pros and Cons of Broadcast TV Advertising

The Pros

Contemporary broadcast television offers advertisers many advantages over competing media.

■ Mass coverage. A full 98 percent of all U.S. homes have a TV (most have more than one), and viewing time for the average household increased from about five hours a day in 1960 to more than eight hours in 2004.

■ Relatively low cost. Despite the often huge initial outlays for commercial production and advertising time, TV’s equally huge audiences bring the cost per exposure down to $2 to $10 per thousand viewers.

■ Some selectivity. Television audiences vary a great deal depending on the time of day, day of the week, and nature of the programming. Advertising messages can be presented when potential customers are watching, and advertisers can reach select geographic audiences by buying local and regional markets.

■ Impact. Television offers a kind of immediacy that other forms of advertising cannot achieve, displaying and demonstrating the product with sound, motion, and full color right before the customer’s eyes.

■ Creativity. The various facets of the TV commercial—sight, sound, motion, and color—permit infinite original and imaginative appeals.

■ Prestige. Because the public considers TV the most authoritative and influential medium, it offers advertisers a prestigious image. Hallmark, Xerox, Coca-Cola, and IBM increase their prestige by regularly sponsoring cultural programs on network TV.

■ Social dominance. In North America, most people under age 35 grew up with TV as a window to their social environment. They continue to be stirred by TV screenings of the Olympics, space travel, assassinations, wars, and political scandals around the world.

The Cons

Sometimes broadcast TV just doesn’t “fit” the creative mix because of cost, lack of audience selectivity, inherent brevity, or the clutter of competitive messages.

■ High production cost. One of broadcast TV’s greatest handicaps is the high cost of producing quality commercials. Depending on the creative approach, the cost of filming a national commercial today may run from $200,000 to more than $1 million.

■ High airtime cost. The average cost of a prime-time network commercial ranges from $200,000 to $400,000. A single 30-second commercial for a top-rated show in prime time may cost more than $500,000, and in special attractions like the Super Bowl more than $2 million. The cost of wide coverage, even at low rates, prices small and medium-size advertisers out of the market.

■ Limited selectivity. Broadcast TV is not cost-effective for advertisers seeking a very specific, small audience. And it is losing some of its selectivity because of changing audience trends. More women are working outside the home or watching cable TV, hurting advertisers on network soap operas.

■ Brevity. Studies show that most TV viewers can’t remember the product or company in the most recent TV ad they watched—even if it was within the last five minutes. Recall improves with the length of the commercial; people remember 60-second spots better than 30-second spots.

■ Clutter. TV advertising is usually surrounded by station breaks, credits, and public service announcements, as well as six or seven other spots. All these messages compete for attention, so viewers become annoyed and confused and often misidentify the product.

■ Zipping and zapping. DVR users who skip through commercials when replaying recorded programs are zipping; remote-control users who change channels at the beginning of a commercial break are zapping.

considerably higher incomes and more education typically have a more diverse range of interests and entertainment options.

The number of TV viewing hours continues to increase. The U.S. Census Bureau estimates that the average American watches over four hours of TV each day. That is about 25 percent of all waking hours.12

Around the world, older women watch TV the most (36 hours per week in both the United States and Canada). This makes the medium very popular with advertisers like Weight Watchers, whose primary target is middle-aged and older women who are concerned with how they look.

Cable in North American homes has significantly altered TV viewing patterns and the use of other media. Households with cable spend less time watching broadcast TV.

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Exhibit 14-3

In 2010, adult viewers rated television as the most authoritative, exciting, and influential advertising medium.

Source: 2010 Report www.tvb.org/media/file/TVB_PB_Media_Comparisons_2010_PERSONS.pdf.

They also spend less time listening to the radio, reading, or going to the movies. Cable seems to reach an audience that is difficult to get to in any other way.13 As a result of this audience fragmentation, advertising on broadcast networks has become less cost effective. DVD rentals have also increased dramatically, drawing more viewers away from advertiser-supported TV, both broadcast and cable (which is why ads have now started appearing on DVDs).

National advertisers have been using cable since the late 1970s, and cable advertising revenues have grown steadily, reaching more than $21 billion in 2010.14 One reason is that cable’s upscale audience buys proportionately more goods and services than noncable subscribers (see Exhibit 14-4). Procter & Gamble traditionally spends the most on network cable. However, local retailers also find local cable a good place to advertise.

Nielsen studies indicate that the average U.S. household receives 118.6 TV channels. A larger number of channels, however, doesn’t translate into more TV viewing.

Exhibit 14-4

Cable households provide advertisers with attractive demographics (Index of 100 5 U.S. average).

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Source: Cable TV Advertising Bureau.

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Exhibit 14-5

Top 10 cable network advertisers (2008).

Rank

Advertiser

Cable TV Spending (in Millions)

Procter & Gamble

$886.2

Time Warner

276.3

Johnson & Johnson

215.9

General Motors Corp.

210.6

General Mills

208.3

Walt Disney Co.

201.0

Sprint Nextel

195.4

AT&T

185.3

Kraft Foods

183.5

Berkshire Hathaway

182.8

The Nielsen data indicate that the more channels a household has, the lower the percentage of channels watched. Households with the most channels (more than 150) tuned in to only 16 channels.15

While there is no doubt that the media play an ever-expanding role in our daily lives, there is a finite limit to the number of advertising exposures people can absorb. When that limit is reached, any new media will simply be fighting for market share. This is the reason for the increasing fragmentation of the audience and the precipitous decline in the huge share of audience once held by the broadcast networks. This is also why media buyers and planners are growing in importance as advertisers search for the elusive audience and fight for their share of that audience in an overcrowded media environment.

The Use of Television in IMC

Television today is very versatile. For many years it was strictly a mass medium, used to great advantage by the manufacturers of mass consumption goods: toiletries and cosmetics, food, appliances, and cars (see Exhibit 14-5). But today, thanks to the narrowcasting ability of cable TV, television can also be a highly selective niche medium. It’s not unusual, for instance, to see ads for special feed for thoroughbreds and show horses on ESPN’s Grand Prix of Jumping. And thanks to local cable, TV is now affordable for even small local advertisers. This makes it a very viable option for use in an IMC program.

While single programs don’t deliver the mass audience they once did, television is still the most cost-effective way to deliver certain kinds of messages to large, well-defined audiences. When it comes to awareness and image advertising, for instance, television has no rival. The same is true for brand reinforcement messages.16

Since marketing integrators are looking to establish, nourish, and reinforce relationships with many groups of stakeholders, television serves another role quite efficiently. It can speak to many different kinds of stakeholders—not just customers—at the same time. Moreover, through its unique ability to deliver a creative big idea, television can impart brand meaning (the symbolism or personality of the brand) to either attract people to the brand or reinforce their current relationship with it.

Television is also a good leverage tool. That is, an advertiser might take advantage of the relatively low CPM of television to reach out to many prospects. Prospects can identify themselves by responding to the commercial, and then the advertiser can follow up with less expensive, one-to-one or addressable media.17

What’s important to remember in all this is that the high visibility of TV forces the sponsor to create ads that people find interesting and that consistently reinforce the brand’s strategic position (remember our definition of great advertising). The brands that succeed are the ones that are the most popular. And “ad liking” has a lot to do with brand popularity.

Types of TV Advertising

LO 14-4

Advertisers use different strategies to buy time on broadcast and cable television. The major broadcast networks offer a variety of programs that appeal to different audiences. So the advertiser buys ads based on the viewing audience of each program. A national advertiser that wants to reach a broad cross section of women ages 25 to 45, for example, might find Grey’s Anatomy an efficient buy at a cost of $203,078 for a 30-second commercial.18 Advertising isn’t always a cut-and-dried process. See the Ethical Issues box on page 444 for the guidelines on advertising to children.

When buying cable TV, an advertiser can buy ads over the full schedule of a channel because cable networks typically aim their overall programming to relatively specific audiences. The Lifetime and Family channels heavily weigh programs toward women; MTV targets viewers 16 to 25. Cable companies sell their network channels in bundles at a discount and offer discounts for run-of-schedule positioning—multiple ad purchases they can

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My IMC Campaign 14–C

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The Pros and Cons of Cable TV Advertising

The Pros

■ Selectivity. Cable offers specialized programming aimed at particular types of viewers. Narrowcasting allows advertisers to choose programming with the viewer demographics that best match their target customers.

■ Audience demographics. Cable subscribers are younger, better educated, and more affluent; have higher-level jobs; live in larger households; and are more likely to try new products and buy more high-ticket items, such as cars, appliances, and high-tech equipment.

■ Low cost. Many small companies get TV’s immediacy and impact without the enormous expenditures of broadcast TV. Cable advertising can sometimes cost as little as radio. Many national advertisers find sponsorship attractive, since an entire cable series can cost less to produce than a single broadcast TV commercial.

■ Flexibility. Broadcast TV commercials need to be short because of the high costs of production and airtime, but cable ads can run up to two minutes and, in the case of infomercials, much longer. They can also be tailored to fit the programming environment.

■ Testability. Cable is a good place to experiment, testing both new products and various advertising approaches: ad frequency, copy impact, and different media mixes.

The Cons

Like every medium, cable TV has its drawbacks.

■ Limited reach. About 23 percent of households don’t have cable. This was cable’s main weakness in the past, but it is less so today.

■ Fragmentation. With more than 50 channels at their disposal, cable viewers do not watch any one channel in enormous numbers. To reach the majority of the cable audience in a particular market, ads must run on many stations.

■ Quality. Cable, particularly local cable, sometimes has poorer production quality and less desirable programming than broadcast TV.

■ Zipping and zapping. Cable TV has some of the same drawbacks as broadcast TV, such as zipping and zapping.

place throughout a channel’s daily schedule (see My IMC Campaign 14–C, “The Pros and Cons of Cable TV Advertising”).

Advertisers can buy time on TV in several ways. They include sponsoring an entire program, participating in a program, purchasing spot announcements between programs, and purchasing spots from syndicators. Exhibit 14-6 shows how much money is spent nationally on the various types of television advertising. The exhibit suggests that cable continues to be attractive to advertisers.

Network Advertising

Historically, major U.S. advertisers purchased airtime from one of the national broadcast networks: ABC, CBS, NBC, or Fox. In 1995, relaxed FCC rules enabled two of the biggest producers of prime-time shows, Warner Bros. and Paramount, to launch their own broadcast networks—WB and UPN—giving them captive distribution outlets for programs they produce and buy.19 With 31 affiliated stations, UPN immediately covered 80 percent of the country, even though it initially programmed only a couple of nights a week. In 2006, UPN and WB merged to become CW.20

Cable has slowly eroded the audience of the broadcast networks. At one time the big three (ABC, CBS, and NBC) had more than 90 percent of the prime-time audience. Today their total share is about 38.3 percent, with ad-supported cable networks comprising 60 percent.21

Networks offer large advertisers convenience and efficiency because they broadcast messages simultaneously across many affiliate stations throughout the country. Broadcast networks tend to reach masses of American consumers representing a cross section of the population, while cable networks tend to reach more selective niches.

Exhibit 14-6

Where does all the money go? Measured TV spending in billions of dollars.

2013

2012

Network TV

$26.9

$27.4

−1.9%

Syndicated TV

5.2

5.1

0.5%

Spot TV

15.8

17.1

27.9%

Cable TV

26.1

24.4

7.1%

Source: Ad Spending Totals from Kantar Media, Advertising Age Marketing Fact Pack,2015, retrieved at http://www.slideshare.net/aidelisagutierrez/ad-age-marketingfact-pack2015

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Television plays an important role in its ability to impart brand personality. Television communicates with many stakeholders simultaneously and can deliver a “big idea” in a uniquely creative manner. This commercial for the Kia Soul shows that anyone can be “cool” if they drive a Soul, even hip-hop hamsters.

Source: Kia Motors Corporation

An advertiser who underwrites the cost of a program is engaging in sponsorship. In a sole sponsorship, the advertiser is responsible for both the program content and the total cost of production. Sponsorship is so costly that single sponsorships are usually limited to specials. Companies that sponsor programs (e.g., AT&T, Xerox, and Hallmark) gain two important advantages. First, the public more readily identifies with the product(s) due to the prestige of sponsoring first-rate entertainment. Second, the sponsor controls the placement and content of its commercials. The commercials can be fit to the program and run any length the sponsor desires so long as they remain within network or station regulations. Further, because networks are centralized, the advertiser gets only one bill.

Sponsorship offers many opportunities. When the popular drama series 24 started its second season, the first episode was presented commercial-free, thanks to a full sponsorship by Ford Motor Company. The episode also featured numerous Ford vehicles in the show. To save money and reduce risks, many advertisers cosponsor programs, sponsoring on alternate weeks or dividing the program into segments. NFL games, for instance, are always sold as multiple sponsorships.

Most network TV advertising is sold on a participation basis, with several advertisers buying 30- or 60-second segments within a program. This enables them to spread their budgets and avoid long-term commitments to any one program. It also lets smaller advertisers buy a limited amount of time and still get the nationwide coverage they need.

Network advertising also has several disadvantages: lack of flexibility, long lead times, inconvenient restrictions, and forced adherence to network standards and practices, not to mention high prices. Costs range from a low of $29,374 (for “Nikita”, which appears Friday nights on The CW) to a high of over $502,900 for “American Idol” (see Exhibit 14-7). For this reason, most advertisers decide to buy spot announcements.

Spot Announcements

National spot announcements run in clusters between programs. They are less expensive than participations and more flexible than network advertising because they can be concentrated in specific regions of the country. An advertiser with a small budget or limited distribution may use spots to introduce a new product into one area at a time. Or an advertiser can vary its message for different markets to suit promotional needs.22

Spots may run 10, 15, 30, or 60 seconds and be sold nationally or locally. Spot advertising is more difficult to buy than network advertising because it involves contacting each station directly. This is a headache with cable channels, since one city may be served by 10 or more cable companies. For the broadcast stations, the national rep system, in which individuals act as sales and service representatives for a number of stations, alleviates this problem through the use of electronic data interchange (EDI).23 This technology enables agency buyers to electronically process orders, makegoods (free advertising time to compensate for problems), and revisions, and to maintain an electronic audit trail through the life of a schedule. Likewise, reps can transmit orders directly to their stations via satellite while keeping in day-to-day contact with agency buyers.24

Meanwhile, a number of large cable rep firms are also working to make the purchase of spot cable more convenient for national advertisers through satellite technology and digital systems that interconnect various cable companies in a region.25

Spot advertising is available only at network station breaks and when network advertisers purchase less than a full lineup, so spot ads may get lost in the clutter—which is why they tend to have fewer viewers and a smaller piece of the ad spending pie.

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Movie product placements also benefit the advertiser when the films are later shown on TV. Apple and Pepsi have found this to be a useful strategy for promoting products.

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Exhibit 14-7

Advertising cost per 30-second spot on the 10 most expensive prime-time shows 2015.

Source: Variety, retrieved at http://variety.com/2015/tv/news/tv-advertising-prices-football-empire-walking-dead-big-bang-theory-1201603800/

Rank

Show and Network

Price (000)

Sunday Night Football (NBC)

$637

Empire (Fox)

521

The Walking Dead (AMC)

502

Thursday Night Football (CBS)

463

Fear the Walking Dead (AMC)

395

Monday Night Football (ESPN)

388

The Big Bang Theory (CBS)

289

Modern Family (ABC)

236

The Voice (NBC)

234

How to Get Away With Murder (ABC)

230

Syndication

As audiences fragment, syndicated programs become an increasingly popular adjunct or alternative to network advertising. Over the years, the syndication industry has grown from almost nothing into a $4.1 billion advertising medium.26

Syndication is the sale of programs on a station-by-station, market-by-market basis. In other words, the producer (e.g., Warner Bros. or Disney) deals directly with the stations, often through a distribution company, rather than going through the networks. This efficient “direct-from-the-factory” approach gives local TV stations more programming control and greater profits. It also gives advertisers access to inventory (commercial time) for their spots that they might not get on network programs—often at better prices.27 Syndication has become the largest source of programming in the United States (see Exhibit 14-8).

Television syndication comes in three forms: off-network, first-run, and barter. In off-network syndication, former popular network programs (reruns) are sold to individual stations for rebroadcast. Examples include Seinfeld and Friends. First-run syndication involves original shows, like Oprah, Inside Edition, and Extra, which are produced specifically for the syndication market. One of the fastest-growing trends in television is barter syndication (also called advertiser-supported syndication). These are first-run programs offered free or for a reduced rate, but with some of the ad space (usually 50%) presold to national advertisers. Wheel of Fortune, Jeopardy, and Oprah, all distributed by King World Productions, are some of the most popular examples.28

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Exhibit 14-8

TV network and syndication distribution.

a. The networks are essentially middlemen.

b. Syndication is often a more efficient way of financing and distributing programs.

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Ethical Issues

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Advertising to Children: Child’s Play?

Kids make up a considerable consumer group whose number and purchasing power are growing. In 1999, children aged 4 to 12 took in $31.3 billion in income from allowance, jobs, and gifts, and spent 92 percent of it, says James MacNeal, a market researcher who specializes in the children’s market. Today, children are influencing the family’s buying behavior for everything from cars to orange juice—up to $500 billion a year. Whether they’re spending their own money or asking their parents to spend theirs, marketing to kids is big business and it’s only getting bigger.

The benefits of reaching children are great. If won over now, they tend to be loyal customers into adulthood. Besides selling to children, advertisers also sell through children. Some companies believe they can sell more by appealing to children’s preferences than to adults’. The minivan was created because children demanded more room, says Mr. MacNeal. When kids decided the vehicle was “uncool,” their opinions helped to develop the SUV. Saturday morning cartoons are the traditional vehicle for ads promoting cereals, candy, and toys. Kids request that their parents buy particular brands of vacuum cleaners and other household goods because they saw them advertised on TV. Marketers rely on kids’ “pester power” to get their products sold.

The dangers of marketing to kids from an ethical perspective are fairly clear: Children are the “vulnerable” market. They are less experienced. Their concepts of self, time, and money are immature. As a result, they know very little about their own desires, needs, and preferences—or how to use economic resources rationally to satisfy them. The nature of children’s conceptual ability makes it likely that child-oriented advertising can lead to false beliefs or highly improbable product expectations. Telling children about a product and accurately describing that product is probably ethical. Convincing them that they must have the toy to be popular and successful with their friends, or misrepresenting the toy, or encouraging them to make a nuisance of themselves to parents and start begging for the toy is probably not. Nothing is likely to enrage parents and society at large more than the prospect of marketers manipulating and taking advantage of children. Cereal is better if a fun character is selling it; so are beer and cigarettes, as the Budweiser frogs and lizards and Joe Camel proved. In the United Kingdom, there is criticism over the use of TV characters such as the Simpsons and Teletubbies, as well as the Spice Girls, to sell snack foods high in fat, sugar, and salt. The junk food firms face a crackdown on the hard sell of products that can make children overweight and unhealthy.

Both critics and defenders agree that advertisers should not intentionally deceive children. Federal legislation has been introduced that would reimpose the 1974 guidelines limiting advertising on children’s programs. These guidelines deal with truth and accuracy, as well as the broader issue of pester power.

The mood in several European countries is to tighten up children-and-advertising guidelines. Sweden has some of the strictest controls in Europe on children and advertising, banning all television advertisements aimed at children under 12. This ban includes advertisements on toys, foods, sweets, drinks, and any products that might appeal to preteens. Steven Shanahan, chief executive of the Institute of Advertising Practitioners in Ireland (IAPI), says that Sweden’s ban is unlikely to work in practice because Swedish children have access to stations other than domestic ones that are not under Swedish TV regulators’ control. Research shows that a Swedish child sees as much advertising as any other European child. TV stations still need advertising revenue, and the commercial breaks in Swedish children’s programming are full of adult advertisements. The real money is not in selling programs to stations but in selling products to the child audience and creating the next toddler must-have. In light of an intense commercial environment, Sweden may not be able to persuade its European partners to adopt the ban. It should, however, raise awareness as to the impact and effect of advertising on young consumers who are not able to protect themselves from the onslaught of marketing messages during their favorite cartoon breaks.

The proposed ban raises other issues. Does the ban on marketing to children compromise the freedom of choice and speech? How far should advertisers go to ensure that children are not misled by their ads? And there are areas regarding how children are used in advertising and the frequency of toy advertising that could be addressed.

Sources: “Self-Regulatory Guidelines for Children’s Advertising,” Children’s Advertising Review Unit, 2003 (www.caru.org/guidelines/index.asp); “Barraging Kids with Ads,” San Francisco Chronicle, July 20, 2004 (http://sfgate.com); “The Original Chocolate Factory Ad, Broadcast during Children’s Programming, Violates CARU Guidelines,” CARU news releases, August 12, 2004 (www.caru.org/news/2004/chocfactory.asp); “Responsibility and Children’s Advertising,” Concerned Children’s Advertisers (www.cca-canada.com/ethics).

Syndication is a powerful tool for building reach. Advertisers like it because they can affiliate with popular programs and maximize their use of broadcast TV, gaining back much of the audience they used to reach through the networks (see Exhibit 14-9).

Direct-Response Television

In the fall of 1992, independent presidential candidate Ross Perot sat in front of a TV camera for 30 minutes with homemade flip charts and a down-home pitch for the White House and drew 20 million viewers. A month later, he pulled a respectable 19 percent of the vote.

Perot made advertising history by catapulting the program-length advertisement (PLA), or infomercial, into the limelight. He also proved what companies that produce and sell infomercials have been saying for years: Long-form advertising can communicate a message in a way other forms can’t.29 As a result, Advertising Age named Perot its adman of the year.

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Exhibit 14-9

Syndication viewing shares for total and daytime dayparts. Although syndication holds a respectable 13 percent share relative to total overall viewing, it commands a full one-third of viewing share of all national broadcast. During prime-time dayparts, when competing with network sitcoms and dramas, syndication’s share of audience drops way off. But during early prime time it is responsible for over 75 percent share of national broadcast viewing, and during late fringe it commands close to 50 percent share. Syndication ranks high in early prime time and late fringe segments because the only broadcast competition comes from early evening news programs and late-night talk shows.

Source: From Billboard/Howard Appelbaum Publisher.

Infomercials aren’t new, but their respectability is. Before Perot, most PLA users were off–Madison Avenue marketers of hand mixers, juicers, and car waxes. Today, major marketers such as Pfizer, Microsoft’s MSNTV2, and Voom have ventured into the infomercial arena.30 In Colorado, long-form ads were used as a negotiating tool in a labor dispute.31 And now even networks air some of these ads, which were once relegated to independents and cable channels.32 The reasons for this sudden growth are simple:

1. Consumers pay attention and can respond immediately.

2. Brand managers may be able to gain a competitive advantage by going where the competition is not.

3. PLAs can fulfill some message objectives, like product demonstration and brand differentiation, far better than 30-second commercials.

4. Results are both measurable and accountable.

5. The ad campaign can pay for itself while supporting the retail trade.

6. PLAs combine the power of advertising, direct response, and sales promotion.33

In addition to infomercials, direct-response TV (DRTV) includes shorter ads (often 60 seconds to two minutes) that ask consumers to order a product, as well as cable networks (Home Shopping Network) that feature round-the-clock sales. It’s easy to see why national marketers have jumped on the bandwagon. The market for DRTV has grown to over a $5 billion market.34

Local TV Advertising

Local businesses and retailers, often in cooperation with nationally known manufacturers, now spend over $16 billion annually on local broadcast and cable TV.35 Most local stations

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This Cannes Lion winner integrates a powerful soundtrack that is recognized by millions of viewers. With no voice over, this 60-second ad relies solely on sight, sound and motion to convey its message. According to Nielsen ratings, Volkswagen: The Force was the 2011 Super Bowl commercial that commercial audiences liked best and has been viewed over 60 million times on YouTube.

Source: Volkswagen Group

sell spot announcements, but some local advertisers develop and sponsor local programs or buy the rights to a syndicated series.

Efficient advertisers study the audiences of various programs and analyze their impact and cost effectiveness against other media vehicles. To do this, they must understand the techniques and terminology used in television audience measurement.

The companies that measure the program audiences of TV and radio stations for advertisers and broadcasters are called rating services. These firms attempt to pick a representative sample of the market and furnish data on the number and characteristics of the viewers or listeners. Several research organizations gather the data at their own expense and publish it. Companies subscribe to a service and use it as a basis for planning, buying, or selling media advertising.

In the United States, Nielsen Media Research is the major rating service for television. Its flagship service, the Nielsen Television Index (NTI), uses a national sample of 5,100 households equipped with people meters to develop audience estimates for all national TV programming sources: 7 broadcast networks, 47 cable networks, 3 Spanish-language networks, and more than 200 syndicators. At the local level, Nielsen uses people meters in the 55 largest markets and diary surveys in 210 TV markets to measure viewing for more than 1,500 local TV stations, 140 cable operators, 48 syndicators, and 2,000 local advertising agencies.36 It publishes the information at least twice a year in a publication commonly called The Book (see Ad Lab 14–A).

Digital video recorders (DVRs) have helped change the face of TV ratings measurement. Because of the perception that audiences were taking measures to skip commercials and only watching the programs, even before DVRs were invented, advertisers and agencies have been lobbying Nielsen to measure commercial minutes rather than program minutes. Commercial minutes have long been thought to be the holy grail of TV audience measurement. But with DVRs, programming companies have been pushing to include measures of shows that are not watched live, which program ratings do not take into account. In 2007 the commercial rating was rolled out, with the new designation of C3 for the commercial rating plus the addition of any commercial viewing up to three days after airing. This new measurement replaces a 65-year-old standard of measurement. Rollout began in 2008 of these new measurements.37

For demographic studies of TV audiences, advertisers also use the Simmons Market Research Bureau and Mediamark Research, Inc. These companies perform extensive surveys of the U.S. marketplace and publish their findings on consumer lifestyles, product usage, and media habits. Advertisers use the results for strategic planning purposes.

Defining Television Markets

Television rating services define geographic television markets to minimize the confusion of overlapping TV signals. The Nielsen station index uses the term designated market areas (DMAs) for geographic areas (cities, counties) in which the local TV stations attract the most viewing. For example, the DMA for Columbus, Georgia (see Exhibit 14-10), is the 17 counties in which the local area TV stations are the most watched.

Dayparts

Advertisers must decide when to air commercials and on which programs. Unlike radio listeners, TV viewers are loyal to programs, not stations. Programs continue to run or are canceled depending on their ratings (percentage of the population watching). Ratings also depend on the time of day a program runs.

Television time is divided into dayparts as follows:

Daytime:

9 a.m.–4 p.m. (EST)

Early fringe:

4–5:30 p.m. (EST)

Combine as

Early news:

5 or 5:30–7:30 p.m. (EST)

early fringe

Prime access:

7:30–8 p.m. (EST)

Prime

8–11 p.m. (EST)

Combine as

Late news:

11–11:30 p.m. (EST)

late fringe

Late fringe:

11:30 p.m.–1 a.m. (EST)

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AD Lab 14–A

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Where Do Those Infamous TV Ratings Come From?

For four decades, the life and death of network TV programs have been in the hands of the Nielsen families, households chosen with the aid of national census and other data to reflect the country’s demographics. Originally there were two measuring types: those who kept diaries and those who had a black box attached to their TV sets. Someone in each of 2,400 diary homes kept a written record of which shows each person watched during the week. In the 1,700 black box households, an audiometer attached to the TV kept track of when the set was on and what channel it was tuned to. Nielsen Media Research paid these families for the permission to gather data from their viewing patterns. The information is used to compute its Nielsen Television Index (NTI), the sole source of national TV ratings.

But that method of determining national ratings has been replaced by the more accurate people meter (see illustration), an electronic device that automatically records a household’s TV viewing. The people meter records the channels watched, the number of minutes of viewing, and who in the household is watching. Each person must punch in and punch out on a keypad. The microwave-based people meter keeps track of second-by-second viewing choices of up to eight household members and relays the data to a central computer, which tabulates the data overnight.

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The original people meter was developed by AGB Research, a British company. AGB found clients in ad agencies, cable networks, and syndicators—all of whom believed NTI overreported broadcast network shows and underreported other types. However, Nielsen developed its own people meter, and AGB abandoned the U.S. market.

Unfortunately, Nielsen’s people meter had its share of problems. At one point, Nielsen’s numbers showed that millions of people suddenly stopped watching TV. The networks hit the roof, but Nielsen officials defended their system. The networks gave advertisers $150 million worth of free time, since they hadn’t met rating guarantees, and decided to use eight-year trends for rating guarantees instead of just the current year’s ratings. And critics are still convinced that people meter numbers are flawed.

Nielsen’s competitor Arbitron is developing a passive people meter whose portable technology can register TV viewing and radio listening anywhere respondents are using them, even out of home. The new Portable People Meter (PPM) is pager-size and would be worn by each panelist. The meter works by detecting identification codes that can be implanted in any form of audio transmission. Respondents are not required to do anything except wear the device, which will eliminate problems with panelist participation incumbent in the current people meter system.

Nielsen joined with Arbitron in its initial U.S. test of the Portable People Meter in Philadelphia in fall 2000. The Portable People Meter has already been tested successfully in the United Kingdom. Currently, Arbitron, like Nielsen, is using meters and diaries to collect TV and radio ratings.

Nielsen conducts its survey sweeps four times a year in major market areas and publishes sweeps books that are the basis for network and local station ad rates. With the advent of the passive people meter, advertisers may once again believe in the ratings they’re paying for.

An interesting development in audience measurement is the single-source data made available by supermarket scanners. Once information on a family’s viewing habits has been gathered, its packaged-goods purchases are measured. The implications are monumental for marketing and media planners. The leaders in single-source measurement today are Information Resources, Inc. (IRI), with its BehaviorScan service, and Nielsen, with its Home Scan service.

Laboratory Applications

1. What are the advantages and disadvantages of the various measurement methods?

2. Which method do you consider the best? Why?

Source: From Billboard/Howard Appelbaum Publisher.

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Exhibit 14-10

This map of the area surrounding Columbus, Georgia, shows media planners which counties are included in the designated market area (DMA) and will be reached by advertising placed on the local television stations. Columbus, Georgia, is the 125th largest DMA in the United States and contains over 200,000 TV households.

Source: From Billboard/Howard Appelbaum Publisher.

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Viewing is highest during prime time (8 to 11 p.m. Eastern Standard Time; 7 to 10 p.m. Central Standard Time). Late fringe ranks fairly high in most markets among adults, and daytime and early fringe tend to be viewed most heavily by women. To reach the greatest percentage of the advertiser’s target audience with optimal frequency, the media planner determines a daypart mix based on TV usage levels reported by the rating services.

Audience Measures

Rating services and media planners use many terms to define a station’s audience, penetration, and efficiency. TV households (TVHH) refers to the number of households that own television sets. The number of TVHH in a particular market gives an advertiser a sense of the market’s size. Likewise, the number of TVHH tuned in to a particular program helps the advertiser estimate the program’s popularity and how many people a commercial is likely to reach.

The percentage of homes in a given area that have one or more TV sets turned on at any particular time is expressed as households using TV (HUT). If there are 1,000 TV sets in the survey area and 500 are turned on, HUT is 50 percent.

The program rating refers to the percentage of TV households in an area that are tuned in to a specific program. The rating is computed as follows:

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Networks want high ratings because they measure a show’s popularity. More popular shows can command higher advertising rates. Local stations often change their programming

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(e.g., buy different syndicated shows) to increase their popularity and thereby their ratings (and their revenues).

The percentage of homes with sets in use (HUT) tuned to a specific program is called the audience share. A program with only 500 viewers can have a 50 share if only 1,000 sets are turned on. Ratings, in contrast, measure the audience as a percentage of all TVHH in the area, whether the TV sets are on or off.

The total number of homes reached by some portion of a program is called total audience. This figure is normally broken down to determine audience composition (the distribution of the audience into demographic categories).

Gross Rating Points

In television, gross rating points (GRPs) are the total rating points a particular media schedule achieves over a specific period. As we discussed in Chapter 9, a weekly schedule of five commercials on programs with an average household rating of 20 would yield 100 GRPs. Recall that GRPs are computed as follows:

Reach (average rating) 3 Frequency 5 Gross rating points

Reach (average rating) × Frequency = Gross rating points

GRPs allow advertisers to draw conclusions about the different markets available for a client’s ads by providing a comparable measure of advertising weight. However, GRPs do not reflect a market’s size. For example, while campaigns in Knoxville and Charlotte might have the same GRPs, they would differ significantly in their reach:

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To better determine the relative value of television advertising markets, other measures are used, such as cost per rating point (CPP) and cost per thousand (CPM), which were described in Chapter 9.

Buying Television Time

The process of buying TV time can be lengthy and, depending on the number of stations in the buy, quite involved. Advertisers or media buyers must

LO 14-6

■ Determine which programs are available at what cost.

■ Analyze the various programs for efficiency.

■ Negotiate price with station reps.

■ Determine what reach and frequency they are achieving.

■ Sign broadcast contracts.

■ Review affidavits of performance to be sure the commercials ran as agreed.

These procedures are so complex that most large advertisers use ad agencies or media-buying services. Buying services have gained in popularity because they charge less and can save advertisers money by negotiating for desirable time slots at reduced rates. Local advertisers typically rely on station reps to determine the best buys for the money.

Requesting Avails

To find out which programs are available, media buyers contact stations’ sales reps—local station salespeople, national media rep organizations that sell for one station in each market, or network reps. The media buyer gives the rep information about the advertiser’s media objectives and target audiences and asks the rep to supply a list of avails (available time slots) along with prices and estimated ratings. Many media buyers ask for the information based on the last few Nielsen books to see whether a show’s ratings are consistent, rising, or falling.

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AD Lab 14–B

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Getting “You’re Out” on TV

“You’re Out” baseball mitts have expanded to television. As the marketing director, you choose to examine the gross rating points (GRPs) for placing your advertising. You have an idea of the days and times you want the ads to be placed. Chart 1 indicates the best programs for Memphis, Tennessee, and relevant planning data your assistant has gathered according to your preferences. Due to time constraints the chart is incomplete, but enough data are available for you to finish the chart.

Chart 1 shows the marketing figures for a single city, but now you decide to determine which of the three major cities in Tennessee will serve “You’re Out” baseball mitts the best. Your assistant didn’t quite finish Chart 2, but with the help of Chart 1 you can complete the needed calculations.

Laboratory Applications

1. Using the formulas in the text as a guide, complete Chart 1.

2. Assuming your budget is $68,000, use Chart 1 to decide which programs would be most effective for reaching children. Explain your selection.

3. Using Chart 1, complete the “per spot” and “rating” figures in Chart 2. Next, calculate how many GRPs each city will deliver if you buy five spots of advertising.

4. Using the completed Chart 2, calculate for each city the number of household impressions.

5. Knowing that you are running five spots, find the CPP and CPM for all three cities.

6. Based on the completed Chart 2, what city is ideal for “You’re Out” baseball mitts?

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Selecting Programs for Buys

The media buyer selects the most efficient programs in relation to the target audience using the CPP and the CPM for each program:

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For example, assume CSI has a rating of 25, reaches 200,000 people in the primary target audience, and costs $2,000 for a 30-second spot with a fixed guarantee on station WALB-TV in Albany, Georgia. Then,

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By calculating CPP, the media buyer can compare the cost of a rating point from one program or network to another. That’s good information for beginning negotiations. But rating points relate to the whole market. The real important figure is the cost of reaching 1,000 prospects in the target market. That’s why the CPM must be calculated against the size of the target audience, not the whole market. The lower the cost per 1,000/target audience (CPM-TA), the more efficient the show is at reaching real prospects.

To get the best buys within the available budget, then, the media buyer substitutes stronger programs for less efficient ones (see Ad Lab 14–B, “Getting ‘You’re Out’ on TV”).

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Negotiating Prices and Contracts

TV stations and cable companies publish rate cards to sell their airtime. However, since TV audiences are estimated at best, television reps will always negotiate prices.

The media buyer contacts the rep and explains what efficiency the advertiser needs in terms of delivery and CPM to make the buy. The buyer has numerous ways to negotiate lower rates: work out a package deal, accept run-of-schedule positioning (the station chooses when to run the commercials), or take advantage of preemption rates. A preemption rate is lower because the advertiser agrees to be “bumped” (preempted) if another advertiser pays the higher, nonpreemption rate.

The media buyer must read the advertising contract carefully before signing it. The contract indicates the dates, times, and programs on which the advertiser’s commercials will run, the length of each spot, the rate per spot, and the total amount. The reverse side of the contract defines payment terms and responsibilities of the advertiser, agency, and station. After the spots run, the station returns a signed and notarized affidavit of performance to the advertiser or agency, specifying when the spots aired and what makegoods are available. Makegoods refer to free advertising time an advertiser receives to compensate for spots the station missed or ran incorrectly or because the program’s ratings were substantially lower than guaranteed.38

Electronic Media Buying Software

With the Internet, today’s broadcast media buyers don’t ever have to leave the office but can, right from their desktops, pore over SRDS and Simmons research data to create and even buy media schedules with electronic avails.

With software like Arbitron’s SmartPlus media-buying suite, media planners and buyers can analyze, plan, and report from one application. Most spot broadcases are revised many times, and SmartPlus allows for revisions and transfers seamlessly in the planning process. Nowadays software can integrate with almost everything through a simple XML/API feed. SmartPlus integrates with Outlook, increasing the efficiency of communications between buyers and sellers.

Nielsen’s PAL software is a national media planning system. It takes into account market-by-market differences in media delivery for network TV, syndicated TV, cable TV, and magazines. PAL can be used in different ways. First, it evaluates market-by-market performance of a national media schedule in terms of GRPs and/or budgets. Also, PAL can define your marketing objectives by using BDI or sales data, along with selected spot weight.

Alternatively, Nielsen’s Clear Decisions and Reach and Frequency help media planners generate schedule results with minimal effort, identify insights from a suite of reports, and even create presentation-ready charts and graphs from one screen. The planner can perform R&F analyses using Clear Decisions to get to the answers faster.

Other Forms of Television

Cable isn’t the only electronic challenger to traditional broadcast TV. Cable providers have their own competitors: DBS, MDS, STV, and SMATV.

■ DBS (direct broadcast satellite) beams programs from space via satellites to satellite dishes mounted in the home or yard. For a monthly fee, consumers can subscribe to one of the DBS program distributors, such as Dish or DirecTV, to receive from 20 to 150 channels.39

■ MDS (multipoint distribution system), a microwave delivery system that can carry a dozen channels, is occasionally offered in rural areas where cable has not been installed.

■ STV (subscription television) is over-the-air pay TV. Subscribers buy a descrambler that allows them to watch programs carried over a regular TV channel.

■ SMATV (satellite master antenna television) uses a satellite dish to capture signals for TV sets in apartment buildings and other complexes, acting as a sort of minicable system.

■ IPTV (Internet Protocol Television) uses a broadband connection to deliver a digital TV service.

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And with the increase in connected TVs (TVs or other electronic devices such as DVD players or game systems like the Xbox 360), Internet apps that deliver Netflix and Hulu Plus are also slowly eating away at market share.

The Medium of Radio

Radio is a personal, one-on-one medium; people listen alone. And radio is mobile. It can entertain people who are driving, walking, at home, or away from home. This makes it a particularly strong way to reach people who commute by car.

Radio is also adaptable to moods. In the morning, people may want to hear the news, upbeat music, or interesting chatter; in the afternoon, they may want to unwind with classical or easy-listening music.

Who Uses Radio?

In an average week, 93 percent of the U.S. population listens to radio; in an average day, about 72 percent. The average American listens to the radio more than two and a half hours each day. In fact, during the prime shopping hours of 6 a.m. to 6 p.m., the average U.S. adult spends more time with radio than with broadcast and cable TV combined.40 As Exhibit 14-11 shows, radio is also cost-effective. In the last decade, the CPM for radio advertising has risen less than for any other major medium and substantially less than the consumer price index.41 As a result, radio’s advertising revenues have grown steadily.

More national advertisers are discovering radio’s reach and frequency potential. Certainly it has worked well for brands like Lindsay Olives. Similarly, Snapple profited greatly from radio. Back when it was still a little company in Queens, New York, and strapped for money, Snapple Natural Beverages decided to use radio. It put its entire ad budget into a year-long schedule with a young, relatively unknown radio show host named Howard Stern. Snapple liked the way he delivered its spots as a live reader.

A few years later, Snapple began receiving letters and phone calls from people in the Midwest and West, where it didn’t even have distribution. It seems that nationally syndicated talk show host Rush Limbaugh, on a restricted-calorie diet, had been giving enthusiastic on-air endorsements for Snapple Diet Iced Tea. The firm moved quickly to sign him as a paid endorser. What it learned was the power of radio, especially when combined with a popular radio personality. This combination doubled Snapple’s sales every year for five years, propelled it into national distribution, and turned it into a major national advertiser.42 The company continues to use radio to promote its products. In 2006, Snapple paid $2 million to sponsor a Boston radio station for 40 days.43

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Exhibit 14-11

Daily and weekly reach of radio for people 18 and older exceeds other media.

Source: the Radio Advertising Bureau.

The Use of Radio in IMC

While television tends to be a passive medium that people simply watch, radio actively involves people. They listen intently to their favorite personalities; they call in to make requests, participate in a contest, or contribute to a discussion; they use their ears and imaginations to fill in what they cannot see. Most people listen faithfully to two or three different radio stations with different types of programming. This means that smart advertisers can use the medium to establish an immediate, intimate relationship with consumers and other stakeholders. That makes radio an ideal medium for integrated marketing communications.

With radio, national companies can tie in to a local market and target the specific demographic group they want to reach. Most important, radio enables advertisers to maintain strategic consistency and stretch their media dollars through imagery transfer. Research shows that when advertisers run a schedule on TV and then convert the audio portion to radio commercials, fully 75 percent of consumers replay the video in their minds when they hear the radio spot.44 That extends the life and builds the impact of a TV campaign at greatly reduced cost.45 In an IMC campaign, where message consistency is a primary objective, this is a very important feature of radio.

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Local retailers like the medium for the same reasons. Also, they can tailor it to their needs. It offers defined audiences; its recall characteristics are similar to TV’s; and retailers can create an identity by doing their own ads. Finally, since radio is so mobile, retailers can reach prospects just before they purchase. Hence, recent years have seen major spending increases by local grocery stores, car dealers, banks, and home-improvement, furniture, and apparel stores.46

Radio Programming and Audiences

Radio stations plan their programming carefully to reach specific markets and to capture as many listeners as possible. The larger the audience, the more a station can charge for commercial time. Therefore, extensive planning and research go into radio programming and program changes.

Stations can use tried-and-true formats, subscribe to network or syndicated programming, or devise unique approaches. Programming choices are greatly influenced by whether a station is on the AM or FM band. FM has much better sound fidelity, fewer commercial interruptions, and more varied programming.

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Depending on a company’s advertising needs, radio has many uses within the IMC model. This ad for Lindsay Olives (www.lindsayolives.com) personifies the quality and selectivity that define the brand in a humorous and memorable way.

To counteract FM’s inroads, many AM stations switched to programs that don’t rely on sound quality, such as news, talk, and sports. Some stations are experimenting with all comedy, midday game shows with audience participation, or formats geared to specific regions, such as KHJ’s “car radio” in Los Angeles. AM stations are also trying to win back music listeners by improving their sound quality and offering stereo broadcasting.

When buying radio time, advertisers usually buy the station’s format, not its programs. Most stations adopt one of the dozen or so standard programming formats: contemporary hit radio (CHR-TOP 40), adult contemporary, country, rock, easy listening, news/talk, adult standards, classical, religious, and so on, as shown in Exhibit 14-12. Each format tends to appeal to specific demographic groups. The most popular format is country music, which is programmed by 18.9 percent of the stations in the United States (both AM and FM) and appeals to a broad cross section of Americans from 25 to 54 years old.

Contemporary hit radio (CHR), always found on FM stations, appeals to teenagers and women under 30. It provides a constant flow of top 40 hits, usually with minimal intrusion by disk jockeys. Another popular format, adult contemporary (or “easy oldies”), is often advertised as “light rock, less talk.” This format aims at the desirable target group of working women between 25 and 54. The news/talk, easy-listening, and nostalgia formats tend to have high listenership among men and women over 35.47

A major trend in radio today is the resurgence of radio networks, which offer services and programs that complement a station’s local programming. A station might subscribe to Premiere Radio Network’s “Delilah,” Cumulus Media Network’s “The Sean Hannity Show,” or the self-syndicated “Dave Ramsey Show.”

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Exhibit 14-12

Radio’s most popular formats. Graph shows number of radio stations for each format.

There are now more than 20 national radio networks, including the multiple “mininetworks” of ABC, CBS, Westwood One, and Unistar (see Exhibit 14-13), and numerous syndicators offer programs from live rock concerts to public-affairs discussions. To stand out, 80 percent of licensed radio stations are opting for syndicated and network offerings.48 As more stations carry these programs and more listeners tune in, national advertisers find them increasingly attractive.

LO 14-8

Although spending on radio advertising accounts for only about 4 percent of all ad spending, consumers spend about 44 percent of their total time with media listening to the radio.49 Clearly, although it is much cheaper to produce than television advertising, radio ad spending has room to grow. In 2010, however, revenue for radio measured $8.2 billion, down slightly

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Exhibit 14-13

The radio mininetworks provide various types of programming including news, talk, and sports. Each network targets a specific demographic group such as Adults 25–54 (CBS) or Men 18 years and older (ESPN).

Source: Data from the M Street Database.

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My IMC Campaign 14–D

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The Pros and Cons of Radio Advertising

The Pros

The principal advantages of radio are high reach and frequency, selectivity, and cost efficiency.

■ Reach and frequency. Radio offers an excellent combination of reach and frequency. The average adult listens more than three hours a day, radio builds a large audience quickly, and a normal advertising schedule easily allows repeated impact on the listener.

■ Selectivity. Specialized radio formats, with prescribed audiences and coverage areas, enable advertisers to select the market they want to reach: a specific sex, age group, ethnic or religious background, income group, employment category, educational level, or special interest.

■ Cost efficiency. Radio offers its reach, frequency, and selectivity at one of the lowest costs per thousand, and radio production is inexpensive. National spots can be produced for about one-tenth the cost of a TV commercial. And local stations often produce local spots for free.

■ Other advantages. Radio also offers timeliness, immediacy, local relevance, and creative flexibility.

The Cons

In spite of these advantages, radio has limitations: It’s an aural medium only, its audience is highly segmented, the advertiser’s commercials are short-lived and often only half-heard, and each ad must compete with the clutter of other advertising.

■ Limitations of sound. Radio is heard but not seen, a drawback if the product must be seen to be understood. Some agencies think radio restricts their creative options.

■ Segmented audiences. If a large number of radio stations compete for the same audience, advertisers that want to blanket the market have to buy at multiple stations, which may not be cost-effective.

■ Short-lived and half-heard commercials. Radio commercials are fleeting. They can’t be kept like a newspaper or a magazine ad. Radio must compete with other activities for attention, and it doesn’t always succeed.

■ Clutter. Stations with the greatest appeal for advertisers have more commercials. Advertisers must produce a commercial that stands out from the rest.

Exhibit 14-1

Top 10 national spot radio advertisers 2014.

Rank

Advertiser

National Spot Radio

Spending ($ in Millions)

Home Depot

$72.5

T-Mobile Wireless

GEICO

63.5

Comcast

58.8

Verizon Wireless

41.3

AT&T Wireless

40.3

O’Reilly Auto Parts

35.4

Macy’s Department Store

34.2

Walgreens Drug Store

29.1

Sprint Wireless

28.2

from the previous year.50 The largest national radio advertisers are major retailers and telecommunications companies (see Exhibit 14-14).

Buying Radio Time

Advertisers need a basic knowledge of the medium to buy radio time effectively: the types of radio advertising available for commercial use, a basic understanding of radio terminology, and the steps involved in preparing a radio schedule.

Types of Radio Advertising

An advertiser may purchase network, spot, or local radio time. Advertisers like the reach and frequency, selectivity, and cost efficiency of radio (see My IMC Campaign 14–D, “The Pros and Cons of Radio Advertising”).

Networks

Advertisers may use one of the national radio networks to carry their messages to the entire national market simultaneously via stations that subscribe to the network’s programs. In addition, more than 100 regional radio networks in the United States operate with information oriented toward specific geographic markets.

Networks provide national and regional advertisers with simple administration and low effective net cost per station. Disadvantages include lack of flexibility in choosing affiliated stations, the limited number of stations on a network’s roster, and the long lead times required to book time.

Spot Radio

Spot radio affords national advertisers great flexibility in their choice of markets, stations, airtime, and copy. They can put commercials on the air quickly—some stations require as

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AD Lab 14–C

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The Reports That Make or Break Radio Stations

Media buyers use the data from three major audience rating services to determine which programs and stations will deliver the greatest number of target listeners.

Arbitron

The Arbitron rating service chooses a group of representative listeners in each of 257 cities and gives them a diary for tracking the time they spend listening to radio. Listeners return the diaries to Arbitron at the end of each week for tabulation, and Arbitron compiles the results into a quarterly report.

The Arbitron Book, available on Arbitron’s Website (www.arbitron.com), reports the number of listeners to particular stations and shows their ages, sexes, and preferred listening times. Radio stations are major clients, but some ad agencies and radio sales reps also subscribe.

Arbitron is also developing the Portable People Meter (see Ad Lab 16–A), which will enable the electronic measurement of radio audiences.

Birch Research

Birch Research uses phone surveys rather than diaries to obtain listener data. Interviewers talk to representative listeners in 130 major radio markets. Results are published monthly and summarized quarterly. Birch also offers Birchscan, a monthly computerized report.

RADAR

RADAR (Radio’s All-Dimension Audience Research) also rates network radio programs based on phone interviews with listeners. Each listener is called daily for a week and asked about listening habits from the day before until that moment. RADAR conducts research year-round and publishes results annually in Radio Usage and Network Radio Audiences. A number of specialized reports are also available.

Laboratory Application

1. What are the advantages and disadvantages of these radio audience measurement methods?

2. Which audience measurement method, diary or phone interview, is best? Why?

little as 20 minutes’ lead time, and advertisers can build local acceptance by using local personalities. Radio rep firms, like Katz Radio, represent a list of stations and sell spot time to national advertisers and agencies.

Local Radio

Local time denotes radio spots purchased by a local advertiser or agency. It involves the same procedure as national spots.

Radio advertising can be either live or taped. Most radio stations use recorded shows with live news in between. Likewise, nearly all radio commercials are prerecorded to reduce costs and maintain broadcast quality.

Radio Terminology

For the most part, the terminology used for radio is the same as for other media, but some terms are particular to radio. The most common of these are the concepts of dayparts, average quarter-hour audiences, and cumes (cumulative audiences).

Dayparts

The radio day is divided into five dayparts:

6 a.m.–10 a.m.

Morning drive

10 a.m.–3 p.m.

Daytime

3 p.m.–7 p.m.

Afternoon (or evening) drive

7 p.m.–midnight

Nighttime

Midnight–6 a.m.

All night

Rating services measure audiences for only the first four dayparts because all-night listening is very limited and not highly competitive. Ad Lab 14–C describes the major radio audience

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Radio stations that choose to accept programming from external sources, like the Westwood One Radio Network (www.westwoodone.com), can increase their market share during instances of special programming. Westwood One is well known for bringing high-quality recordings of top-name concerts, such as The Rolling Stones, to radio stations that might not otherwise be able to acquire such programming.

Source: Westwood One, Inc.

rating services. Heaviest radio use occurs during drive times (6–10 a.m. and 3–7 p.m.) during the week (Monday through Friday), when many listeners are commuting to or from work or school.

Radio stations base their rates on the time of day the advertiser wants commercials aired, but the rates are negotiable according to supply and demand at any given time. For the lowest rate, an advertiser orders spots on a run-of-station (ROS) basis, similar to ROP in newspaper advertising. However, this leaves total control of spot placement up to the station. So most stations offer a total audience plan (TAP) package rate, which guarantees a certain percentage of spots in the better dayparts if the advertiser buys a total package of time.

Average Quarter-Hour Audience

Average quarter-hour audience (AQH persons) identifies the average number of people listening to a specific station for at least five minutes during a 16-minute period of any given daypart. For example, station KKDA in Dallas–Fort Worth, Texas, has an average quarter-hour listenership of 33,800, meaning that any day, during any 16-minute period between 3 and 7 p.m., about 33,800 people ages 12 and older are tuned in.

The average quarter-hour rating expresses the AQH persons as a percentage of the population. Since KKDA is located in an area of 3,072,727 people, its average quarter-hour persons could be expressed as an average quarter-hour rating of 1.1:

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The same idea can be expressed in terms of average quarter-hour share: the station’s audience (AQH persons) expressed as a percentage of the total radio listening audience in the area. For example, if the total average quarter-hour persons for all stations is 676,000, then radio station KKDA’s average quarter-hour share is 5:

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The gross rating points of a radio schedule are the sum of all ratings points delivered by that schedule, or the gross impressions (see Chapter 9) expressed as a percentage of the population being measured:

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Cume Estimates

The cume persons is the total number of different people who listen to a radio station for at least five minutes in a quarter-hour within a reported daypart (also called unduplicated audience).

In the example, our schedule on station KKDA generated 811,200 gross impressions, but that does not mean that 811,200 different people heard our commercials. Many people heard the commercials three, four, or five times. By measuring the cumulative number of different people who listened to KKDA, rating services provide the reach potential of our radio schedule, which in this case is 167,800.

The cume rating is the cume persons expressed as a percentage of the population being measured. For example,

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Satellite Radio

A challenge to “terrestrial” radio has been mounted by networks that transmit signals nationwide via satellite. As of 2008, satellite radio has been a two-player system between first-out-of-the-block XM and Sirius, now the owner of both services. Within a short period of time the networks have succeeded in signing a sizable number of subscribers, about 7.7 million for Sirius and nearly 8.6 million for XM.

In order to receive satellite radio, an audience member must pay a monthly subscription fee and invest in a receiver capable of receiving one of the two networks’ signals. XM and Sirius have attempted to convince people that radio is worth paying for by offering two important benefits not available to terrestrial radio listeners: a large number of program choices (each network offers dozens of stations and features a variety of music and nonmusic formats) and exclusive programming, such as Howard Stern on Sirius and Oprah Winfrey on XM.

How significant is satellite radio as an alternative to terrestrial radio? It is difficult at present to be sure. XM and Sirius have successfully leveraged exclusive talent (Stern, Winfrey), and programming (NBA and NFL games on Sirius, MLB games on XM) to attract subscribers.51 Internet giant Google has partnered with XM to extend its AdWords program to bidding on radio ads.52 And XM’s addition of programming associated with Oprah Winfrey has attracted big advertisers, including Acuvue, Dove, General Electric, Iams, JCPenney, SlimFast, Splenda, Target, and Warners TrueFit.53 In addition, in 2007 the two rivals announced intention to merge, and in 2008 the FCC gave its approval.

The Seven Steps in Preparing a Radio Schedule

The procedure advertisers use to prepare radio schedules is similar to that used for TV schedules.

1. Identify stations with the greatest concentration (cume) of the advertiser’s target audience by demographics (say, men and women ages 35 to 49).

2. Identify stations whose format typically offers the highest concentration of potential buyers.

3. Determine which time periods (dayparts) on those stations offer the most (average quarter-hour) potential buyers.

4. Using the stations’ rate cards for guidance, construct a schedule with a strong mix of the best time periods. At this point, it is often wise to give the advertiser’s media objectives to the station reps, suggest a possible budget for their station, and ask what they can provide for that budget. This gives the media buyer a starting point for analyzing costs and negotiating the buy.

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People BEHIND the Ads

Randy Falco, CEO, Univision

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“You’re fired.”

As the star of the reality entertainment show “The Apprentice,” Donald Trump has fired a lot of people (including celebrities on his “Celebrity Apprentice” variation). But in June of 2015, it was Trump himself who was shown the door.

Launching his bid for the Republican nomination for president, Trump chose language describing undocumented immigrants from Mexico that many considered incendiary. That, in turn, created a crisis for Randy Falco, head of the largest Spanish-language network in the United States, Univision. Falco announced that his network would no longer air the Miss USA beauty pageant, a program owned by Trump, a response made to what Falco called Trump’s “insulting remarks about Mexican immigrants.”

Falco explained his decision this way:

At Univision, a U.S. based Company that proudly serves as the voice of Hispanics, we had to act according to our values as a mission-driven company dedicated to serving our community. We cannot be associated with insulting and intolerant speech that brands an entire community of Mexican immigrants in the U.S. as people who bring drugs, crime and rape into our country. To the contrary, as I said in our statement, we see first-hand the work ethic, love for family, strong religious values and the important role Mexican immigrants and Mexican-Americans have had and will continue to have in building the future of our country. We took this action because it preserves the dignity of our community and our employees and our relationship with them.

With humble origins as a Spanish-language TV station in San Antonio, Univision is now present on nearly every big cable system in the United States. Like any network, Univision needs content. Some is produced by local affiliates, including news and programming. Many popular shows come from Grupo Televisa, a Mexican production company. But Univision also looks for quality shows throughout Central and South America. To celebrate its 50th anniversary, the network introduced a new logo and tagline, positioning Univision as the “Hispanic Heartbeat of America.”

Falco’s tenure has been marked by many aggressive moves to increase the value of the Univision brand and continue viewership growth. These include creating channels such as Univision tlNovelas (limited-run serial dramas more popular globally than in the United States), Univision Noticias (a news service), and Univision Deportes. Deportes focuses on sports programming, especially Mexican soccer league coverage. Falco also collaborated with ABC to create an English-language cable news channel called “Fusion.”

The results have been nothing short of impressive. In February of 2013 the network ranked fourth, beating NBC for the first time ever. And during July sweeps in both 2013 and 2014, Univision finished first, beating all English-language networks. Falco acknowledged the significance of his network’s accomplishment by writing, “Wrapping up July—during a time when other networks are investing more than ever in summer programming—as the No. 1 network among both Adults 18–49 and 18–34 for the first time, is making history.”

In 2014 Falco notched another win when he reached an agreement with cable giant Comcast. Some had speculated Comcast’s disinterest in offering Univision was related to its ownership of rival Spanish-language network Telemundo. With the deal, Univision gained access to over 90 percent of U.S. Hispanic households.

Given the growth of Hispanic audiences in the United States and the attractiveness of the demographic to leading advertisers, no one would blame Falco for playing it safe. But safe is not his style, and it is not the reason the company put him in charge. Falco is playing to win.

And Donald Trump shouldn’t take things too personally. He’s not the first NBC target Falco has publicly challenged. After watching an NBC News interview in which journalist Chuck Todd served up soft-ball questions to President Obama, Falco tweeted that Todd could learn a thing or two from Univsion’s own news star: “Chuck Todd should watch Jorge Ramos and learn how to interview the President and ask tough questions.”

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Because advertisers typically buy radio spots according to station format rather than by specific program, the AQH is typically a strong indicator of the most opportune time to run ads. Commercial ads, like this humorous spot from Hooked on Phonics.com (www.hop.com), are frequently aired during dayparts with high listenership, such as drive times. This works especially well for Hooked on Phonics.com, whose listener base—parents of younger children—are very likely to be in the car with their children at this time.

5. Assess the proposed buy in terms of reach and frequency.

6. Determine the cost for each 1,000 target people each station delivers. The key word is target; the media buyer isn’t interested in the station’s total audience.

7. Negotiate and place the buy.

Chapter Summary

As a means of reaching the masses, no other medium today has the unique creative ability of television. Broadcast TV grew faster than any previous advertising medium because of the unique advantages it offered advertisers: mass coverage at efficient cost, impact, prestige, and social dominance.

Television is a powerful creative tool, but the medium still has many drawbacks, including high actual cost, limited selectivity, brevity, clutter, and susceptibility to zipping and zapping.

Broadcast TV dominance is being challenged by new electronic media, particularly cable. Cable offers the visual and aural appeal of TV at much lower cost and with greater flexibility. Cable audiences are highly fragmented, which helps advertisers target specific markets but is a drawback for those wanting to reach a mass audience.

TV advertising can be done at the national, regional, or local level and can take the form of program sponsorships, segment sponsorships, and spots of varying lengths, including program-length infomercials.

To determine which shows to buy, media buyers select the most efficient ones for their target audience. They compare the packages of each station, substitute stronger programs for less efficient ones, and negotiate prices to get the best buy. Media buyers must have a firm grasp of certain important terms: designated market areas (DMAs), TV households (TVHH), households using TV (HUT), program rating, share of audience, gross rating points, and cost per thousand.

Like television, radio is a highly creative medium. Its greatest attribute is its ability to offer excellent reach and frequency to selective audiences at a very efficient price. Its drawbacks are the limitations of sound, segmented audiences, and its short-lived and half-heard commercials.

Radio stations are normally classified by the programming they offer and the audiences they serve. Radio stations may be AM or FM. They may use network or syndicated programs and follow any of a dozen or more popular formats. Advertisers purchase radio time in one of three forms: local, spot, or network. Buying radio time requires a basic understanding of radio terminology. The most common terms are dayparts, average quarter-hour, and cumulative audiences.

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Important Terms

affidavit of performance

audience composition

avails

average quarter-hour audience (AQH persons)

average quarter-hour rating

average quarter-hour share

barter syndication

broadcast TV

cable TV

cost per rating point (CPP)

cost per thousand (CPM)

cume persons

cume rating

daypart mix

designated market areas (DMAs)

drive time

first-run syndication

gross rating points (GRPs)

households using TV (HUT)

imagery transfer

infomercial

inventory

local time

makegoods

networks

off-network syndication

participation basis

preemption rate

prime time

program-length advertisement (PLA)

program rating

programming format

rating service

run of station (ROS)

satellite radio

sponsorship

spot announcement

spot radio

total audience

total audience plan (TAP)

TV households (TVHH)

UHF

VHF

Review Questions

1. What are the advantages of broadcast TV advertising for a product like milk?

2. What steps can advertisers take to overcome zipping and zapping?

3. Why has advertising on network TV become less desirable in recent years?

4. In what ways is cable TV’s selectivity a strength? A drawback?

5. What are the various ways to buy broadcast television time?

6. How can TV be best used in an integrated marketing communications program?

7. How can radio be best used in an IMC program?

8. What is the format of the radio station you listen to most? How would you describe the demographics of its target audience?

9. What is the difference between average quarter-hour and cume audiences? Which is better?

10. What is the significance of dayparts in radio and TV advertising? What are the best dayparts for each?

The Advertising Experience

1. Radio Advertising

Valentine’s Day is approaching, and as the owner of Dream Flower Florists, you want to increase your share of local business by advertising on the radio. After researching local stations, choose one whose format suits your target audience. Decide what kind of buys you will make and when they will be aired.

2. TV Organizations

The size of the television industry and the advertising dollars that are spent within it are extraordinary. Many TV-related organizations were formed to help serve the industry. Discover a little more about the nature and scope of the television industry as you peruse the following Websites. Be sure to answer the questions that follow.

■ Broadcast Education Association (BEA): www.beaweb.org

■ Cable/Telecommunications Association for Marketing (CTAM): www.ctam.com

■ Cable World: www.cableworld.com

■ National Association of Broadcasters (NAB): www.nab.org

a. Who is the intended audience(s) of the site?

b. What is the site’s purpose? Does it succeed? Why?

c. What is the organization’s purpose?

d. What benefit does the organization provide individual members/subscribers? The overall advertising and television and cable communities?

3. Broadcast Media Tools

Broadcast advertising reports and audience studies are critical to the development and implementation of effective media strategy. As with print media, advertisers have a set of “staple” companies and reports they regularly use to help plan and implement their broadcast media buys. Visit the following syndicated and

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independent broadcast media companies’ Websites and answer the questions that follow:

■ Arbitron: www.arbitron.com

■ Bureau of Broadcast Measurement (BBM): www.bbm.ca

■ Cabletelevision Advertising Bureau (CAB): www.onetvworld.org

■ Nielsen Media Research: www.nielsenmedia.com

■ Radio Advertising Bureau: www.rab.com

■ Radio Marketing Bureau (RMB): www.rmb.ca

■ Television Bureau of Advertising: www.tvb.org

■ Television Bureau of Canada (TVB): www.tvb.ca

■ TV RunDown: www.tvrundown.com

a. What type(s) of broadcast media information does the company specialize in and what specific services, products, or publications does the company offer?

b. What industries/companies would be best suited to utilize the company’s media resources?

c. Does the company represent syndicated or independent research?

d. How useful do you feel the company is for gathering broadcast media information? Why?

4. If Hyundai asked its agency to come up with a corresponding radio complement to its Assurance TV campaign, what would its agency want to keep in mind when converting this concept to an audio-only format?

5. Given the audience for Hyundai’s Assurance campaign—middle-class America—in what daypart do you think its TV commercial would be

CHAPTER

Using Digital Interactive Media

Learning Objectives

To explore the important factors advertisers weigh when considering digital interactive media. This medium has its own distinct characteristics, unique advantages, and drawbacks. Advertisers must be able to compare the merits of this medium and understand the most cost-effective ways to use them in their media mix.

After studying this chapter, you will be able to:

LO15-1 Discuss the various opportunities and challenges presented by digital interactive media.

LO15-2 Explain the evolution of interactive media.

LO15-3 Discuss the digital audience and the challenges involved in measuring it.

LO15-4 Explain how programmatic advertising works.

LO15-5 Define the various kinds of digital advertising.

LO15-6 Debate the pros and cons of the Internet as an advertising medium.

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Source: Voyages-sncf.com

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How many banner ads have you clicked in the past couple of hours? Days? Weeks? Can you even remember the last time you scrolled over to a blinking banner ad and clicked to leave your intended destination? If you are like a lot of people, the answer is probably no. ■ The Internet marketer Hubspot recently posted some pretty gruesome stats about banner ads, including that the average click through rate (CTR) is 0.1 percent (i.e., 1 in 1000 people) and that about 50 percent of clicks on mobile banner ads are accidental.1 ■ These numbers offer a clue why banner ads suffer a poor

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reputation as a marketing tool. In fact, Bob Hoffman, a partner at Type A Group, recently wrote that banners are “the worst advertising.”2 ■ Not everyone agrees with these dim assessments. As with all forms of advertising, careful planning and smart strategy make a big difference. Do the ads appear on sites with related content? Does the ad feature a specific product or does it link to a general Website? Is the banner message simple and easy to digest or complicated? Finally, is the creative execution inspired or trite? ■ The last point brings us to one of the best banner ads of 2014. The intriguingly named “Banner Contest for Psychopaths” was created by TBWA\Paris for the client Voyages-SNCF, a rail travel company. ■ A set of three different banners pitched a contest which could be won in one of two ways. The “easy way” was to go to Voyages’ Website and answer a small number of easy questions. The “other way” varied according to which of the three banner ads the audience member encountered. In one, the “24 hours banner,” the web user had to grab a moving ticket in the banner and hold it. For 24 hours straight. In another, the user had to click the banner 1,000,000 times. And in the final one, the user had to scroll the banner. Ambitious players had to scroll 708 miles, or the distance from London to Barcelona. Less ambitious players needed only scroll for 587 miles, the distance from London to Geneva. ■ The agency estimated that for those choosing “the other” ways, it would take just under 48 hours of non-stop mouse behavior to win the tickets. Hence the campaign’s name. And, in fact, hundreds of people did try the “other way,” and six people somehow managed to complete the task. More importantly for Voyages, the click-through rate soared to nearly six times the average for web display ads.3 ■ The campaign’s success originated in TBWA’s awareness that without a creative spark, banners are not terribly effective. In this case, the banners worked well, not only because of a unique idea, but because the idea would have special appeal with the younger target audience interested in rail travel. ■ The campaign was also aided by publicity. The irresistible title and silly challenge attracted media attention, which ensured many people would learn about Voyages even if they were not exposed to the ad. ■ The “Psychopaths” campaign shows that proper strategy, well-designed creative, and a deep understanding of the audience, can turn the lowly banner ad into a powerful marketing asset.4

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Digital Interactive Media

LO 15-1

Today, we are all participating in a media revolution, brought on by incredible achievements in communications technology. We’re talking, of course, about the Internet, the fastest-growing medium in history.

To understand the dramatic effect this is having on marketing and advertising, imagine for a moment what life was like before radio and TV. Back then, if you had a product to sell, you made your appeal to the consumer directly, often on her front doorstep. If she didn’t like what you were peddling, she slammed the door in your face. She was in complete control of the selling environment.5 Then along came radio and, 30 years later, TV. Now mass marketers had a captive audience, people who would willingly pay for an evening’s entertainment at home by simply sitting through the commercials. Advertisers prospered—and so did consumers, as they enjoyed a rapidly growing standard of living.

But now the sands are shifting across the advertising landscape. The remote control was the first step toward convenient interactivity, and it had a major impact on commercial viewership. Instead of watching commercials, people could now use the station breaks to channel surf, effectively slamming the door once again in the salesperson’s face.

Right on the heels of the remote came the widespread distribution of cable TV. In little more than a decade, the network TV audience plunged from 90 to 50 percent. SLAM!

Then, of course, came the VCR. People could now record shows and watch them later at their convenience, zipping through the commercials. Or they could just rent a movie and

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The Banner Contest for Psychopaths is an example of a successful digital interactive media campaign. Over 300,000 people clicked on the banners and one tenacious customer completed the 24 hour challenge by holding the moving ticket in the banner for 24 hours straight.

Source: Voyages-sncf.com

skip the commercials altogether. TiVo brought ad-avoidance into the digital age, allowing viewers to customize their entertainment schedules. SLAM!

Meanwhile, technology keeps on going and going and going. It’s already given us the 3D TV, tablets, the mobile phone, the Internet, digital media players, IPTV, and VOIP—and the software to make it all simple enough for virtually anybody to use. With growing consumer acceptance of all this wizardry, prices have plummeted, making most of it affordable for almost everyone.

These are not just advertising media. In many cases, they represent completely new ways of living and doing business. The fastest-growing advertising medium in history has also opened the door to electronic commerce.

From the convenience of your own personal computer, you can bank online, buy a car or a beautiful piece of art, trade stocks, book your airline reservations, purchase concert tickets, buy a complete new wardrobe from your favorite department store, or even order your week’s groceries and have them delivered to your door.

The Internet has also changed the way we send mail, eliminating the need for an overseas airmail stamp if you want to communicate with your brother in Berlin. You can do library research in the comfort of your den, or you can start your own home-based business and market your products worldwide.

The Internet is truly revolutionary in its effect on our daily lives, and it’s a revolution for marketers, too. As the nation’s biggest traditional advertisers realized that Internet media offered wonderful opportunities for achieving real, bottom-line results, they started increasing their online spending dramatically. In light of this change, the Internet research company eMarketer projected that online advertising spending would reach $51 billion by 2012, and make up 15 percent of total U.S. media spending.6 Similarly, the U.S. Census Bureau has estimated that e-commerce revenues for 2011 were $194.3 billion.

In addition to this phenomenal growth, by offering true interactivity, online media enable businesses and other organizations to develop and nurture relationships with their customers and other stakeholders, in a way never before available, on a global scale at very efficient cost.

In just 15 years as a commercial medium, the Internet has become a mass forum for advertising as well as other communications (see Exhibit 15-1). In recognition of this explosive growth, we need to understand how advertisers buy Internet advertising and use it in their marketing plans.

The Internet as a Medium

The Internet has come a long way from its simple roots. While some people assume it is very new, in fact the technological infrastructure of the Internet has been around for over 50 years.

The Internet is a global network of computers that communicate with one another through protocols, which are common rules for linking and sharing information. Although it still seems quite new, the Internet began in the early 1960s as a result of the Defense Department’s Advanced Research Projects Agency (ARPA) plan to create a network that could survive a cold war attack. ARPAnet had little commercial value; its primary users were governmental organizations and research universities, and the Internet of today is a far different medium. However, ARPAnet was important because its structure, a distributed network, was a revolutionary system. Traditionally,

LO 15-2

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The Internet has ventured out from the computer to the millions of mobile “smartphones” that can access Websites. Soon many more people will access web content from mobile devices than from computers.

Source: © Stanca Sanda/Alamy Stock Photo

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Exhibit 15-1

U.S. online advertising spending, 2011 to 2016 ($ in billions).

Source: Data provided from eMarketer.com.

media content has been delivered through centralized networks, in which a hub, such as a TV station, a newspaper publisher, or a cable company, distributes content to many receivers (see Exhibit 15-2). In a centralized system, if the hub is knocked out, receivers are left without information. But a distributed network is characterized by many different hubs and links, which allows continuous communication even if some connections stop working.

There are at least three other important distinctions between the Internet and traditional media. The first is the cost of time and/or space. In traditional media, time (on TV or radio) and space (in print) are precious and limited resources. Network TV commercials average 30 seconds, which is a very small window, and that window is expensive, averaging in the hundreds of thousands of dollars. In contrast, space on the Internet is vast and relatively inexpensive. Websites generally can store as much information as a company wishes to share. For consumers who require lots of facts before they make a decision to buy, this is a real plus.

The second distinction between traditional media and online media is the consumption of content. In traditional space, audiences consume content in an appointment-viewing mode. For instance, NBC develops and schedules a show and, if you enjoy it, you sit down on a certain night and time each week to watch. With the Internet and the ability to deliver content to multiple places at simultaneous and various times, consumers can now initiate the viewing or consumption of content when they “demand” to watch. As audience viewership numbers decrease and online interactivity increases, more content owners will incorporate a digital strategy that allows them to both appease the consumer’s need for on-demand viewing and deliver the audience to advertisers that help support the content. Hulu.com, which is a

Image

Exhibit 15-2

In a centralized network, a hub distributes content to many receivers. A distributed network has many different hubs and links.

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joint venture of NBC Universal and News Corp., provides content from over 50 providers, such as FOX, NBC, MGM, Sony Pictures Television, and others, allows users to watch full-length episodes of their favorite TV shows, old and new; and gives users the ability to cut out and create “clips” of their favorite scenes for reposting onto their own social networking pages such as myspace.com. While obviously appealing to the consumer, Hulu also gives advertisers the opportunity to connect their brands with premium content online, to interact with highly engaged consumers, and to extend their reach via Hulu’s broad distribution network.

A third distinction is the relationship between those who create content and those who consume it. Traditional media historically were content creators while audiences were content consumers. In our previous NBC example, NBC is the creator and you are the consumer. But the Internet, from its beginnings, has been interactive, blurring the line between content providers and consumers. The Internet audience doesn’t just consume online content, it interacts with it and creates it. As an example, imagine a teenager who uploads a video to YouTube. The teen is both a content creator (of her video or Website) and a consumer (when she watches other videos). In addition, the Internet makes it easy and cheap for the teen to promote her video. She can e-mail friends and ask them to watch it or she can create links to the video on her Facebook page. If her friends like it, they may recommend the video to others on their own social platforms. Eventually, a huge audience might watch the teen’s video, even though it was produced very inexpensively. Something like this actually happened in 2006

Image

Marks and Spencer uses the Internet and Instagram to stay connected to their shoppers. Take a look at their beautiful site here: https://instagram.com/marksandspencer

Source: Marks and Spencer

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with video diary entries posted by a young woman, identified only as Lonelygirl15, on YouTube. The videos showed the musings of a typical but expressive teen about her parents, boyfriend, and life in general. After the first audience for the videos shared them with friends, Lonelygirl15’s videos received more than 15 million cumulative views, equivalent to the number of people who watch a top 20 network TV show. Major media outlets such as Ad Age and The New York Times picked up on the phenomenon, eventually raising questions as to whether Lonelygirl15 was real or a clever fake. She was eventually revealed as the latter (the videos were created by two young filmmakers), but the fact that people were unable to tell for a long time makes one thing clear: there has never been a medium quite like this one.

A Brief History of the Internet and the World Wide Web

How did the Internet become such a pervasive and interactive medium? To understand that, we have to know how it came to be. In the early 1980s, the National Science Foundation expanded what had been ARPAnet by supporting a fast data network that linked information centers across the United States. At the same time, online content providers such as AOL and CompuServe were building an Internet audience by providing news, information, and e-mail services to subscribers. These services anticipated the World Wide Web by encouraging people to use their computers to find information and communicate with others. But AOL and CompuServe still retained the structure of a centralized network because most content either originated with or flowed through a centralized hub. If you were an AOL subscriber, you couldn’t get access to content on CompuServe or Prodigy unless you subscribed to them as well.

Throughout the 1990s, the numbers of people using the Internet were doubling each year. Fueling the medium’s growth were the increasing popularity and affordability of personal computers and the growing use of modems, which allowed computers to tap into the Internet via an ordinary phone line. The 1990s was also the decade in which people began going online to access a particular part of the Internet known as the World Wide Web (WWW). The web, as its name implies, was a distributed network of content providers and users, communicating through a protocol known as HTML, or HyperText Markup Language. HTML allowed for the relatively easy creation of displays, called web pages, that can be easily linked to all kinds of content, including other web pages or sites (and, later, photographs, movies, databases, sound files, and such). Viewing web pages was made easy by the development of web browsers, software that interpreted HTML (and later other code that permitted greater interactivity, such as Sun’s JAVA and Adobe’s Flash). Although Microsoft was not the first to develop a web browser, chair Bill Gates recognized the potential of the web for his company relatively early, and Microsoft developed the most popular browser in use today, Internet Explorer.

In the 2000s, the Internet is a global medium. People around the world use the Internet to read news, research products, stay in touch with friends, and find out what is new. They are increasingly doing this using high-speed broadband access rather than slower telephone lines, which makes it easy to watch videos, listen to audio programming, and download large files.

In a centralized system such as television it is relatively easy to find content: Sit down, turn the set on, and watch. If the show on one channel is boring, switch to another. Even with a couple of hundred channels, a viewer can quickly find out what is on. But the web is the home of millions of destinations, available at all times of the day and on every day of the week. The experience of the web is only partially determined by content creators. Just as important, it is created by its users, who are free to follow their own inclinations in finding entertainment and information.

This new medium has proven highly popular. The web exploded from about 50 sites in 1993 to more than 30 million active sites and 70 million registered sites worldwide in 2005.

The Internet Audience

In the past several years we have seen a steady migration of people who used to spend time in front of the TV moving over to the computer. A 2006 study by Nielsen//NetRatings suggested that some Internet users are watching as much as 25 percent less TV. According to Mainak Mazumdar, Nielsen vice president of product marketing and measurement science, “It’s not that people are abandoning TV for the Internet. Sometimes they do both. We only have 24 hours a day…. (That’s) a finite amount of time to consume media.”7 Of course,

465

Exhibit 15-3

Top 10 most visited Websites.

Source: Alexa, November 22, 2015, retrieved at http://www.alexa.com/topsites.

Rank

Site

Country

Google.com

USA

Facebook.com

USA

Youtube.com

USA

Baidu.com

China

Yahoo.com

USA

Amazon.com

USA

Wikipedia.com

USA

Qq.com

China

Twitter.com

USA

Taobao.com

China

some TV networks also maintain popular Websites, and this strategy is paying dividends in the digital age. For example, although overall TV use is down among Internet users, this same group watches more programming on cable networks such as Bravo and Comedy Central than do non-Internet users. This is doubtless due, at least in part, to the strong, feature-rich Website that each channel maintains (see www.comedycentral.com and www.bravotv.com). Exhibit 15-3 indicates which Websites were most popular in 2015. Google, the top site, serves more than a billion search requests each month, more than half of which arrive from mobile devices.

Who Uses the Internet

The percentage of the U.S. population able to access the Internet on a regular basis continues to climb. In 1997, only 50 million people were wired. This number had doubled by 2000 and has since doubled again. In 2011, more than 273 million people in the United States accessed the Internet each month.8 Worldwide, the active Internet audience is estimated at 2.3 billion, with many more occasional users (see Exhibit 15-4). According to

Internet World Stats (www.internetworldstats.com), Internet penetration is currently growing fastest in Africa, where the percentage of users is more than 30 times greater than in 2000. Iceland (98%) and Norway (97%) top the list of the most wired nations.

Media budgets tend to be very pragmatic. As audiences migrate, so do the media dollars. As a result, media spending on Internet advertising has grown substantially. One of the great draws of the Internet from the marketer’s point of view is its demographics.

Historically, the majority of people who surfed the Internet were well educated, upscale, white males who used the Internet for business or scientific purposes. Yet, recent surveys of Internet demographics suggest the reach of the medium is much more diverse and in some ways closely resembles the U.S. population (see Exhibit 15-5). Women and men use the Internet in roughly the same proportion (women 79%, men 81%). Internet reach is still greatest among non-Hispanic whites (83%).

Internet usage is growing steadily, but still lags, for users over 65 (48%). There is now no area where Internet usage has decreased.

And what is this audience doing? Of the 273 million monthly Internet users, the Pew Internet & American Project Life Study suggests that more than 250 million use e-mail and search

Exhibit 15-4

Number of people online (in millions). Data compiled by Nielsen//Net Ratings and the International Telecommunications Union.

Source: From Internetworldstats.com.

Region

Population

(000,000) 2011 est.

Internet Users

(000,000)

Penetration (%)

Africa

1,037

139

13.5%

Asia

3,879

1,016

26.2

Europe

816

500

61.3

Middle East

216

35.6

North America

347

273

78.6

Latin America/Caribbean

597

236

39.5

Oceania/Australia

67.5

World Total

6,930

2,267

32.7

466

engines to find information. Almost 230 million use maps. Use of the Internet for weather and travel also ranks very high, 231 million and 177 million people, respectively. As would be anticipated from a growth medium, all of these numbers are still increasing.

Measuring the Internet Audience

When marketers and the media first began trumpeting the marvels of the Internet, they quickly noted the potentially vast size of its user population. As noted, internet users comprise most people in industrialized nations and a fast growing portion of the rest of the globe.

How People Access the Internet

LO 15-3

While traditionally people think of accessing the Internet through a computer, the reality is that most people are accessing the Internet these days in a variety of ways with a variety of devices. The introduction of the smart phone, for instance, has also increased consumer awareness and demand for access to the Internet via a mobile device. One of the more popular Internet uses is meeting others online for gaming on devices from Microsoft, Sony, or Nintendo.

This is all made possible through high-speed connections, both wired and wireless. According to a summer 2009 study by @plan (a Nielsen-Online tool), 91 percent of the 18-and-over online population has broadband Internet access, making it the main connection type to the Internet. Broadband connections are really just a description of the ability to transmit multiple signals simultaneously on one data line. What it means for consumers is faster Internet surfing and faster data uploads and downloads. Broadband connections have helped revolutionize industries such as photography and personal home videos and launched popular sharing sites such as Flickr and Youtube. Equally important is the increased speed of cellular networks, allowing people to quickly upload pictures or videos from their phones to sharing sites such as Instagram and Snapchat.

Why is this important to advertisers? There are many reasons, but primarily because as consumers get more comfortable interacting with and seeking out rich content such as videos, they will become more likely to supplement their other media usage with the Internet.

How People Use the Internet

Some people believe that the first era of the World Wide Web has already passed, and that a new philosophy drives the activities of some companies. This philosophy has been dubbed Web 2.0 and represents the idea that the future of the web is in companies that encourage user sharing and collaboration (see Exhibit 15-6). Wikipedia, the popular online encyclopedia, is often cited as a prime example of this new philosophy.9 Unlike most other encyclopedias, Wikipedia is not constructed from articles penned by authorities or experts. Instead, anyone can create an entry, which in turn can be edited by someone else. In this sense, the site represents the efforts of thousands of users, rather than hundreds of authorities. Other examples of this type of collaboration include Twitter, Digg, and Craigslist.

One of the unique features of the Internet is the relative ease of finding and accumulating data based on advertising efforts. In this section we will discuss how the technology allows us to better understand users and refine our advertising efforts not only from campaign to campaign, but also while a campaign is in market. We will reflect on the two phases of online advertising that utilize and generate the most data: planning and tracking. Last, we will look at the issues surrounding all these data and how the industry approaches standardization.

Media Planning Tools

As with all other media, there are companies that specialize in delivering audited measurement of potential reach to help media planners choose the right vehicles based on their target audience. Two main companies help in the media planning process on the Internet:

Image

Exhibit 15-5

Percentage of demographic groups that use the Internet, according to a 2008 Pew Internet & American Life Project survey.

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Exhibit 15-6

Contenders for Web 2.0 activities, according to a Pew Internet & American Life Project surveys. Some of these activities have been around for a long time, but might qualify as Web 2.0 because they provide opportunities for content creation and interaction. Since the time this survey appeared, social web activities have exploded.

% of Internet Users

Who Do This

Internet Activities (all)

Watch a video on a video-sharing site like YouTube or Vimeo.

Use an online social networking site like MySpace, Facebook, or LinkedIn.com.

Look for information on Wikipedia.

Upload photos to a Website so you can share them with others online.

Rate a product, service, or person using an online rating system.

Post a comment or review online about a product you bought or a service you received.

Post comments to an online news group, Website, blog, or photo site.

Share something online that you created yourself.

Participate in an online discussion, a listserv, or other online group forum that helps people with personal issues or health problems.

Create or work on Web pages or blogs for others, including friends, groups you belong to, or for work.

Download or share files using peer-to-peer file-sharing networks, such as BitTorrent or LimeWire.

Create or work on your own Web page.

Create or work on your own online journal or blog.

Use Twitter.

Source: Pew Internet and American Life Project, www.pewinternet.org.

Nielsen-Online and comScore. Both companies have a suite of tools that help define target market size, behavior, and composition relative to each major Website on the Internet. They also provide views into how other advertisers are using the Internet, thereby giving competitive insights into industry and category best practices.

These companies measure the activities of a set number of people or a panel of people and provide reports on their usage patterns across Websites and Internet applications, such as iTunes. Nielsen randomly recruits individuals to download and utilize a desktop meter so all Internet activity on that computer is then tabulated, measured, and recorded. This process is very similar to one of the methods Nielsen utilizes to measure TV audiences. Using a limited sample size, Nielsen then projects these numbers to the rest of the Internet audience as averages. For instance, if a panel identifies that 50 percent of all men aged 18–34 go to ESPN.com daily, whereas on average most sites garner only 25 percent of the male panel audience, Nielsen will project those numbers to the rest of the Internet to arrive at an index of 200 for ESPN.com relative to the entire Internet traffic for men between the ages of 18 and 34. Media planners utilize these numbers to identify the highest concentration, or composition, of the target they are trying to reach. However, because of lack of standardization, many companies report many different numbers, and it is a media planner’s job to make heads or tails of the data. (See Ad Lab 15–A for a deeper explanation.)

The Promise of Enhanced Tracking

Today’s software now provides some of the most precise tracking and targeting tools ever. In fact, every time you step into the Internet, some computer may be watching to see just where you go. Software using HTTP interacts with what are known as cookies, small pieces of information that get stored in your web browser when you load certain Websites. Cookies track whether a certain user has ever visited a specific site. This allows the site to give users different information depending

Image

Samsung uses Facebook display advertising and short, benefit-focused copy to attract social media users.

Source: Samsung Electronics Co., Ltd.

468

AD Lab 15–A

Image

Internet Ratings: A Call for Standards

With the increased popularity of the Internet as an advertising medium comes increased reliance on measurement. However, because of a lack of standards, many measurement methods are available and it can be challenging to make heads or tails of the various solutions.

Each measurement company has its own way of “counting” and measuring, but for the most part there are two main buckets of measurement. There are planning tools such as comScore and Nielsen//NetRatings and tracking tools such as Doubleclick, Omniture, and WebTrends. All of these companies help quantify Internet usage, but the main difference between the sets is that one is based on projected activity from samples of consumers and the others are census-based, where census means complete records of activity at a site or ad campaign level.

The panel-based, or sample, approach has to date been widely accepted in the planning community for the main reason that it offers demographic and targeting-based information that is still considered unreliable from the census companies. However, both comScore and Nielsen have come under tremendous pressure to come up with a better solution as they have been highly scrutinized for undercounting by up to two to three times what most publishers count from their own server logs. In fact, in April 2007, the CEO of the Interactive Advertising Bureau (IAB) sent a scathing open letter to both companies complaining that they better get their acts together. The IAB is a standards body committee, made up of over 375 leading interactive companies, that actively engages in and supports the sale of online advertising. An excerpt from the letter:

Imagine my surprise when I came to the IAB and discovered that the main audience measurement companies are still relying on panels—a media-measurement technique invented for the radio industry exactly seven decades ago—to quantify the Internet…. To persist in using panels that undercount or ignore the diverse populations that are the future of consumer marketing is to deny marketers the insights they need to build their businesses. And it certainly appears to us as if they are being undercounted or disregarded, for our members’ server logs continue to diverge starkly from your companies’ sample-based assessments, by [two times to three times] magnitudes in some cases—far beyond any legitimate margin of sampling error.

However, everything isn’t all peaches and cream on the census side either. In fact anyone can perform a basic search for Internet measurement information and find a number of blogs, articles, and press releases about the monumental discrepancies between all of the various census-based reporting tools, and there are many. The discrepancies stem from a multitude of reasons: different data collection methods, unique data models, untagged pages, blocking software, cookie issues, and many more reasons. In fact Google Analytics, Google’s free-to-use Website tracking tool, has pages on its help site about why Google AdWords’ clicks don’t match Google Analytics’ page visits. So is there hope? Yes, and it comes in two forms: Media Rating Council (MRC) and start-ups.

The MRC’s number one objective is To secure for the media industry and related users audience measurement services that are valid, reliable, and effective. Hallelujah … right? It is definitely a step in the right direction; however, since the MRC is an organization that can tell you only what you “should do,” not what you “must do,” it is up to the advertisers and publishers to come to resolution if the industry really wants to see a change happen.

Or, you rely on the start-ups to make a better black box. Companies like Alexa, Quantcast, and even Google AdPlanner are coming up with different, possibly more acceptable, ways to measure Internet usage. But as with all start-ups, they have yet to truly prove themselves. Their task is to engage with advertisers and publishers and reliably deliver numbers that both sides feel comfortable with.

Laboratory Applications

1. What are some of the problems of Internet audience measurement?

2. Do you think these problems can be fixed? How?

on whether they are repeat visitors. Cookies also indicate the users’ frequency of visits, the time of last visit, and the domain from which they are surfing. Additionally, cookies give marketers great insights into their campaigns on a daily basis, such as the number of times users call for an ad, time of day, type of browsers they use, whether or not they click, and so on.

Typical online marketers employ the services of third-party ad servers. Third-party ad servers deliver ads from one central source, or server, across multiple web domains, allowing advertisers the ability to manage the rotation and distribution of their advertisements. The best-known companies are DoubleClick, now owned by Google, and Atlas DMT, now owned by Microsoft. These companies allow advertisers to monitor the performance of their buys on a daily basis all the way down to conversion to sales or any other action advertisers desire. By placing a line of javascript code on the last page of the sales process (in this case the confirmation page), DoubleClick and/or Atlas can match the user back to the last advertisement they saw or clicked on, via the cookies they place on the user’s browser, and

469

Image

One reason media budgets are shifting to the Internet is that the medium offers a variety of ways to track interactions of consumers with ads. One company that helps provide such metrics is comScore (www.comscore.com).

Source: comScore, Inc.

credit that advertisement with the sale. This allows the agency to understand direct metrics from advertising to sales in near real time. This hyperaccountability is what ultimately brought the online ad industry out of the dot-com crash of the early 2000s—marketers could easily justify their advertising spending’s direct effect on the company’s bottom line.

More sophisticated technology provides marketers with additional details about the consumer. The computer first assigns each user an anonymous and encrypted identification number for tracking purposes. A user profile is then created with data on the content of the pages read, what keywords may have been used in a search, the time and day that a web page was viewed, the frequency with which an ad is seen, the sequence of ads that are seen, the computer operating system of the user, the browser type, and the IP address. From these data, marketers’ computers can again guess the user’s ISP, telephone area code, and NAIC code. Marketers may then match these data with demographic information gathered offline to create a clearer picture of consumer behavior than has ever been available.

However, behavioral targeting, this new ability to track people’s behavior on the Internet, has stirred considerable debate. Although software developers claim that the users are tracked anonymously with encrypted identification numbers, privacy advocates believe the marketing method is too invasive into consumers’ lives (see Ethical Issues on pages 472–473).

Seeking Standardization

As much as Madison Avenue may want web measurements to resemble traditional media measurements, the Internet cannot provide them. As we’ll describe shortly, simply counting advertising impressions from a web page is an impractical method of tabulation. However, the basic questions remain the same: Do people see our ads? Are they effective? Until fairly recently, when a task force of the Internet Advertising Bureau (IAB) provided some practical definitions, Internet audience measurement information lacked the standardization needed to be able to compare its advertising effectiveness to other media.

The most simple measurement, yet an area of great controversy, is the advertising impression. The IAB defines an ad impression as “an opportunity to deliver an advertising element to a Website visitor.”10 When a user loads a web page with ads on it, the browser will pull the advertisement from its host ad server and bring it up as a banner, button, or interstitial. The number of ad requests received can then be translated into the familiar cost form. The problem with this definition, from the point of view of advertisers and agencies, is that the advertiser is not guaranteed that a user will ever see an ad. People often click away to some other site before the requested ad ever comes up. Under the IAB definition, an advertiser would be charged for an ad that never had the opportunity to be seen. The AAAA prefers to define an ad request as an ad that is actually delivered to users’ screens. Only then do they truly have an opportunity to see the ad. This controversy over definitions has a huge impact on the business because it also creates reporting differences between what web publishers count and what the agencies count and are willing to pay for. These considerations prevent marketers from obtaining the foolproof numbers they want. But as technology improves the speed and methods of online advertising, we can anticipate increased accuracy in measurement. For more on Internet ratings, see Ad Lab 15–A.

A second measurement, unique to the Internet, is the click rate or click-through rate. A click occurs when a visitor moves the mouse’s pointer to a web link and clicks on the mouse button to get to another page. The click rate is the number of clicks on an ad divided by the number of ad impressions. In essence, marketers are measuring the frequency

470

with which users try to obtain additional information about a product by clicking on an advertisement.

Buying Time and Space on the Internet

LO 15-4

Media planners cannot think of the Internet in mass media terms. Interactive media are personal audience venues, as we discussed in Chapter 12. That means one on one. So cost per thousand, rating points, and share of audience don’t really mean the same things in the interactive world. With interactive media, we’re not always building sales volume. We’re building relationships, one customer at a time. And the care companies exercise in buying and developing their interactive programs and integrating them with their mass media programs will determine their overall success.

Currently, the leading national advertisers spend a small piece of their marketing communications pie on interactive media—less than 15 percent of their budgets. However, it still is the fastest-growing segment. Online advertising spending grew to a record 23.4 billion in 2008.11 Exhibit 15-7 lists the top 10 Internet advertisers ranked by spending. The best marketers are testing extensively. That means being willing to lose money for a while, which is, of course, not exciting to most advertisers or agencies. Many direct marketers are investing heavily in online catalogs. Some places like Dell Computers (www.dell.com) generate several million dollars from online sales each day.

Pricing Methods

Advertising space on the Internet can be purchased in several different ways, as we will discuss later in the chapter. The most common means is the banner ad, typically billed on a cost-per-thousand basis determined by the number of ads displayed. On most web pages, the base banner rate pays for exposure on a rotating display that randomly selects which ads to show.

The real marketing power of the Internet, however, is the ability to specifically target an audience in a way that is virtually impossible in traditional media. In addition to general banners, media buyers may opt to purchase more selective space. For example, ads may be purchased in a portal’s information categories and subcategories, such as finance, news, travel, or games. Prices vary according to category and increase as the buyer targets a more selective audience. Costs are tiered according to thousands, hundreds of thousands, or even millions of page requests per month.

Another augmentation to the general banner purchase is the keyword purchase, available on major search engines. Advertisers may buy specific keywords that bring up their ads when a user’s search request contains these words. Keywords may be purchased individually or in packages that factor in the information categories and subcategories of a search engine site. In the early days of the Internet, some “keyword entrepreneurs” purchased large numbers of keywords from the search engines. They were later able to license these words to third parties at a substantial profit. This model has since changed to a bidding model, effectively

Exhibit 15-7

Top 10 U.S. Internet advertisers.

Rank

Company

Estimated Spending

(Millions)

TD Ameritrade Holding Corp.

$262.9

Experian Group

250.4

FMR Corp. (Fidelity Investments)

242.6

Sprint Nextel Corp.

241.1

General Motors Co.

240

E-Trade Financial Corp.

191.2

Walt Disney Co.

186.9

Scottrade

181.8

Netflix

177.6

Verizon Communications

169.2

Source: AdAge www.adage.com/datacenter.

471

killing keyword “entrepreneurs.” We will go into more depth on these issues later in this chapter.

Some publishers will charge their clients according to click-throughs—that is, when a user actually clicks on a banner ad to visit the advertiser’s landing page. Although the CPM for simple impressions is considerably lower, this method is still unpopular with publishers. When an advertiser buys on a per-click basis, the publisher may expose many users to an advertiser’s banner message without being able to charge for the service.

For advertisers involved in e-commerce, some publishers offer an affiliate marketing program whereby they charge a percentage of the transaction cost. For example, a site devoted to music reviews may have a banner link to an online music retailer. When consumers buy music from the retailer, the site publisher receives a percentage of the sale for showing the banner.

The Cost of Targeting

The very selective nature of the Internet can, for additional cost, be combined with tracking technology to be discussed later. This makes for a very focused campaign. Companies such as Tacoda work behind the scenes to meet the advertiser’s CPM guarantees by using software that directs specific ads to a highly selective audience. Because Tacoda technology “tags” users, it can build a consumer profile and show those ads that are likely to be of the greatest interest to that specific web user.

But contrary to popular belief, consumer targeting on the Internet is very cost intensive. While it is true that millions of people do indeed scour the Net each day, it is still difficult to find and reach the specific consumers that you want. Thus, prices for precise Internet business-to-business targeting can eclipse even those of direct mail.

Stretching Out the Dollars

One of the problems facing most Internet marketers is how to get enough reach from their advertising. The enormous numbers of users who utilize the major search engines make these sites attractive for advertisers. However, web browsers surf millions of other web pages each day, many of which are potential sites for effective ads. Contacting all these sites and negotiating advertising contracts on each is a nearly impossible task.

For this reason, most advertisers work through ad networks, which act as brokers for advertisers and Websites. Ad networks pool hundreds or even thousands of web pages together and facilitate advertising across these pages. The advantage is that this allows advertisers to gain maximum exposure by covering even the smaller sites. The drawback is that such advertising is more difficult to monitor. Each site must be watched for traffic and content, which creates problems when trying to calculate costs. A few web masters have been known to try to cheat the system by artificially increasing the number of page requests. So, as with any medium, caution is always the watchword.

Types of Internet Advertising

LO 15-5

The nature of the Internet is a constant state of evolution. Therefore advertisers have new and interesting ways to reach target audiences that extend beyond the more standard ad placements (see Exhibit 15-8). We will discuss the less fluid advertising elements first and then look at the ways in which the medium is continuing to grow. In approaching this topic we will work our way back up the generic online “sales funnel.” The Internet is truly unique as a medium in its ability to lead directly to sales so we will approach the section in that way, but beware of pigeonholing the Internet as a direct marketing medium. It has often been said that the accountability factor is not only the Internet’s saving grace, it is also the bane of its existence. (See the Portfolio Review on page 480 for different online creative executions discussed in this section.)

WebSites, Microsites, and Landing Pages

The technical definition of a Website is a collection of web pages, images, videos, or data assets that is hosted on one or more web servers, usually accessible via the Internet. Wikipedia.com lists 22 different types of Websites. We will be primarily referencing two:

472

Ethical Issues

Image

Who’s watching you?

It is safe to assume that a large percentage of the readership of this book, by virtue of the fact that it is a college-level textbook, fall within the adult 18–24 demographic. This isn’t hard to extrapolate, nor is it all that intrusive to the reader that someone somewhere has this information. However, if the knowledge were much deeper, and that someone knew where you were from, what your marital status is, what college you are attending, if you are female or male, and what type of cologne or perfume you like, that might be a bit scary. If the information could go even deeper, well that would perhaps be unsettling.

It is just these types of feelings that drive the consumer privacy issues online. Throughout this chapter we’ve highlighted the various ways in which consumers can be targeted and messaged online. This is all possible due to a few lines of code called cookies that track, categorize, and filter your every click.

Companies like BlueKai, an online behavioral data company, supply marketers with access to consumers online who have exhibited behavior that match their intended target audience. For instance, if Audi wanted to be within the consideration set of a potential new car buyer, they would pay BlueKai a fee to identify and target all of those people that have exhibited such behavior—recently went to an auto Website, spent a lot of time on that site, and has frequently returned over a specific duration. Companies like BlueKai can even suggest what type of car the person is interested in, so Audi could potentially buy all of the BMW “Auto Intenders,” as classified by BlueKai.

Companies like BlueKai partner with large Websites, like Expedia.com, which allows them to (a) capture this data, (b) mine it for insights, (c) organize and categorize the information, and (d) sell it to advertisers. In exchange, BlueKai shares the information and the revenue it creates with their partners. This allows their partners to have multiple revenue streams and do a better job of classifying their monthly Internet traffic that they too sell to advertisers.

While trying to understand consumer purchase behavior by tracking activity is not new—credit card companies have engaged in these practices selling their data to direct mail fulfillment houses—the amount of personal data and the ability to predict from that data is what has some people leery about the process. The insight into people’s traffic patterns has sparked much debate over what is and what isn’t intrusive to the consumer. When polled, 62 percent of consumers say they do not want their activities to be tracked online. However, behaviorally targeted advertising is some of the highest performing online ads. So how does a marketer make heads or tails of this, as consumers are clearly more interested in the targeted advertising, but don’t trust the way in which that information is gathered, and perhaps used.

To further complicate the issue, when an advertiser also has a web property that has high monthly visitation, like Amazon.com, then the question of who owns the data arises. While most argue that the data of any individual is owned by that individual, there are no clear directions to the consumer, nor are there any industry-wide practices, that allow customers to turn off access to this data by advertisers. The savviest of online consumers turn off their cookies, however by doing so they limit the ability of the Internet to truly personalize their experience. Amazon.com’s recommendation engine is a very good example of this. If you subscribe to the Amazon.com newsletter and spend a few minutes and a few pages looking for a particular type of item, say barbeques, but don’t purchase. Then within a few days Amazon.com’s

corporate and commerce sites. A corporate site is used to give background information about an organization, product, or service. A commerce site is used primarily to sell a product or service. Of course there is a fine line between these definitions; for companies like Amazon.com the corporate site is the commerce site and vice versa. Good marketers look at their Website as more than the above definitions. They understand that the Website is an extension of the brand and that the Website experience is synonymous with a brand experience. Knowing that not all corporate sites are quite up to snuff to deliver on this brand extension, many marketers use microsites and landing pages to circumvent this issue and deliver the desired experience.

A microsite is used as a supplement to a Website. For advertisers it is typically singular in focus and delivers on the current advertising message. For instance, when Electronic Arts (EA) launched the Return of the King video game after the very popular movie trilogy The Lord of the Rings, it had Freestyle Interactive build a robust microsite that gave users cheats, codes, game screens, and exclusive videos and also gave users a chance to win a replica sword from the movie. The kicker was that to unlock the content, users actually had

Exhibit 15-8

U.S. Online ad spending share, by format, 2011–2016

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Source: Data from eMarketer.com

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e-mail communications will miraculously be filled with barbeques, some of which you looked at, some of which are recommended to you. It must be known that Amazon.com works from a registered user base, thereby not utilizing cookies to track behavior but uses user sessions instead. However, the example still applies for the thousands of Websites who practice something similar without ever registering for the site. Like.com (now owned by Google) was one such site. If you looked for a watch on their site but did not purchase, incredibly a banner ad displaying the last item you looked at would appear on your Yahoo! Mail login screen within minutes.

The Federal Trade Commission (FTC) has been investigating the issue, much like they did in the early 2000s when they ultimately passed the CAN-SPAM act, making it illegal to spam—send e-mail without permission. In late 2011, the FTC issued a privacy report that called for a “do not track” system to be put in place. Since that announcement all major browser software companies have supported the issue. What it means is that the default setting on browsers will have a header call (DNT:1) identifying that this individual wishes to not be tracked when they arrive at a Website. However, the directive of this header call can only be acted upon by the server of the Website, which makes the system as a whole honor-based. This means that Websites, as of this writing, are not legally bound to take action on the browser header call, and since very few consumers even understand this, most Websites do not comply.

Evidon, a privacy technology company, was founded to help consumers and business see, understand, and control data online. Their technology makes it easier for companies to comply with the “do not track” system, and insure that companies are maintaining a healthy consumer-focused set of privacy policies. As the debate and awareness continues to build, companies like Evidon will be important for brands and publishers to align with. Jon Leibowitz, the Chairman of the FTC, thinks that more privacy will actually be more lucrative for the online industry. However, not everyone agrees, especially those that can’t see a better technology than cookie-based tracking. However, almost everyone would agree that consumer trust is paramount in the long-view of revenue generation. What do you think?

Questions

1. Why would companies want to track everyone’s online behavior?

2. Think of the last five Websites you were on, what did you look at? How do you think advertisers could use that information to better target you?

3. Has the online media industry taken tracking too far? Do you think it is okay, or not okay to watch people’s behavior online?

Sources: Abbey Klassen, “Behavioral Targeting Might Scare Consumers Less if we Did a Better Job Explaining it,” Ad Age Blogs, October 17, 2011 http://adage.com/article/abbey-klaassen/behavioral-targeting-scare-consumers-job-explaining/230431/ Do Not Track, Wikipedia.org, http://en.wikipedia.org/wiki/Do_Not_Track Colleen Taylor, “FTC Chairman Leibowitz: More Privacy Could Actually Bring Bigger Revenue for Web Giants, TechCrunch.com May 31, 2012 http://techcrunch.com/2012/05/31/ftc-chairman-leibowitz-do-not-track-effects-on-advertising/ About Evidon, May 31, 2012 http://www.evidon.com/about/index

to go on an Internet-based scavenger hunt to find four pieces, or shards, of the sword. Each piece unlocked more content until the sword was “reforged” and the user could open the cheats and enter to win the replica sword. The microsite was able to identify how many pieces each user had found due to the ability to store and read data on cookies placed on the user’s browser.

Any web page can be a landing page—the term used to describe direct links to deeper areas of the Website that advertising drives consumers to beyond the homepage. Typically advertisers use landing pages to give consumers a more relevant experience as it relates to the message from the advertising. For instance, if someone searches for “men’s dress pants” on Google, Dockers wants to send them directly to the men’s apparel section, and more specifically all the way to the pants page, rather than making the user click two or three more times just to find the relevant products. Advertisers use landing pages to streamline the selling or information-gathering process, as studies have found that people’s attention spans are limited online. If they cannot find what they are looking for right away, they may be lost forever. Consumers are fickle and anything to help them on their online journey is typically a smart approach.

Search Engine Marketing

Most people looking to find information on the web now use a search engine. Search engines are Websites that allow people to type a word or phrase into a text box and then quickly receive a listing of information on a search-results page.

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Exhibit 15-9

Percentage of online searches by search engine used, December 2011, as reported by comScore Search.

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Source: ComScore Release April 2009, U.S. Search Engine Rankings, retrieved from www.comscore.com/Press_Events/Press_Releases/2009/5/comScore_Releases_April 2008_U.S._Search_Engine_Rankings.

In the late 1990s, several companies competed to be the leading brand for searches. For now, there is a clear winner: Google (see Exhibit 15-9). Moreover, the story of how Google used a superior search capability to become one of the fastest-growing and most profitable companies in the world offers important lessons for advertising on the Internet.

Like most other people, when Google’s creators, Sergey Brin and Larry Page, first met at Stanford, they did not know how search could be profitable either. But at the time, profits were not their main interest. Brin and Page were interested in helping users find information and believed they had a better system for doing so.

The two created an algorithm, eventually named Pagerank, that analyzed the links and relationships of Internet sites to come up with rankings. When a keyword is entered in a search, Google looks for Websites that mention the word. This is no different from what many of their early competitors did. But in addition, Google analyzes Website links in order to determine what sites are considered useful. Consider two sites that each use the term marketing five times. If a web user used marketing as a search term, Google’s search engine would locate both sites on its servers. But which site should be listed relatively high, where it will be viewed quickly, and which should be listed much lower? This is where Pagerank comes in. Sites that many other sites link to are assigned higher Pageranks and end up relatively high in search results. For example, if 20 Websites link to one of the two marketing sites and just one links to the other, the first site will get a more prominent listing. The algorithm also analyzes the quality of the links. Specifically, sites with especially popular or authoritative Websites linking to them get very high Pageranks. The net result of this is a fast search engine that returns remarkably relevant search results.

Because the company created a better search engine, Google was able to attract growing numbers of web users. However, throughout the 1990s it lacked a clear way to make money from the search mechanism. Like many companies at the time, Google sustained itself on venture capital. After the dot-com bust of the early 2000s, Google investors strongly encouraged Brin and Page to develop a revenue model. Their response was two advertising programs, AdWords and AdSense. It is difficult to overstate how successful these programs have been, because in a few short years Google has used them to create an annual revenue stream approaching nearly $80 billion.

AdWords

Do a search on Google and you will notice that search results are not the first thing you encounter on the results page. The first listings are in a light-blue shaded area that is described as “Sponsored Links.” The two sponsored links at the top and all of the sponsored links on the right are not search results, but rather paid listings. For advertisers there is really no better place to put a message. There is no other environment that allows advertisers to gain such insight into what consumers are thinking while at the same time placing a targeted advertisement in front of that consumer. For instance, if you are working for Dockers and you are targeting men seeking business attire, where do you spend your money? On a magazine ad that may or may not get in the hands of someone thinking about clothes or on an AdWords placement for the word dress pants?

Google’s search results page is thus composed of two distinct areas: search results, which are organic (unaffected by sponsorship), and sponsored links. Google’s sponsored links have three important characteristics. First, advertisers do not pay just for being seen, a common practice with banner ads. Instead, advertisers pay Google only when a search engine user clicks on the link and visits the sponsor’s site. This performance-based pay-per-click model has proven very attractive to advertisers. Second, the amount that an advertiser owes for each click-through is not actually set by Google. Instead, it is determined in an auction, where companies can bid for keywords used in search, such as the term marketing. Higher bids generally lead to better listings, such as those located on the first search results page and located near the top of the page. These are locations where the search engine user is most likely to see them. Holding true to their relevancy algorithm for organic searches, Google adds one additional twist to their AdWords: the ranking of sponsored listings is not completely

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determined by how much a company bids on a keyword but on their ad’s performance as well. Text ads that attract lots of clicks rise in the rankings, while links that are ignored fall. Third, Google benefits from the targeted nature of search. When people are hunting for a term like marketing, they often find that the sponsored links are as useful as the search results. Google estimates that almost 15 percent of searches result in click-throughs to sponsors, an astonishingly high conversion rate in comparison with other media, interactive or traditional. Google’s model clearly emphasizes performance.

AdSense

Google’s other major ad program is AdSense. Websites that use AdSense set aside a portion of pages for Google text ads. The ads themselves are selected by Google software and inserted automatically, without any input from the Website. Google’s AdSense software attempts to insert ads that are relevant to the site’s content.

The revenue model for the AdSense program is very similar to AdWords in that advertisers pay Google only when web users click the link and visit the sponsor sites. In this case, the owner of the site in which the ad appeared also gets revenue. For popular Websites this can generate a great deal of revenue, and it is thus a powerful incentive for site owners to participate in the Google program.

Large Websites, such as those listed in Exhibit 15-3, generally don’t use programs such as AdSense, preferring to sell ad space themselves. But AdSense has helped thousands of small to midsized sites and blogs develop steady revenue streams. Tiny, targeted, and text-based ads have revolutionized the web.

Of course, to benefit from search-based ad programs, companies must have Websites that convert visitors into customers. Businesses ranging from your local florist to global manufacturers are using the Internet to present multimedia content that includes interesting or entertaining information, product data, video and even games. Many of them, like E*Trade and Amazon.com, conduct all their commerce right on the web. Users move from page to page and site to site depending on what they are looking for. In other words, the user is in control. The consumer chooses what screens to experience, which banners to click, and which to ignore.

That means marketers have to provide information that is useful and relevant. They have to keep updating it to get repeat visits. And a little entertainment with a few freebies tossed in doesn’t hurt. Even Ragú (www.ragu.com) spaghetti sauce has a colorful site that offers Italian phrases, recipes, and occasionally a sweepstakes. Learning how to use this new medium challenges the creativity of the whole advertising community. And with the amount of daily updating that is required to keep Websites current, the opportunity for career growth and specialization is great.

Banners and Buttons

The basic form of web advertising is the ad banner. A banner is a little billboard that spreads across the top or bottom of the web page. When users click their mouse pointer on the banner, it sends them to the advertiser’s site or a buffer page. The standard size for an ad banner is 468 pixels (picture elements) wide by 60 pixels high. That means that on a standard 8½- by 11-inch page, the banner would measure just over 4½ inches wide by 1/2 inch high.

While banners are a common unit of web advertising, the cost of a banner can range wildly—anywhere from free to thousands of dollars per month. Some standardization is taking place in the business, with most sites now charging, on a cost-per-thousand basis, anywhere from $0.25 to $100.00 CPM, depending on the number and type of visitors the site regularly receives.12

In 2003, in response to many agency requests to simplify the ad buying process, the Interactive Advertising Bureau (IAB), the association of web publishers, introduced the

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Portfolio Review

Image Advertising on the Internet

As the fastest-growing medium in history, the Internet offers incredible opportunities for a wide range of people in both business and advertising, despite a number of unknown factors of the medium. For advertisers, there is a whole new world of potential customers out there, waiting to be engaged. But for advertising’s historically television-oriented creatives, just learning to use the new medium effectively is a challenge, especially with the medium’s ever-changing and ever-evolving technological landscape. What’s interesting is that this is exactly the same challenge that took place when TV was first introduced some 50 years ago.

Without question, we are witnessing a new creative revolution that will continue well into this millennium.

• In this portfolio, study the ads and evaluate how each site capitalizes on the truly interactive nature of the medium or how it could better incorporate interactivity with the audience. Try to determine how the Website fits into the company’s overall strategy and how the site either complements or perhaps replaces a more traditional media approach. Could the company benefit from incorporating additional features into the Website? What features would you suggest?

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Award winner Van Houtte shows that a B2B Website can match the beauty of sites that target consumers.

Source: Van Houtte Coffee Services

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Ultranoir is a Paris digital boutique that creates stunning Websites for their clients. You can see their work at http://www.ultranoir.com/en/#!/home/.

Source: ultranoir

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Illusion magazine showcases all forms of art including graffiti, fine art, illustration, tattoo, and cinema. The Website has been nominated for the Webby Award three times and won Best Art Website in 2015. View the Website at http://illusion.scene360.com/

Source: Scene 360

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Source: Yahoo! Inc.

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Apps are another digital advertising platform. These are some of the most honored apps of 2014.

Source: Hidden Variable Studios

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Source: Simogo

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Here are two more award winning apps, from Simogo and reddit.

Source: reddit inc.

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The highly interactive nature of AirBnB’s site ensures that customers come back often.

Source: Airbnb, Inc.

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Southwest’s award-winning heart campaign has its own microsite.

Source: Southwest Airlines Co.

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Vogue’s challenge is clear: as a brand known for fashion it must have a Website that reinforces the magazine’s reputation for taste, beauty, and design.

Source: Vogue

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Coca Cola encourages recycling at its Ekocycle site.

Source: The Coca-Cola Company

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Google’s famously sparse search site may not garner artistic awards. But it is the starting point for over a trillion searches each year and digital commerce is hard to imagine without it.

Source: Google

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Universal Ad Package, a suite of 16 standard ad sizes (including skyscrapers, rectangles, pop-ups, banners, and buttons) designed to improve the efficiency and ease of planning, buying, and creating online media.

Similar to banners are buttons, small versions of the banner that often look like an icon and usually provide a link to an advertiser’s landing page, a marketing tool that leads people into the purchasing or relationship-building process. Because buttons take up less space than banners, they also cost less.

The advancements in Adobe’s Flash have greatly enhanced the once-static banner and button ads. Full motion, animation, and user interaction, for example, are now commonplace. In fact, one of the greatest areas of recent growth has been rich-media advertising, which includes graphical animations and ads with audio and video elements that overlay the page or even float over the page. Many of the rich-media ads complement the standard banners endorsed by the IAB, as each of these can display 15-second animations.13

Some of the more common types of rich-media ads include animated banners, interstitials, Superstitials, and preroll. The interstitial is a catchall term for a variety of ads that play between pages on a Website, popping up on the screen while the computer downloads a Website that the user has clicked on. All of their various formats tend to perform well in terms of click-through rates and brand recall—which is what the advertisers care about. The Superstitial is actually a trademark of Unicast, now owned by Viewpoint. The Superstitial makes use of a “polite download” technology to push ads into a web browser’s cache only when the computer’s bandwidth is idle; the ads then play from the cache when the user requests a new web page. With polite download technology, the ad avoids tying up bandwidth when the user needs it. The standard Superstitial ad is quite large and plays for a long period of time (up to 20 seconds). The size and playing time of this type of ad are similar to television ads, making them as rich as any experience available online.

Rich mail, on the other hand, allows graphics, video, and audio to be included in the e-mail message. When you open up a rich e-mail, your e-mail client automatically calls up your Internet connection and launches an HTML page in your e-mail window. E-mail clients

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Google’s advertising revenue comes primarily from two sources: AdWords (left above) and AdSense (right above). AdWords generates revenue when web users click sponsored links during search. AdSense does the same when users visit Websites that are part of Google’s program.

Source: Google

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Nothing demonstrates the web’s power better than sites that offer the helping professions ways to improve their efforts. The site teAchnology is one such web destination. Teachers can find thousands of lesson plans and worksheets, as well as teaching tips and themes. Revenue from advertising helps keep the site fresh and easy to use.

Source: 2015 Teachnology, Inc.

that are offline will invite you to click on the link when you have your Internet connection open again. If your e-mail client does not support graphics, you will receive the e-mail in text only. We can anticipate seeing more audio and animation integrated into these ads as improving technology accommodates them.

Preroll is now a fast-growing advertising segment. With more bandwidth comes the consumption of more video entertainment online, and companies such as Broadband Enterprises and YuMe Networks are trying to capitalize on this by aggregating much of this content and placing 5-second to 30-second video advertisements as a third-party ad server. How is this different from TV? As we discussed previously, the Internet’s ability to hypertarget is one of the many ways it sets itself apart. So, imagine if you could get the great qualities of TV advertising—sight, sound, and motion—to a highly targeted audience, at prices lower than those of TV.

Sponsorships and Added-Value Packages

A form of advertising on the Internet that is growing in popularity is the sponsorship of web pages. Corporations sponsor entire sections of a publisher’s web page or sponsor single events for a limited period of time, usually calculated in months. In exchange for sponsorship support, companies are given extensive recognition on the site. Sometimes an added-value package is created by integrating the sponsor’s brand with the publisher’s content, as a sort of advertorial, or with banners and buttons on the page.

IBM has exclusively sponsored the Super Bowl web page, at an estimated cost of $1 million for each event. Other forms of sponsorships have included web serials, sites devoted to women’s issues, contests, and giveaways.

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IKEA garnered worldwide praise for its banner campaign “Smallest Store in the World,” which featured a tiny banner that connects users to the enormous IKEA shopping site.

Source: Ikea

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Crispin Porter 1 Bogusky struck gold with its web campaign for Virgin Atlantic Airways (www.virgin-atlantic.com), which won a Pencil (a prestigious ad award) at the One Show Awards. The lighthearted banners deliver the benefits of Virgin’s services and keep to the brand’s playful, cheeky tone.

Source: Virgin Atlantic Airways

Classified Ads

Another growing area for Internet advertisers, and an excellent opportunity for local advertisers, is the plethora of classified ad Websites, like Craigslist. Many of these offer free classified advertising opportunities because they are typically supported by ad banners of other advertisers. In style, the classifieds are very similar to what we are all familiar with from newspapers. You can search for homes, cars, jobs, computer equipment, business opportunities, and so on. Moreover, the search can be narrowed to your city or expanded nationwide. Many of these sites are sponsored by the search engines themselves or by local newspapers around the country.

E-Mail Advertising

According to Forbes’s “2009 Ad Effectivness Study,” 74 percent of marketers send e-mail advertising to customers who have asked for it. Marketers have always known that direct-mail advertising (discussed in Chapter 18) is the most effective medium for generating inquiries and leads and for closing a sale. It’s also been the most expensive medium on a cost-per-exposure basis. Now, thanks to the Internet, the power of direct mail is increased even more, and the cost is reduced dramatically.

A word of caution, though: It’s important to differentiate responsible e-mail advertising from spam, which is really just electronic junk mail. Spam generally refers to unsolicited, mass e-mail advertising for a product or service that is sent by an unknown entity to a purchased mailing list or newsgroup. Spammers face the wrath of frustrated customers, tired of having their inboxes filled with unwanted e-mails. Since January 2004, spammers also face litigation under the CAN-SPAM Act (Controlling the Assault of Non-Solicited Pornography and Marketing). Legitimate e-mail advertisers are required to (1) clearly mark the e-mail as advertising, (2) provide a valid reply-to e-mail address, and (3) allow recipients to opt out of future mailings. The first lawsuits under the act were filed in April 2004 against two companies that had sent nearly a million e-mails advertising bogus diet patches and growth hormones.14 With this in mind, wary marketers are focusing their e-mail efforts on customer retention and relationship management (CRM) rather than on prospecting.

One of the hottest trends on the Internet today actually started as an application of e-mail, but has been enhanced by social media. Thanks to viral marketing, Amazon.com, Napster, eBay, Blue Mountain Arts, and Hotmail all made it big on the web, reaching unexpected heights in short time spans, most with surprisingly low marketing budgets.15 Viral marketing is the Internet version of word-of-mouth advertising. The term was coined in 1997 by Steven Jurvetson and his partners at the venture capital firm Draper Fisher Jurvetson. They were describing free e-mail provider Hotmail’s incredible growth to 12 million users in just 18 months through the use of a little message at the bottom of every e-mail.16 The message invited recipients to sign up for their own free Hotmail account.

Since that time, many other marketers have come up with ways to induce their satisfied customers to recommend their product or service to friends and family members. One of the keys to viral marketing success is to present an offer with real perceived value—one that people will want to share with one another. Audible, a Website featuring digital audiobooks, for example, uses a referral program whereby members are rewarded with free books each time someone they refer to the site signs up and becomes a member. Since members enjoy the

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My IMC Campaign 15-A

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Using Interactive Media

Every medium offers unique creative options that media planners can incorporate into each campaign to help break through the clutter. However, no other medium has the same degree of flexibility as the Internet does. While the IAB has done a good job of setting banner ad standards, the development of new technologies continually pushes the boundaries of what advertisers can do online. In concert with technological advancements, now-standard technologies are also decreasing in cost.

For every new campaign, advertisers need to think about how each element of their online presence communicates the company’s message. From the Website, to the banner advertisements, to social media, a brand appears on multiple online sites, and coordinating its image across all of them is time consuming. It can also be very creative and rewarding. Here is a list of avenues you should explore, but not limit yourself to, as you think about building your online campaigns:

■ Website, microsites, and landing pages

■ Search engine marketing

■ Banner ads

■ Rich media

■ Social media

As you embark on the online portion of your campaign, think of the online platform as a blank canvas for you to meet your objectives. Start by determining the Website’s purpose and move out into the online world. Think about what users will do after seeing your print or TV ads and how you will capture the interest and demand generated by that promotion. The Internet, while extremely important in your communication strategies, may not be the first place your audience notices your ads. However, remember that most online sessions start with a web search, whether that occurs on sites like Google or Yahoo!, or on the intended Website itself. So it is imperative that you have a good search strategy in place for all online activity.

To understand what sites your audience regularly uses, look to free services like Quantcast and/or Google AdPlanner as a means of identifying sites where you will want to advertise. When you plug in some information about your target at these sites, you will get a list of sites your intended audience frequently uses. This is a helpful guide in determining the appropriate venues to capture your target’s mindshare. While the Internet is in a constant state of evolution, savvy marketers commonly use some technologies associated with it, such as rich media. Rich media is the term for web ads that have a high degree of interactivity or motion or that pull info directly from the advertiser’s Website into the banner ad. Today rich media is so widely accepted that almost any site where you are thinking about advertising will be able to handle its creative demands. That wasn’t always so, but companies with a long-standing history of producing great rich media executions, such as PointRoll, Eyeblaster, DART Motif, and Atlas Rich Media, have paved the way for turnkey solutions.

Last, think about ways to connect with loyalists of your brand in ways outside of push communications. How do you create a conversation with them and empower that audience to help you in your marketing efforts? We are speaking, of course, of social media. Does your brand warrant a Facebook page or a Twitter feed? If so, how will you use these arenas creatively and how will you incite participation and pass-along?

Online media can be fun, but they can also be daunting because the virtual sky is the limit. Remember to make sound judgments and to put yourself in the consumers’ shoes. Are you asking too much of them with your online strategies, or will your approach resonate?

site so much, it’s natural that they would want to share the pleasure with their friends and families. Another example is Blendtec’s “Will It blend” series, which was started on Youtube.com (it can now be found at www.willitblend.com) and has brought a new consumer market to a blender company that formerly served industry. See the My IMC Campaign above to better understand interactive media and how to effectively choose the different types of online media.

Problems with the Internet as an Advertising Medium

LO 15-6

The Internet, like any medium, has its drawbacks. It is not a mass medium in the traditional sense, and it may never offer mass media efficiency. Some marketers may decide it’s too complex, too cumbersome, too cluttered, or not worth the time and effort.

Moreover, the Internet is not controlled by any single entity, so there may be no one to hold accountable. Security (e.g., for credit card purchases online) has improved, but it’s still a problem for some. The technology for running television-quality video is still not in place, and the long-term cost of full participation in the Internet is anybody’s guess. The final drawback is also one of the Net’s greatest appeals: It is the most democratic of media—anybody can get on it and do or say just about anything. That’s both good and bad.17

Using the Internet in IMC

As we discussed in Chapter 8, one of the keys to successfully developing an integrated marketing communications program is to promote purposeful dialogue between the company

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and its stakeholders. That is what interactivity really means. And that is where the Internet offers its greatest potential.

For the first time, customers and other stakeholders can truly respond to a company’s media communications in real time, using the same channel for feedback that the company used for promotion. This means that even if a customer finds herself accidentally at the company’s Website, she can commence a dialogue (relationship) with the company immediately if something there strikes her fancy. Of course, this also means that, if the Website triggers her memory of a less-than-satisfactory experience with the company, she can use the same mechanism for complaining. But that’s actually good, because a customer who complains usually cares. And a complaint gives the company the opportunity to correct the situation and set things right. It also gives the company information on how to improve. Sophisticated marketers cherish complaints.

While all of this is well and good, it also brings up a new problem for marketers today. In the good-old days of simple mass media advertising, manufacturers placed their ads on network TV and went on about their business. The retailers took care of customers, so the manufacturers didn’t really have to be concerned about them. In the new age of integrated marketing communications, that is no longer the case. Yes, the retailer is still there, but Ms. Consumer doesn’t want to talk to the retailer. She’s a pretty sophisticated person. She knows who makes the product and if she’s got a complaint that’s who she wants to talk to. So it’s not good enough for companies to put up a pretty Website on the Internet and then walk away from it. It has to be staffed—daily—and it must be kept up to date—daily. If you go online on Sunday morning and check your local newspaper’s Website for yesterday’s baseball scores, you don’t want to read about how your team got whipped Friday night. You already read about that yesterday. While this may seem obvious, the fact is that these problems still occur regularly, and they defeat the whole purpose of having an interactive location for your customers to visit. Realizing this, companies are now finally beginning to staff up. But this is very expensive—often requiring companies to double or triple their Internet budget with no increase in advertising exposure. So the decision to use the Internet for integration is a big one and cannot be taken lightly.

The Global Impact of the Internet

The United States overwhelmingly outspends the rest of the world in Internet advertising. However, in only three countries—Norway, Sweden, and the United Kingdom—is the share of online ad spending 10 percent or greater. By 2009, ZenithOptimedia predicts that Australia, Canada, Israel, Japan, South Korea, Taiwan, and the United States will join that club.18 Online marketing and advertising budgets will soon rival the amounts spent on radio and outdoor spending, at about 8 percent of all advertising expenditures.

Currently, the United States enjoys fairly heavy international web traffic, caused mostly by a lack of telephone and Internet infrastructure and Websites overseas. International Websites also tend to remain primitive in design and function compared to U.S. competitors, which are strongly consumer oriented. Furthermore, the international appeal of U.S. brands, especially companies such as Coca-Cola and Disney, is strong.19

But as the Internet has increasingly become a household word, the content of Websites for local businesses overseas will also grow. Already Yahoo! has staked claim by servicing Japan, Germany, France, Norway, Sweden, Denmark, and Korea in their native languages. And while today most international web surfers are proficient in English, this can be expected to change. As local online markets grow, so will the number of non-English-speaking users.

With the growth of an overseas online market, we can anticipate that American companies will try harder to cater to the native population.20 Expanding their horizons to encompass the whole world will be the key to businesses’ success in the 21st century.

Other Interactive Media

In addition to the Internet, advertisers now also use other new media vehicles, such as interactive TV and mobile advertising. While they are not major media forms, they do warrant some brief discussion.

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Craigslist provides Internet users a free marketplace to buy and sell products. The rapid growth and dramatic success of such sites have come at the expense of newspaper classified sections.

Source: Craigslist Inc.

Interactive TV

Imagine you’re watching Empire and a spot for State Farm Insurance appears. You remember you’re not happy with your current insurance carrier. You pick up your remote control and click it on a box in the corner of the screen: “For more information.” A menu appears. You click on “Auto insurance,” and a multimedia presentation begins. At various prompts, you click your remote to get more information. At the end you request the location of a State Farm agent. The directions print out on a PC printer attached to your TV. Then it’s back to Empire.21

Although this rosy scenario fills the dreams of many advertisers, the reality is not nearly so encouraging. Interactive TV is powered by digital video recorders (DVRs, sometimes also called personal video recorders). In 2003, interactive TV, provided by companies such as TiVo and DirecTV, reached 3.2 million U.S. households.22 TiVo subscribers take full advantage of their commercial-skipping powers, zooming past three-quarters of advertisements in programs they have recorded.23

Experts predict that within a decade, interactive TV will be as common as cable is today. Accordingly, advertisers like Coca-Cola, Pfizer, and Chrysler are scrambling to innovate and adapt to the new medium, which compels them to reach consumers with advertising vehicles other than the traditional 30-second commercial. In particular, television advertisers are working to increase program sponsorship and product placement. Forrester Research asked television advertising executives how they might cope in a DVR-saturated environment. Exhibit 15-10 indicates that advertisers will respond by investing more money in TV to make their spots and sponsorships DVR-resistant. Other forms of advertising, like TiVo’s “Showcase” feature, allow subscribers to access entertaining, long-format ads. For example, Best Buy sponsored a Rolling Stones concert segment in order to advertise the group’s latest live DVD boxed set.24 For the moment, however, because the percentage of interactive TV households remains so low, most advertisers are simply repackaging existing TV or Internet spots for the interactive TV format rather than investing in developing unique content.

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The stand-alone digital kiosk provides businesses and municipal organizations with a new technology for communication and advertising. Kiosks today are used for a variety of purposes, ranging from the sale of train tickets to distribution of coupons, to renting DVDs.

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Exhibit 15-10

Responses of 133 national advertisers when asked “If large numbers of consumers could skip commercials while watching television, how would your advertising spending change, if at all, in each of the following types of programming?”

Mobile Advertising

When mobile advertising was first introduced, the carriers controlled a lot of the inventory as they limited the amount of traffic that went outside their deck. The deck refers to the content and experience that the carrier made available to their users when they loaded a web browser on their phones. This was due in large part to the carriers’ desire to boost revenues from their own data services and not bog down their networks with massive data downloads from off-deck web surfing. However, iPhone has revolutionized the mobile phone business and the way consumers interact with their phones.

The iPhone has increased data plan usage, or non–voice-related consumption over the carriers’ networks. iPhone users are 12 times more likely to use their phones for video and mobile TV.25 Because of this increase, people are using their phones to download applications and games, surf the web, and send multimedia messages. All of this presents opportunities to advertisers. Typically these applications, which are now available for most smartphones and some feature phones, connect periodically to the network to check for updates, identify a person’s location, or for games to connect one user with another. The appeal to advertisers is that unlike any other medium, the phone is the only real portable and personally identifiable medium.

While it still constitutes a relatively small share of all advertising globally, mobile ad spending continued its track record of double-digit growth in 2015.26 The most common form of mobile advertising, banner advertising (also called WAP, Wireless Access Protocol, Banner), is very similar to online banner advertising. Banner advertising is standardized by the Mobile Marketing Association (MMA) which, much like the Interactive Advertising Bureau (IAB) for online banner advertising, has issued guidelines and standards for mobile web advertising (they can be found here: http://mmaglobal.com/policies/global-mobile-advertising-guidelines). Banner ads can also be placed into applications that have been downloaded to a user’s phone, and can be swapped as those applications reconnect with the network.

The other form of advertising and the one that represents the largest inventory is sponsored SMS (Short Message System). Companies like 4INFO, in the United States, offer news, horoscopes, and sports scores, among other things, for free to users via SMS, and advertisers sponsor these messages. The carriers have set up very strict guidelines in the use of SMS and act as a gatekeeper for all messages that go over their networks in an effort to reduce SMS spam. A person can reply back to the SMS message to opt-in to the marketing message that has been displayed, or can go directly from that SMS, via a link, to a mobile web page.

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People BEHIND the Ads

Brian Green Senior Director, Property and Advertiser Solutions, Yahoo

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Courtesy of Brian Green

For just under 20 years now, Yahoo! has been a staple in the lives of numerous online surfers. So much so that it still has one of the largest daily reach vehicles on the Internet. On any given day well over 100 million unique users traffic Yahoo!’s pages, according to Yahoo!’s Advertising Solutions page. Name a TV program with that type of reach that doesn’t involve helmeted players throwing a pigskin.

On nearly all Yahoo! pages you’ll find an advertisement, and with all of those users turning multiple pages, the resulting amount of ad inventory is staggering. So staggering in fact that Yahoo! has a group dedicated to monetizing all that traffic. The group is called the Marketing Solutions Group and it’s their responsibility to package, price, and present the opportunity to advertisers, working in conjunction with the client-facing sales team.

One of the men leading this group of skilled negotiators—and by that we mean internal negotiation, as they have to work with multiple groups to do their jobs, such as product, sales and yield management—is Brian Green, Senior Director, Property and Advertiser Solutions. Brian has been in the digital advertising industry since early 2000. His resume includes big brand agencies like Foote, Cone and Belding (now a part of Draftfcb), and publishers such as Fox Interactive Group and IGN. He’s worked as a media planner, a digital sales representative, and a performance marketing specialist. Truly a well-rounded set of skills that make him just right for this group within Yahoo!.

Contemporary Advertising sat down with Brian Green to learn more about his role and how he faces the challenges of the fast-moving digital advertising industry.

CA: How does Yahoo! set their prices for advertising?

Brian: In most cases we act like most large Internet companies—we use a variety of tools that help price our products. From third-party research tools like ComScore and Nielsen, to proprietary programs and databases that give us a robust history on our prices and their respective fill rates. We use these tools to give us a healthy picture on our competition, supply and demand, and industry trends that may affect our rates.

In other cases, we are given objectives from our clients and our work is less analytical and more creative in how we package our various offerings together to truly achieve that objective. This is where knowledge, experience, and a little marketing know-how are actually more effective than the most efficient of CPMs (cost per thousand).

CA: What types of advertisers seem most interested in buying on Yahoo!?

Brian: Most advertisers are actually not classified by their industry categorization, for example auto, but rather by the tactics they are trying to achieve. Because of Yahoo!’s broad reach we are big enough to reach all advertisers’ objectives and therefore have a healthy cross section of advertisers that include those trying to achieve branded metrics, direct marketing measures, and those that seek a hybrid approach—building brand through direct marketing methods.

This ability to work with advertisers of any ilk is what makes Yahoo! still, after all these years, a very relevant vehicle for brands. And because Yahoo! continues to innovate and push the envelope, we have been able to maintain a healthy audience at a time where audiences migrate to the next big thing, seemingly daily.

CA: Your homepage is one of the most expensive one-day advertising placements on the web, why can you continue to sell it at such a high out-of-pocket cost?

Brian: Yahoo!’s stable and massive one-day reach makes it unique to the Internet. Most web properties accrue their reach over a 30-day period. Very few properties can actually give an advertiser tens of millions of eyeballs with one advertising placement. Because of that, the out-of-pocket is definitely high, but what we have found is that our rate is actually extremely competitive.

CA: How do you feel you help advertisers meet their objectives better than your competition?

Brian: Because of Yahoo!’s size it’s difficult to point to just one thing as the reason we are so unique. Saying that we have invested a lot of time and money in ensuring that we have a unique mix of ad products such as search, targeted content, and ad exchanges, along with a unique programing and content strategy that gives ample opportunity for advertisers of all objectives.

CA: Lastly, with so many people using phones and tablets to access Yahoo!, how does Yahoo! handle cross channel engagement?

Brian: Like any other brand, it’s important for Yahoo! to think of their users and their customers in an integrated way, therefore we provide an integrated sales process that is solution-oriented to meet the needs of the advertisers. We also have been very bullish on our distribution strategies ensuring that our users can access all of the Yahoo! content in a variety of ways within a robust set of Internet-enabled devices such as mobile phones, tablets, and even on Internet-connected TVs.

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QR codes, mobile coupons, and video present other opportunities, but are still not readily available to the masses as each phone needs to have functionality or a software/application that will allow it to interact and use these emerging technologies.

Chapter Summary

Digital interactive media, which include online database services, the World Wide Web, interactive television, and mobile advertising represent a revolution in the making. From an advertising standpoint, these media offer an opportunity to develop customer relationships rather than volume. These media are still in flux, but they’re growing at an exponential rate and offer an array of challenges and opportunities for advertising creativity.

The commercialization of the Internet really began with the commercial online services that offered a large subscriber base to potential advertisers. However, the Internet itself dwarfed the online services in potential since it reached so many people around the globe. Once web browser software became available, it made the Internet user-friendly to noncomputer specialists.

Similarly, search engines made sites on the World Wide Web available to PC users with just the click of a mouse. When people began migrating to the web, so did advertisers. The first banner ad was sold by Wired magazine.

Web users tend to be upscale, college-educated men and women. This is an ideal target, especially for business-to-business advertisers. This group is rapidly broadening, which will make the web even more attractive to many mainline advertisers.

The most common types of online advertising are search, banners, buttons, sponsorships, interstitials, and classifieds. Like all media, the Internet has many advantages and disadvantages.

Most Internet advertising is sold by CPM. Some, though, is sold by click-through or results. Today the biggest advancements are in social media which present a relationship opportunity to brands never before realized. Mobile advertising is a burgeoning medium that presents advertisers the opportunity to reach on-the-go consumers.

Important Terms

ad networks

advertising impression

affiliate marketing program

banner

behavioral targeting

broadband

button

centralized networks

classified ad Website

click rate

click-throughs

composition

customer retention and relationship management (CRM)

deck

distributed network

e-mail advertising

HTML

interactive TV

Internet

interstitial

keyword

landing page

microsite

preroll

protocols

rich mail

rich-media advertising

search engine

search-results page

spam

sponsored links

sponsorship

third-party ad servers

viral marketing

web browser

web page

Website

World Wide Web (WWW)

Review Questions

1. How did the Internet evolve to its present status as an advertising medium?

2. Which companies on the Internet receive the greatest amount of advertising revenue? Why?

3. What are the different ways of advertising online?

4. What are cookies, and what are they used for?

5. What are the different ways web publishers charge for advertising?

6. How would you describe the advantages the Internet offers advertisers over traditional media?

7. How does audience measurement on the web differ from that for traditional media?

8. What is the importance of interactive media to small advertisers?

9. What do best practices suggest that advertisers first do before engaging in social media?

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The Advertising Experience

1. Internet Advertising

Advertising banners on the Internet are akin to outdoor billboards and fill the information superhighway with advertising messages, corporate signage, and hyperlinks. Companies like DoubleClick (www.doubleclick.com) are flourishing as they introduce new and better ways of managing web advertising—helping advertisers feel more confident about the ad programs they place.

Visit the following advertising-related sites on the Internet and discover more about this fast-changing segment of the advertising industry. Then answer the questions that follow.

■ DoubleClick: www.doubleclick.com

■ Clickz: www.clickz.com

■ iMedia Connection: www.imediaconnection.com

■ Interactive Advertising Bureau (IAB): www.iab.net

■ Internet Advertising Resource Guide: www.bannerreport.com

■ Jupiter Research: www.jup.com

■ mediapost: www.mediapost.com

a. What group sponsors the site and what is the organization’s purpose?

b. What are the size and scope of the organization?

c. Who is the intended audience(s) of the Website?

d. What services does the organization offer Web advertisers?

2. Designing a Banner Ad

X-Scream magazine, which is dedicated to extreme sports of all kinds, would like to dedicate some of its advertising budget to banner ads. Taking into account the target market this magazine would have, find three Websites its consumers might visit, and design a banner ad that would motivate them to learn more about (and subscribe to) the magazine.

3. Visit Dove’s special Website, www.campaignforrealbeauty.com, and watch the ad featured there titled “Evolution.” What do you think of the ad? What do you think are the advantages of placing the ad on the web? Where else on the Internet might you expect to find the ad?

4. In 2006 Dove asked visitors to its Website to open a free account and create a Dove ad. The company provided tools that allowed visitors to construct the ad easily at the site. The best ad was then featured in the 2007 Academy Awards program. What communications objectives do you think were behind this effort? What metrics do you think Dove used to gauge the success of this web initiative?

5. IKEA’s Kitchen View Website is an innovative way to increase brand exposure. But do you think it ultimately sold more kitchen solutions? Make a case for why or why not.

6. Assume that you are an interactive media designer working on the Kitchen View project, and you have been assigned the task of developing a banner ad to promote the Website. What information would be essential to present? How might this be accomplished given the inherent limitations of banner ads?

CHAPTER

Social Media

Learning Objectives

To explore how social media are changing the way that advertisers think about engaging with their audiences. Advertisers must understand how to effectively employ social strategies that enhance the relationships they have with their current and potential customers.

After studying this chapter, you will be able to:

LO16-1 Discuss how social media differs from traditional media.

LO16-2 Explain the various ways that social media can be used.

LO16-3 Discuss how social media have changed consumer’s behavior.

LO16-4 Explain how to manage social media on behalf of a brand.

LO16-5 Define the different applications of social media.

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Source: Facebook

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This is the story of how the face of charitable giving evolved from Jerry Lewis to Mark Zuckerberg. And Bill Gates. Not to mention Justin Bieber, Dave Grohl, Patrick Stewart, Katie Perry, Tom Cruise, and over two million other individuals. ■ Americans are generous people. According to the National Philanthropic Trust, more than 95 percent of households give to charity and the average household donation is nearly $3,000. The total donated by Americans in 2014 was more than $358 billion, a record amount and a 7 percent increase over the previous year. ■ That said, many charitable organizations struggle to raise funds for a variety of notable causes and there is never enough. The Foundation Center estimates that there are more than 1.5 million charities and nonprofits in the United States alone. Standing out in such a large group is challenging, to say the least. ■ For many years the charitable organization with the most famous media presence was the Muscular Dystrophy Association (MDA). It’s Labor Day Telethon, hosted for 55 years by Jerry Lewis, raised more than $2 billion in the fight against muscular dystrophy. ■ Far less well known than the MDA, the ALS Association also fights motor neuron disease. The Association specifically provides research funding and support to causes in the fight against amyotrophic lateral sclerosis (ALS), better known as Lou Gehrig ‘s Disease. The debilitating and ultimately fatal illness was named after the famous New York Yankee whose career and life was cut short by its devastation. Compared with MDA’s $65 million haul from its 2008 telethon, the ALS Association managed to attract only $5 million in 2013. ■ The year 2014 looked as though it would be another fairly ordinary one for the ALS Association. Then something happened that seems, in retrospect, so unusual and unexpected that it resembles a Hollywood movie. The unusual happening was the “Ice Bucket Challenge.”

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■ How it started is a matter of some dispute. Sports Illustrated suggested that a former college baseball star Peter Frates got the whole thing going. Frates posted a video on Facebook in which he challenged friends to either donate to the ALS Association or pour a bucket of freezing ice water over their heads. They were then to challenge their friends to do the same within 24 hours. ■ For several months nothing big happened. But soon, some sports stars, including professional golfers and pro hockey players, issued their own Facebook challenges. In June, 2014, the morning program of the Golf Channel broadcast a live challenge, and in mid-July Matt Lauer did his own on NBC’s “Today Show” at the request of former golfer Greg Norman. Still through the first week of August, 2014, Facebook posts about the challenge barely registered a blip. Then, toward the middle of the month, a tsunami of postings appeared. From just a few thousand videos, postings grew through the third week of August to easily exceed a half million in just one day. ■ The results were staggering. It was estimated that more than 2.4 million videos were posted to Facebook. As the campaign went on, many of the videos incorporated entertaining dimensions, as when Bill Gates created his own ice bucket challenge bucket-pouring machine. The viral nature of the video was aided by public callouts to others to join in.1 ■ Since the original challenge was to either donate or pour ice water, you may be wondering what good this all did for ALS. Most people, it was clear, did both. They posted the icy videos and donated. In fact, donations to the ALS Association went from $5 million to $115 million in the United States alone, and the organization estimates that global contributions surged to more than $200 million. ■ Of course, the campaign was not without critics. Some argued that it distracted attention from other causes. Others wondered what pouring ice water had to do with educating the public about ALS. As for the association, excited about its success, it proactively posted information for donors about where the money would go and promised to revisit the campaign in 2015. ■ Is this a testament to the power of new media? The MDA must have thought so. In response to the success of the ALS Association challenge, the MDA announced it was retiring its long-running telethon and would be looking for new ways to engage with donors in the future.

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Introducing Social Media

Throughout Chapter 15 we alluded to social media platforms such as Facebook, YouTube, MySpace, and Twitter. But what are social media? No doubt any of you reading this textbook have used some of them. In fact, most mainstream Websites have incorporated social media elements to gain more stickiness, an industry term that refers to the ability of a site to keep audience. More likely than not, each of you has either a Spotify profile or a Facebook profile, or both. These sites have been dubbed “social” for their ability to connect like individuals in a manner that has never been seen before. Social media replicate the real world without its geographic barriers.

Until recently, if you wanted to socialize with individuals who had similar likes and dislikes you would form clubs, such as a book club. However, you were limited to people who resided in your general vicinity, which would typically limit the size of the club. Social media allow people to “meet” virtually to discuss and share their interests with each other. You might ask why this is considered new if the Internet has been around for more than 15 years? That’s a good question, and in fact some forms of social media have been utilized since the beginning of the commercial web.

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The visual beauty of Pinterest is reminiscent of the importance of design in traditional print media.

Source: Pinterest

But Facebook, Yik Yak, Instagram, and Snapchat have revolutionized the way we communicate with each other, allowing one person to broadcast, for lack of a better term, to his or her entire friends list—an accumulation of the people he or she knows who share some interest, whether

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it’s related to work, politics, leisure, family, or other. Unfortunately for marketers, harnessing social media is not as cut-and-dried as it is for other forms of media, both digital and analog. In fact, most best practices suggest that a brand first listen to what is being said, rather than jump right into the social conversation. This can be easy enough to do because when someone writes a blog or microblog post, comments on another’s blog, or bookmarks a page using Digg, that information is open for anyone to see. A host of tools collect all of this information using key words. Companies like Nielsen’s BuzzMetrics or J.D.Power’s Umbria Communications help marketers aggregate all the information being posted about their brands or products to understand the general consensus, negative or positive, about them. In turn, large advertisers like Electronic Arts, Coca-Cola, Virgin America, and Procter & Gamble all have a social media component to each brand or product they market. For marketers, then, social media go beyond promotion or advertising. In social media, people will interact with each product or brand differently, and the brand promise must really shine through.

Our Social Media Peronas

We noted in Chapter 15 how the web gave rise to the consumer as content creator. Social media platforms are the catalyst for this behavior change. Their value proposition is primarily centered on ease of use. Social media make it easier to maintain more friendships, to find people with similar interests, and to share information with friends. Used in conjunction with search engines, social media also make it easier to find content.

In a well-publicized research piece, Forrester Research described the many different ways in which consumers engage with social media. Exhibit 16-1 illustrates the seven user types

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Exhibit 16-1

Seven user types identified by Forrester Research.

Source: Retrieved from www.mindjumpers.com/blog/2012/01/global-social-media-adoption-2011/.

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identified by Forrester. From creators to inactives, each of us falls into a bucket that broadly defines how we use social media. Unlike traditional media, where consumption is inherently passive, social media consumption can be both passive and active.

Social Is More Than Media

LO 16-1

Social media resist easy classification because they are as much technology as they are media and can take on many different forms, including magazines, forums, weblogs, social blogs, microblogs, wikis, podcasts, photographs or pictures, videos, ratings, and social bookmarking. As one author suggests,

there are six different types of social media: collaborative projects (e.g., Wikipedia), blogs and microblogs (e.g., Twitter), content communities (e.g., YouTube), social networking sites (e.g., Facebook), virtual game worlds (e.g., World of Warcraft), and virtual social worlds (e.g., Second Life). Technologies include: blogs, picture-sharing, vlogs, wall-postings, e-mail, instant messaging, music-sharing, crowdsourcing and voice over IP, to name a few. Many of these social media services can be integrated via social network aggregation platforms. Social media sites are sites like Facebook, Twitter, Bebo and MySpace.2

The Rise of Social Media

Our need to feel connected to others is what drives the now mass adopted social media. While some advertisers are still struggling to figure out how to play in the social arena, most companies agree that success in social media is necessary for their brands. In some radical instances, companies have used social media as their main web presence, and have all but forgotten an actual Website. This is counterintuitive to how the Internet grew as a medium, however it makes sense given the characteristics of social media. Since all social media require a profile to engage, one could argue that the profile of a company is essentially the job of a corporate Website. If that were the case, then why would a company need multiple profiles? As you will learn in this chapter, social media is an open environment and for some companies that is a scary proposition. The lack of control defies how marketers were taught to protect the brand. Conservative or risk-averse brands find engaging in social media difficult and cumbersome, and young brands, like Zynga and Zappos.com (now owned by Amazon.com), are reaping the benefits.

Adoption of Social Media

The inherent nature of social media—the fact that they are social—thereby connecting and relating people to one another, helps explain their monumental rise in popularity. The media carry attributes that allow a single point, in any part of a system of connected points, to broadcast to the entirety of the system or network. The promise of social media has not been missed by advertisers. In 2013 it was estimated that social ad revenue was about $6.1 billion in the United States. That number is expected to hit nearly $10 billion in 2016 (see Exhibit 16-2). And a big reason for that growth is the power of social media in the technology that more and more people use to access the Internet: the smartphone.

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Exhibit 16-2

Social Media Ad revenues.

Source: Douglas Karr, Brief History of Social Media Advertising, June 24, 2014, retrieved at: https://www.marketingtechblog.com/brief-history-social-media-advertising/.

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Exhibit 16-3

Demographics of Popular Social Media Platforms.

Source: Maeve Duggan, Nicole B. Ellison, Cliff Lampe, Amanda Lenhart and Mary Madden, “Demographics of Key Social Networking Platforms,” Pew Research Center, January 9, 2015, retrieved at: http://www.pewinternet.org/2015/01/09/demographics-of-key-social-networking-platforms-2/.

Another attraction of social media for advertisers is the ability to target. As can be seen in Exhibit 16-3, Facebook is popular among virtually all key demographics. Conversely, Instagram and LinkedIn have particular appeal to specific groups, the young and the well educated, respectively.

Despite its appeal, social media still poses risks for brands that don’t “get” how to relate to their customers. In fact, one story of an advertiser’s misfortune involved what seemed to be an innocent video advertisement. However, the Johnson & Johnson brand Motrin took a major hit with a very influential audience: “mommy bloggers.” These women took offense to a small portion of the video that suggested that women “wear their babies” as if they were fashion statements. While the company was only trying to identify the physical effects of having to tote your baby in a wearable baby carrier, the mommy bloggers didn’t appreciate the brand’s tongue-in-cheek humor. Motrin felt forced to write an apology on its Website, pulling it off the air and losing millions in valuable media space.3 Despite these misfortunes, brands are still actively engaged in social media and we will discuss later how advertisers are harnessing the power of social media platforms.

While Facebook is the king of the mountain (Exhibit 16-4 shows that Facebook owns a whopping 55% market share), it was by no means the first social site; most people are

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Exhibit 16-4

Visit market share 2012–2015.

Source: 2015 data from Experian Marketing Services as reproduced at Marketingcharts.com, retrieved at http://www.marketingcharts.com/updates/top-10-multi-platform-social-networking-websites-forumsjanuary-2015-50943/. The 2012 data from Experian Marketing Services as reproduced at Marketingcharts.com, retrieved at: www.marketingcharts.com/interactive/top-10-social-networkingwebsites-forumsmarch-2012-21698/.

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hard-pressed to identify the first social media Website that reached 50 million users, and are astonished to find that it came long before the time that is affectionately called Web 2.0. Where Web 1.0 was considered the static Internet full of pages and links, Web 2.0 is the social web, where everything is open and sharable. Have you thought of the answer yet? Alumni-focused social site Classmates.com reached 50 million users in the late 1990s. And it wasn’t until 2002–2004 that social media really took off and companies like Friendster, LinkedIn, MySpace, and a small college-oriented social network named Facebook experienced their monumental growth. Another trend visible in Exhibit 16-4 is the new players in the social media space. Instagram, Tumblr, and Reddit were no-shows on the 2012 list while they are top-ten and growing in 2015. And while Facebook is the undisputed champ, its share of visits is shrinking.

Social Trends

In spite of Facebook’s popularity, some still think the site, and even social media generally, is a fad. One poll by the Associated Press and CNBC stated that 51 percent of American adults believe that Facebook’s appeal is just a fad.4 These results came mere days before what was anticipated to be another historic initial public offering (IPO) from a web-based company. While many will debate for years the impact of the Facebook IPO, one thing is for certain: the IPO generated the most trading in history, causing havoc on the technology that performs the actual trades. So much so that Facebook had to pay back millions of dollars to some brokerages as a settlement for not being able to manage the volume of trading. Regardless of what may become of social media networks like Facebook, the reality is that social media technologies have infiltrated our lives and are a technological interpretation of our own natural behavior. That said, there are still flaws in social technology that limit its ability to imitate more complex human behavior, but the simple act of sharing, connecting, and keeping up with friends, family, and acquaintances thus far has made social networking the king of social media. Perhaps social media reign over traditional media, too, if you add up the sheer mass of global users that Facebook has attracted. At the end of March 2015, Facebook claimed 1.44 billion monthly users, 83 percent of whom are outside North America.5

Trending is a term used by tweeters to describe what people are talking, or tweeting about on Twitter. And as we mentioned earlier, because social media platforms are open, in some cases what’s being tweeted isn’t actually happening on Twitter but in a third-party tool, application, or Website. Facebook Connect and Twitter’s open application protocol interface (API) means that any site, tool, or application can feed and extract information from the social network sites in accordance with how the user has granted permissions. For instance, if a person wants to find friends in her local area and see what they are doing, she might load up Foursquare on her iPhone and see where her friends have “checked-in.” She might check-in too, and that information is then fed to Twitter or Facebook or both as a tweet or status update. But how did Foursquare know who her friends were? Easy, when our subject signed up for the service she used Facebook Connect. This allows her not to have to input any information on yet another site. It also allows Foursquare to see all the people she is connected with on Facebook, cross-referencing those friends with active Foursquare users and instantly attaching them to her account.

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Twitter offers advertisers several programs to engage users, from modest efforts like Promoted Posts to expensive, cross-platform campaigns such as Promoted Trends. In the middle, and useful for gaining followers, is the Promoted Account campaign, illustrated here.

Source: McDonald’s

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Exhibit 16-5

Teen use of social media platforms.

Who Uses Social Media

We’ve already established that social media are the fastest growing media in history, but that doesn’t mean that every demographic is on board, Earlier, in Exhibit 16-3, we showed a broader demographic breakdown of social media sites. In Exhibit 16-5 above, we present usage rates for a group of increasing interest to advertisers: teens. As can be seen in the exhibit, Instagram and Snapchat have far more appeal with this group than with older age groups. This is important as brands begin to wonder if they should be actively participating in the media. Naturally, brands that cater to the older demographic are not so quick to adopt social practices. As the penetration continues to grow for the 65 and older segment, however, those same brands will quickly move to participate in social media.

Types of Social Media

LO 16-2

Social media include any web- or mobile-based technology that is used for interactive communication between groups, communities, companies, and individuals. This broad definition helps explain why there are so many different types of technologies that fall under the social media umbrella. Worldwide there are over 2.8 billion social media profiles, which represents about half of all Internet users.6 Here are some of the most common types of social media:

Forums

Forums are typically sections of sites that connect individuals around a specific topic. For instance, a Mustang forum will have users conversing about the iconic automobile. Some technology companies like Disqus and Livefyre actually connect people horizontally on different forums, meaning a user can manage one Disqus login for several forums on many sites about different topics. In 2011, monthly forum contribution declined significantly from the previous year, from 38 to 32 percent of total Internet users.7

Weblogs (Blogs)

A blog is a reverse chronological journaling site. Typically blogs are personal in nature; however, they have become so pervasive that some Websites use a blog format as their main page. WordPress and Blogger (owned by Google) are two of the more common blog content management systems (CMSs). These CMSs are web-publishing tools that allow for nontechnical users to post content easily. Twenty-seven percent of global Internet users actively engage in blog-writing on a monthly basis.8

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Ethical Issues

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It’s Not Always Nice to Share

If you are using this text for a college course, the popular social networking application Facebook needs little introduction. You already know all about it. Facebook has many users, over 900 million worldwide.

But it is especially popular on college campuses. This is due partially to its origins—while Facebook is now available to anyone over age 13, it was started with a focus on college students. In fact, when founder Mark Zuckerberg (see People behind the Ads, Mark Zuckerberg, in this chapter) launched the site in 2004, it was open only to members of his school, Harvard College.

What makes Facebook so irresistible? Certainly, highly addictive features like the “Wall,” where friends can post messages, “pokes,” and “status,” and where there’s lots of space for posting pictures, are part of the appeal. Users of Facebook can stay in touch with lots of people, almost in real time. The site is so addictive, in fact, that universities have begun trying to find ways to limit access during class hours.

So Facebook is a Website that is visited by young, influential, highly educated users who spend inordinate amounts of time at the site and are passionate about what they do there. Can you think of anyone who might be interested in that group?

Of course the answer is advertisers, and in fact, advertising has, from the beginning, been a part of Facebook. The costs of running and maintaining the site are defrayed by ads, which is why it is free for users.

Software giant Microsoft has an exclusive contract with Facebook to serve display ads. Microsoft sells space to advertisers, then pays Facebook for the opportunity to show ads on the site’s pages. The particular ads that appear on a given page are determined by data collected by Microsoft. The goal is to place the right banner ad on the right page. As you know from Chapter 15, this is typical practice on the Internet, not only for Microsoft but for other large companies like Google and Yahoo!

But in November of 2007, Facebook launched a program that was anything but typical. “Beacon” was designed to let users share information about offsite activities, including purchases, with their friends. Here’s how it worked, at least in theory. You join Facebook. Later you visit a different Website, like that of movie ticket vendor Fandango, and you buy a movie ticket. Just a short while later, your Facebook profile updates and tells your friends about the tickets you bought.

It was almost inevitable that Facebook would develop something like Beacon. That is because what excites advertisers about social networks like Facebook, even more than the desirable demographics, is the fact that people are busy influencing one another at the site. This is the real power of social networks, and the real draw for advertisers.

Recall our earlier discussion of Gladwell’s The Tipping Point. Gladwell describes the power of a few influential people in starting social epidemics. Advertisers see Facebook as a place where influentials can share information about what they buy with many other people, potentially starting many such epidemics. This is why Zuckerberg has long claimed that Facebook would start an advertising “revolution.” And not coincidentally, it is why some valued Facebook’s worth to be in excess of $100 billion.

But from the start, Beacon was flawed. For one thing, even though third-party sites were supposed to inform Facebook users about what would happen when they bought at the site, it appears that some did not. So a Facebook user who bought something at Overstock.com was supposedly never told that Overstock was a member of the Facebook advertising network and that his or her purchase would be shared with friends.

Second, users did not “opt in” to the program (sign up for it), they had to “opt out” (cancel it). That virtually guaranteed that a lot of people would be unaware of how much information they were sharing with others. Eventually this was changed so that users had to opt in, but not before significant damage to Facebook’s credibility had occurred.

Even worse, a software engineer discovered that even if Facebook users explicitly indicated that they did not want to share information about purchases, Facebook collected the information anyway. This turned out to be a practice that directly contradicted Facebook’s publicly stated policies.

In the end, Zuckerberg decided that Beacon had to be changed. This was prompted by the bad press the program had received, the cancellation of several large advertisers, including Vodafone, Virgin Media, and Prudential, and several user-based petitions, including one organized by Moveon.org.

The founder posted an apology to users at the Facebook blog on December 52007. It read in part (go to http://blog.facebook.com/blog.php?post57584397130 to read the entire apology):

About a month ago, we released a new feature called Beacon to try to help people share information with their friends about things they do on the web. We’ve made a lot of mistakes building this feature, but we’ve made even more with how we’ve handled them…. When we first thought of Beacon, our goal was to build a simple product to let people share information across sites with their friends…. But we missed the right balance. At first we tried to make it very lightweight so people wouldn’t have to touch it for it to work. The problem with our initial approach of making it an opt-out system instead of opt-in was that if someone forgot to decline to share something, Beacon still went ahead and shared it with their friends. It took us too long after people started contacting us to change the product so that users had to explicitly approve what they wanted to share. … I’m not proud of the way we’ve handled this situation and I know we can do better. Thanks for taking the time to read this.

Zuckerberg was good to his word, and the program was changed. The modern incarnation of Beacon is far different from the version introduced in late 2007. For example, according to the Facebook site, “When [an advertiser sends information about a purchase] to Facebook, the user is immediately alerted … and will be alerted again when they sign into Facebook. The user must proactively consent to have [the information] from your Website published.” This, of course, is a far cry from how things started.

So, for Zuckerberg and many Facebook users, the Beacon experience was a hard lesson learned. To Zuckerberg’s credit, he acted fast and apologized for his mistakes when it became clear that users would not tolerate Beacon’s privacy settings. Facebook continues to be one of the most popular (and valuable) locations on the web. And there is little doubt that advertisers will continue to search for ways to leverage the unique attributes of social networks for promoting their brands.

Questions

1. Why was Beacon created? Was it ethical to ask users to “opt out” rather than “opt in” to the program?

2. Think of a purchase you have recently made that you would not want shared with your friends. How would you feel about a site that did so without your explicit permission?

3. Did Facebook’s missteps with Beacon amount to a poor business decision, or do you think that it rose to the level of being unethical?

Sources: Brad Stone, “Facebook Executive Discusses Beacon Brouhaha, New York Times Bits,” http://hits.b1ogs.nytin1es.cod2007/11/29/facebook-responds-to-beacon-brouha11a/; CA Security Advisor Research Blog, “Facebook’s Misrepresentation of Beacon’s Threat to Privacy; Tracking Users Who Opt Out or Are Not Logged In,” http://community.ca.com/blogs/securityadvisor/archive/2OO7/ll/29/facebool-s-misrepresentation-of-beacon-s-theat-to-privacy-acking-users-who-opt-out-or-are-not-logged-in.aspx; Juan Carlos Perez, “Facebook’s Beacon More Intrusive Than Previously Thought,” PCWorld, www.pcworld.codarticle/id,140182-c,onlineprivacy/article.html; “Facebook Beacon,” www.facebook.com/business/?beacon; “Leading Websites Offer Facebook Beacon for Social Distribution,” www.facebook.com./press/releases.php?p59166.

Blogs can also be multimedia in nature whereby the post is a photo or a video, like Flickr and YouTube. While some of the nomenclature describing the activities on these sites differs, in essence they feature the same easy-to-use web publishing format. However, in Flickr and YouTube the user creates channels rather than pages and uploads content rather than posting content. Uploading video has increased from 21 to 27 percent among global Internet users.9

Microblogs

A microblog, according to PC Magazine, is a blog that contains brief entries about the daily activities of an individual or company. The most popular microblog on the web today is Twitter. Much like blogs, microblog postings are organized in reverse chronological order, but users are allowed only 140 characters of text in their posts (or tweets). This allows for the transfer of small bits of information or content with many people at the same time, giving it a broadcast characteristic. The activity of updating a microblog has increased from 13 to 24 percent among global Internet users.10

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Wikis

A wiki is a user-collaborated content site, typically text in nature. Wikis allow the community to create, edit, or delete content. They are typically used to share knowledge across diverse groups of individuals. Wikipedia is the most well-known wiki.

RSS

Really Simple Syndication (RSS) is an old technology, by web standards, but can be used in many different forms to distribute content. It is the backbone for things like podcasts, vodcasts, or vlogs, and text-based headlines. RSS feeds benefit publishers by automatically syndicating content.

Social Bookmarking

A once-popular form of sharing content on the web, social bookmarking has recently declined in popularity. However, out of this form of social media came a very important

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Exhibit 16-1

The top social networks based on unique visitors.

Site

Estimated Unique Monthly Visitors

Facebook

900,000,000

Twitter

310,000,000

255,000,000

250,000,000

Google+

120,000,000

Tumblr

110,000,000

Instagram

100,000,000

80,000,000

Flickr

65,000,000

Vine

40,000,000

Chinese Sites

WeChat

350,000,000

Douban

80,000,000

RenRen

54,000,000

Source: ComScore, November 2011, http://en.wikipedia.org/social_networking.

categorization tool—tagging. Tagging is the act of self-classification with key words that make content easier to search for and therefore find. Tags are now used in every form of social media as a way to organize the information. Popular social bookmarking sites are Reddit.com, Stumbleupon.com, and Tumblr.com.

Social Networking

Social networking is the term used to describe Websites where people congregate based on some shared interest. In the case of Facebook, that interest is information on people; on LinkedIn, the shared interest is business; and so on. Exhibit 16-6 shows the top social network sites based on unique visitors. Social networking is still the fastest-growing active social media behavior online, increasing from 36 percent of global Internet users to 59 percent managing their profile on a monthly basis by the end of 2011.11 The fastest-growing social network as of mid-2012 is Pinterest.com, where people can “pin” pictures of the things they are interested in and write a short caption.

The Data Explosion

In Chapter 15 we wrote of the tracking mechanisms that allow marketers to measure usage and patterns of behavior. Couple that information with the data flowing into and out of these social platforms and you have more data being produced in two days than that from the beginning of recorded history through 2003.12 All of this information gives marketers a greater understanding of how their audience interacts with, shares, likes, dislikes, and feels about their brand. This unprecedented feedback mechanism is the advertiser’s holy grail; however, most advertisers haven’t had the wherewithal to truly take advantage of this opportunity. There might be a number of explanations as to why, but most likely the reasons stem from a lack of resources and not enough understanding about how some indirect measures, like brand likability, ultimately affect the companies’ bottom line.

This is starting to change; as advertisers ask these tough questions, handfuls of entrepreneurs seek to answer them. Companies like Turn, a media technology company, are building software as a service (SaaS) for marketers to truly harness the power of these data. Their technology, and others like it, is so powerful that it will take data from the marketers’ existing databases (CRM, Transactions/Sales, Newsletters, etc.) along with data from third-party data providers (BlueKai and Targus Info) and Website traffic to give a view of the makeup of the brand’s customers. Then the marketers are able to use those data to target them and people like them on the Internet, all in real time while optimizing the campaign based on the actions people take on the ads and the effect on the sales or transactional data. This technology allows marketers to make split-second decisions on whom to send a message to, on what site, and with what execution to increase the probability of a desired action, such as a sale. Sounds a lot like what we discussed in Chapter 9 about the role of a media planner. No wonder the advertising agencies are scrambling to figure out how they play in this world of new social media and technology.

Managing Social Media

With all these different types of social media comes the task of managing the various outposts that a brand may accumulate. One of the biggest differences between social media and traditional media is that social media consist of 20 percent planning and 80 percent execution and management, whereas traditional media is the exact opposite: 80 percent planning and 20 percent execution and management. This means that social media are more labor- and resource-intensive. The plus side to that equation is that social does not bring with it large media costs, unlike traditional media. This runs counter to the way that most companies

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think of purchasing media, where the majority of the budget goes to working media—placed advertisements—not actual resources.

Owned Media and Fragmentation

LO 16-3

One of the things that we have yet to mention about social media is that unlike traditional media, in the past social media sites were not paid for. Rather, most brands spent time and effort in owned properties. The distinction here is that an owned property, like a Website, is not a place where you have to pay a media company to gain a presence to distribute your message. Like the brand Website, social media worked the same way: The various pages or groups that a brand deploys are free in that no money changed hands from Disney to Facebook, for example, despite Disney having multiple pages for its parks, movies, TV channels, cruises, and more. But be careful what you wish for, because the worst thing that a brand can do is let these pages languish. This means that each brand has to employ or outsource to an agency the management of these pages. Page management is more than likely the easy part; the hard part is to continually create and update these presences with enough engaging content not to bore or overwhelm the audience. The biggest reason “unfollowing” happens on Twitter is overtweeting. Finally, social media sites like Facebook are beginning to monetize brand pages, so the days of a free ride are ending.

Going back to our Disney example, with so many brands and so many avenues to deploy their owned presence, managing the fragmentation is resource-intensive and requires several policies and procedures to ensure accurate portrayal of the brand in these arenas. But like everything else in our new technology era, where there’s a headache, aspirin is being made. Buddy Media and Hoot Suite are two young companies that help brands and agencies take control of all their social presences from one dashboard. They provide analytics and measurement tools that help define success from every promotion, tweet, poll, or other content mechanism that is deployed. Trend analysis will help brands explain the effects of every action they take on social media sites.

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Google, which dominates search and digital display advertising, has set its sights on social media with Google+. The company has a variety of ways of linking audiences with platforms, and while the Google’s reach in social cannot match Facebook, it is clearly determined to be successful.

Source: Google

Listening tools, which we will discuss later in the chapter, also are very beneficial in understanding what’s going on in the blogosphere (the aggregation of all blogs online). For example, how is a company’s brand being talked about, and is it negative or positive? Text analytics—the measurement and analysis of text-based user-generated content (UGC)—is a burgeoning field in the social space, giving rise to unprecedented insights from the mere words and syntax we use when expressing our opinion about a product, brand, or service on the Internet.

These tools help make the fragmentation of social media a bit easier to manage; however, the tools are only as good as the people using them. Therefore, it is still a very labor-intensive way of connecting with an audience.

Building Social Authority

LO 16-4

Social media bring a new element into advertising and marketing—the human element. When a company or a brand engages in social media, it must use people to administer their profiles in different communities. This means that the consumers know they can connect with actual people from a company in real time, not an anonymous Website. The effect is that a relationship is started between consumers and brand that, hopefully, elevates the perception of the company as an authority in the area where they are selling their products or services. The subsequent increase in brand favorability increases the likelihood of a sales increase too. This is what most companies strive for when planning

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In social media the only thing needed to build a following is creativity, passion, and a sense of what audiences find interesting. Red Bull was one of the first brands to take advantage of Instagram’s advertising platform. Their campaign involved posting both their own images and that of their many followers.

Source: Red Bull

social media into the media mix. However, building authority is not as easy to accomplish as it is to describe. As we discussed earlier with the mommy bloggers, and Motrin, it is sometimes hard to predict the outcomes of the human interactions, just like in the physical world.

Transparency and Authenticity

The tenets that social media have encouraged such as openness, transparency, and authenticity have caused marketers to rethink their traditional promotional messages. As Brian Stolis, principal at Altimeter Group, wrote in a 2011 Forbes article, “I actually see businesses changing how they approach social media to deliver value to the customer.”13 What Stolis is saying here is that historically, value was an expression of the relative cost of a product or service being advertised. Nowadays value goes beyond just the pricing or product and extends into the customer’s life, perhaps in many different ways, such as Nike creating a jogging social network to connect more joggers together under the umbrella of the Nike brand. This service doesn’t directly sell shoes, but it begins to connect the brand with the heart of the customer in such a way that the brand has now become part of his or her passion. This is a very powerful and emotional attachment that is unmatched by the more in-your-face promotional messages of other media.

However, many companies aren’t built to be as open and connected as social media platforms demand. These companies need to figure out whether, if they do not make efforts to maintain a level of openness, it’s worth their participation in the media: Do they walk away from social media as a viable marketing tactic? Or do they fundamentally change their business structure to be more open to the two-way dialogue of social media?

Two-Way Brand Communication

Market research is nothing new to brands. Understanding the perspective of the target audience has helped brands create better products, services, and communications. However, the instantaneous feedback mechanism that social media provide is new and is so immediate that most companies, until recently, haven’t been able to handle the demands of social media. Consider that just 10 years ago, getting information about how a brand’s audience felt about its product required weeks to recruit, administer, compile, and report the findings. Now it can happen within seconds by just typing a few key words into a social listening tool and poof, you have information not only about the brand, but about the competition, the category, and the industry. Best of all, you can assess sentiment based on the syntax of the text.

It has also been known that word of mouth (WOM)—for example, a friend’s recommendation—is the most effective form of communication in persuading a future sale (see Exhibit 16-7). In social media, WOM is replicated on sites that post user reviews. Here audiences can find detailed and helpful perspectives on businesses of all kinds. This kind of social intelligence rewards businesses that provide value. It also punishes businesses that fail to serve customers well.

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Driving traffic to a brand’s Website is not the sole purview of Google. Facebook’s “Click to website” posts can accomplish the same objective.

Source: Facebook

Social media platforms are tools that amplify WOM and make it measurable. A brand can now know how often an asset (link, photo, video, promotion) has been shared and how many people it has reached. This makes social media very powerful in their ability to move the proverbial needle on WOM recommendations. Most brands want to figure out how to encourage that behavior and social media provide that platform. Through branded pages,

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Exhibit 16-7

Source: Myles Anderson, “88% of Consumers Trust Online Reviews as Much as Personal Recommendations,” Search Engine Land, July 7, 2014, retrieved at: http://searchengineland.com/88-consumers-trust-online-reviews-much-personal-recommendations-195803.

Facebook, Pinterest, Twitter, and others can engage in the conversation and hopefully move the conversation in the right direction.

This is why authenticity and transparency are important. If a consumer is engaged in a give-and-take conversation, the less authentic it feels, the more impatient he or she will grow with the brand. But brands need to be very clear on what it means to be truly authentic and truly transparent. Clearly it would make bad business sense for a company to be 100 percent transparent or authentic because chances are, its competition is listening. Besides that, we are dealing with humans and humans have a tendency to say one thing and mean another. Consider the word convenience as an explanation for banking services. For different people that word means different things; it might mean that the bank makes it easy by offering mobile services, or that the bank is located nearby for easy walk-in service, or that the bank has customized the experience especially for the individual customer. All of those elements are convenient, so it isn’t enough to just suggest that authenticity and transparency are the tent poles of the business’s social strategy. The brand needs to define how authentic and transparent it is going to be, and typically what this two-way communication really offers is an opportunity for the brand to be helpful in its own way (authentic) and not just push promotional offers, but rather give the customer greater opportunity to explore behind the scenes with the product or service (transparency).

Customer Service in Social Media

As we suggested in the last section, being helpful is a very powerful mechanism for a company to engender trust and loyalty within a customer base. This was evidenced by Zappos.com, Comcast, and many other brands that utilize social media as an extension to their customer service efforts.

Log in to Twitter and search @comcastcares, and you’ll find a stream of questions, comments, and statements from customers to @comcastcares with near-immediate responses. There are even updates from the Comcast Twitter feed when they are stepping away from the computer for a few minutes so no one gets angry if Comcast doesn’t reply right away. What started out as a project quickly became an initiative for reducing support costs at the company.

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Other companies like DirecTV provide forums for their customers to self-support. They will even bring in top volunteer commenters to be “beta customers” on new products and services, asking for their valued feedback. This keeps the customers happy, and the beta customer now feels obligated to help others and to maintain goodwill within the forum of frustrated and irate customers. By playing to the ego of some of these top influential customers DirecTV customer service reps, who are usually not as knowledgeable on technical issues, deal with a lot fewer customer issues, saving millions of dollars a year.

Consider the implications of this story. A man arrives late to the Four Seasons hotel in Palo Alto and gets bumped to a room that doesn’t meet his standards. Not happy about this, he tweets his displeasure. The Four Seasons sees the tweet immediately and rectifies the situation. As it turns out, the guest visits Palo Alto nearly 60 times a year. He then tweets his pleasure and the Four Seasons has just created a loyal customer.14 Prior to the advent of social media, the guest would have channeled his frustration in ways that the hotel could never have known about, and could possibly have lost him as a guest forever. As the best-selling author and creator of @comcastcares, Frank Eliason, says, social media mark the end of business as usual.

Social Media by the Numbers

Social media have changed our behavior. It’s safe to say that the world has drastically changed in the past 20 years. Consider these numbers:

■ There are over 4 billion e-mail accounts in the world, with an average of 1.7 per user. The number of e-mails sent each day is over 205 billion, a number that will grow by 3 percent over the next few years.

■ 1.83 million images a day are uploaded to Flickr alone.

■ Over 500 million tweets are posted each day.

■ About 300 hours of video are uploaded to YouTube every minute.15

■ More than 700 million “snaps” and 500 million stories are sent on Snapchat every day.16

These are mindboggling statistics that depict the massive scale of social media and the onslaught of information that everyone receives on a daily basis, not to mention the sea of change in our day-to-day lives, since none of these activities were even possible before the advent of the commercial Internet.

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Kleenex attracted 27 million views and nearly as many comments with its viral “unlikely best friends.” Chance needed a break when he lost the use of his hind legs after being struck by a car. Michael, who lives with a disability himself, found him at a shelter and created a way to give the dog mobility. While the sharing statistics are important, it was the heartfelt stories that people posted that made this viral so powerful.

Source: Kimberly-Clark Worldwide, Inc.

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Exhibit 16-8

Source: Cooper Smith, “It’s Time for Retailers to Start Paying Close Attention to Social Media,” Business Insider, June 30, 2015, retrieved at: http://www.businessinsider.com/social-commerce-2015-report-2015-6.

How Social Media Have Transformed Business

There are countless ways to describe how social media are changing the business environment. As Exhibit 16-8 shows, the flurry of engagement created by social media is not useful for branding alone. It has real consequences for revenues from e-commerce. Here are some demonstrations of how social media platforms continue to push the boundaries of what is standard practice:

■ In 2010, Pepsi dropped TV advertising for the Super Bowl and invested $20 million in social media instead.

■ Comcast has at least 11 full-time employees dedicated to customer service via social media sites.

■ Dell has attributed well over $6.5 million in revenue directly from Twitter.

■ JetBlue Website visitors who also visited Twitter were 35 percent more likely to complete a booking than visitors who did not visit Twitter.17

■ 36 percent of social media users post brand-related content.

■ Two out of three social media users believe Twitter influences purchases.

■ 50 percent of people follow brands on social media sites.

■ 75 percent of companies now use Twitter as a marketing channel.

■ 41 percent of the class of 2011 used social media sites in their job search.

■ 89 percent of agencies said they would use Facebook to advertise for their clients in 2012—either by purchasing ads, creating pages, or using other methods of engagement.

■ 39 percent of agencies said they would focus on Twitter, 36 percent on YouTube, 21 percent on LinkedIn, and 18 percent on Google1.18

■ Twitter advertising options include promoted tweets that cost up to $2 an engagement and promoted trends that run to $200,000 a day. Snapchat charges $750,000 a day for advertising on the platform.19

Application of Social Media

Social media are not one-size-fits-all marketing tools. So much is predicated on the type of company, the audience, and objectives for using the medium. We’ll cover some of the more common uses of social media in the following sections.

Common Uses of Social Media

Although not all brands are active in social media—and not all brands have to be—there are some common ways in which advertisers are starting to harness the power of social media.

LO 16-5

Blogs

One of the easiest and best ways to get started in social media is to be a practitioner. Blogs are simple, reverse chronological order web pages that are typically opinionated in nature. Many brands deploy blogs as a way for customers to hear the voice of the brand and get to know the brand on a deeper, more personal level. Zappos.com has an extensive site that lists blogs by category of shopping items: outdoor, running, or housewares, to name a few. We’ll revisit Zappos.com later in the chapter.

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My IMC Campaign

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Using Social Media

Unlike any other media choice, social media platforms aren’t necessarily about placing ads in the areas that have the highest concentration of a company’s target audience. In fact, that traditional process simply doesn’t apply.

Social media are about engagement. However, engagement is a tricky word because it is typically defined differently for each brand. But defining what engagement means for your brand is what will help you determine how you will approach social media appropriately. Take a moment to think about how your target audience uses social media and where there might be entry points for you to engage the users. This is the first step in figuring out how to use social media for IMC.

As you have read throughout this chapter, the use of social media is now a very important part of integrated marketing communications. Basically, social media’s function is to make brands remember that their target audiences are actually just people, and that they need to treat them like that.

The great thing about social media is that they allow you to be very creative. But don’t go overboard on one creative idea because social media are as much about sustained and consistent presence as they are about having a one-off creative execution. Also remember that social media are inherently open, which means that seemingly disparate technologies can actually work together to create something new, rather than having to invent a new “thing.”

Approach the use of social media for your campaign as a way to connect with your loyalists, and perhaps provide them with the tools to share your brand. Remember that word of mouth is the king of communications, and who better than your loyalists to sing your praises? There are many different ways in which people interact with social media, and you need to understand how the loyalists for your particular brand use them to achieve their goals. If you can identify that, and come up with some creative ideas that deliver on those goals, then you will have a winning strategy.

Brand Monitoring and Social Listening

We’ve talked briefly in this chapter about listening tools such as Nielsen’s BuzzMetrics. These tools allow brands to aggregate all of the commentary, positive, negative or otherwise, into a user-friendly dashboard with robust analytics and trend analysis of how conversations are growing and sentiment is changing over time. These tools are great for learning how people are actively talking about your brand. There are many different ways you can use these data. A very common way is to track new product launches and gauge the receptiveness from the customer base.

Remarketing

It used to be standard for brands to give their web audience the ability to sign up for newsletters right from their Website. They would then take those names and remarket to them on an ongoing basis until they opted out of the communications. In some cases, the brands became so sophisticated they could tell you the exact number of sales from each newsletter drop based on the day, time, and offer. Nowadays these customer databases have moved to the social web, where likes and followers dominate the way in which most brands remarket to their customers. There are efficiencies to this replacing e-mail as the main form of remarketing, mostly around scale—it is much easier to follow or friend a brand than to fill in a lead form. Also, the message is distributed in multimedia formats where a customer wants to interact with the brand or company, and not necessarily in his or her inbox. A brand can create a channel on YouTube.com or Vimeo.com, have a Twitter page and Facebook page, and even have a LinkedIn group or Slideshare.net or Flickr channel—all of which allow the brand to distribute communications to its own network.

Marketing Research Online Communities (MROCs)

Communispace and Passenger are the largest suppliers of online communities for marketing research purposes. Imagine that you were a brand and you had what you thought was the next big idea. Well, if you had a marketing research online community (MROC), you could ask your loyal customer advocates what they thought of the idea or the

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communications or all of it. Communispace and Passenger recruit and manage these small communities on behalf of the brands, giving them valuable feedback prior to spending large sums of media dollars only to find that the new product would ultimately flop. Starbucks is a good example of an online community that works. The community allows users to submit to Starbucks their ideas and suggestions, which are then voted on. Starbucks promotes the ideas that make it into actual products or services in its blog Ideas in Action.

Customer Service

What a brand can do with 140 characters of text! For Comcast and Zappos.com, they can build brand loyalty that is unmatched in their category. What started out as one “guy” behind the @Comcastcares Twitter account has become a team of support personnel answering questions about everything from what channel is my regional Fox Sports network, to how do I program my remote, to even managing complaints about billing issues. For Zappos.com, those 140 characters can encourage every employee to be active on all things social media, including and especially Twitter. This allows the company to distribute its already legendary customer service to nearly every tweeter in the United States. Anytime someone talks about Zappos.com, an answer or a retweet (RT) will surely follow, and it is quite possible that the person answering you is Tony Hsieh, the CEO of Zappos.com.

Social Ads

Advertising in social media requires a strategy and set of objectives in the same way that advertising in other media does. A firm should have a clear sense of who they want to reach and what they hope to accomplish. Is the purpose of the advertising to grow contacts for a list, grow a group of followers, increase knowledge of the product or brand, drive people to a Website, or make a sale? Who is the market and how can social media tools ensure the campaign targets only prospects?

Facebook

As several of the exhibits in this chapter make clear, Facebook remains the 900-pound gorilla in social media. The site has global reach (not including China, which limits social media access to non-approved sites) and can be accessed by almost a third of the entire Internet audience. Almost 700 million people use the site every day.

Companies that wish to advertise on Facebook can take advantage of several opportunities:

A boosted post gives a company the opportunity to make a post more prominent in the News Feeds of individuals who are fans of the company. This increases the chance more fans will see the post, like or share it, or engage in some other way. Boosted posts are useful with people who are already fans and can increase a brand’s followers if fans share the post with others. For extra money, Facebook will promote the post with friends of a brand’s fans.

Ads called click to website operate much as Google search ads do, they bring the user to the firm’s site outside of Facebook. For a company looking to make a sale or elicit some other behavior from Facebook users, this is a good option.

Page likes ads are intended to grow the fans of a company or brand. The ads feature the like button right in the ad, which makes it easy for a user to become a fan. There is some controversy about exactly how meaningful it is for a brand to cultivate “likes,” but most marketing experts agree that likes are not an end in themselves but the beginning of an opportunity for a brand to build a relationship.

Variations of this type of ad may try to encourage deeper relationships, such as a purchase. Additionally, the ads may feature product videos, maps, or other engaging content. While some ads appear in the News Feed, others may appear to the right of the feed or in the user sidebar.

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Mobile App Installs are another category of ads on Facebook that, as the name suggests, ask users to install apps on their smartphones or other devices. Examples of apps include “Band Profile,” which allows musicians to share music with fans, “Causes,” an app that helps nonprofits raise money, and “Where I’ve Been,” an app sponsored by social media company TripAdvisor that allows users to share their journeys with others.

The performance of these different advertising opportunities varies somewhat according to data collected over a variety of campaigns. Data for Mobile App Installs and Page Posts suggest click-through rates (CTRs) of approximately 2 percent.

Finally, Facebook allows advertisers to restrict exposures of their campaigns to the right demographic mix, including selecting audiences on the basis of education, geographics, or gender, but also likes and interests.

Twitter

Twitter offers a similar menu of choices for advertising, beginning with the Promoted Tweet. Promoted Tweets help to raise the prominence of a tweet to the top of follower’s feeds, the Twitter equivalent of Facebook’s news wall. Twitter does extend the reach of Promoted Tweets to users who are not brand followers, but whose interests and behaviors are similar. This makes it easier for a brand to grow followers.

Another option for Twitter advertisers is the Promoted Account. These appear in a user’s “Who to Follow” tab and are an even better choice for increasing followers as the primary audience is not current followers of the brand. Twitter suggests that promoted accounts are most useful for driving purchases, leads, downloads and signups, for increasing brand awareness and WOM sharing, and for driving web traffic.

A third Twitter opportunity is Promoted Trends. These are an expensive option; Twitter charges companies $200,000 a day to purchase a Promoted Trend. In exchange, companies get their hashtag near the list of trending topics on Twitter, which can be seen by all users. This has proven attractive not only to big brands like Coke and Disney but presidential campaigns.

The performance of ad campaigns on Twitter is a bit more difficult to assess as the company shares less information with advertisers than does Facebook. However industry estimates suggest that CTRs on Twitter campaigns is consistent with those in Facebook.

Other Social Media

Advertising is now a part of almost every popular social media platform, including Instagram, Google+, Snapchat, and Pinterest. These companies have built loyal, active audiences that are immensely attractive to advertisers. They are also proving effective in mobile, which advertisers like because people are accessing the web more and more from phones and tablets.

Social media organizations have not been shy about asking brands to pay large sums of money for their audiences either. The $200,000 that Twitter demands for a Promoted Trend is steep enough to match rates that television networks will require for a prime-time commercial. And Snapchat’s asking price of $750,000 for advertising on the platform exceeds the costs of almost every TV prime-time commercial save those that run during the Super Bowl.

Crowdsourcing

To come up with a new logo or a Website redesign, companies can spend tens of thousands to hundreds of thousands of dollars. Or, they could go to 99designs.com or Crowdspring, create a brief, and allow people to showcase how they might produce your logo. People from all over the world congregate on these sites looking for new projects. Next they create mockups of designs for you to peruse and decide which ones you like best. Then you can work with the designers to tweak the logo or advertisement to get it to your liking. The final price tag? Just under $800. This can save companies lots of money that they can use in other ways. It is quite possible that the person who had the winning design sits in another country where $800 goes a long way. This is the power of crowdsourcing.

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People BEHIND the Ads

Mark Zuckerberg Founder and CEO, Facebook

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No one ever made it big by thinking small. Proof positive: Mark Zuckerberg, CEO of Facebook. “A lot of companies get grouped as social networking,” Zuckerberg told Fortune magazine. “Lots are dating sites, or media sites or sites for community. But our mission is helping people understand the world around them.”

So how does someone go from nearly broke college kid to web tycoon in just a few short years? The best answer may be a unique combination of smarts, ambition, determination, guts, and a bit of hacker mentality.

Zuckerberg was born in Dobbs Ferry, a suburb of New York. Like many of his generation, he grew up with computers and became a self-taught programmer. A bit of code Zuckerberg and a friend wrote for creating customized music playlists caught the attention of Microsoft, which offered the teens jobs. But Zuckerberg had been admitted to Harvard, so he turned the company down and headed for Cambridge.

Once on campus, Zuckerberg got his first taste of both fame and controversy. The Ivy League school lacked an online photo directory and administrators claimed it would be impossible to create one. That statement proved to be a challenge that Zuckerberg could not resist. Breaking into Harvard’s computers, he posted photos on a Website he named Facemash. To build traffic, he invited Harvard students to visit Facemash and pick who was “hotter” among pairs of undergrad photos. A short time later, the school closed him down.

But Zuckerberg wasn’t finished, and his first incarnation of Facebook was birthed in February 2004. Zuckerberg himself describes Facebook as a “social utility that helps people communicate more efficiently with their friends, families and coworkers.” It proved to be an immediate success, and within a couple of weeks a majority of Harvard students had joined. A short time later, Facebook was expanded to other schools and proved equally successful.

Zuckerberg now had to decide whether to stay in school or build a company. He chose the latter, leaving Harvard for Palo Alto, California, close to the headquarters of nearly all the major web and software firms. By 2006 Facebook had attracted nearly $40 million in venture capital and had almost 7 million users, predominantly college students.

But with success came new challenges. Although Facebook’s trajectory was remarkable, its size was still tiny in comparison to MySpace, then America’s most popular social networking site. In 2006 MySpace membership hovered around 100 million. Zuckerberg’s plans to expand his site outside of college campuses had not been successful, and Facebook’s growth rate was flattening. The question that was likely in his mind was, Is this the top?

In addition, Facebook’s success was getting attention, and big companies were making offers. Viacom offered $750 million, but Zuckerberg turned it down. A short while later Yahoo! came calling. Few people know what it’s like to be 24 years old and get a $1 billion offer for your company. One of them is Mark Zuckerberg. He told Yahoo! he would accept the offer, but at the last minute Yahoo! changed the bid—it announced it would pay “only” $800 million for Facebook. Zuckerberg decided to walk away.

Bold? Even audacious? Absolutely. But once again, it appears Zuckerberg made the right choice. In October 2007 Microsoft announced it would take a $240 million stake in Facebook.

This decision built on Facebook’s alliance with Microsoft as its exclusive ad-serving partner. The implication of Microsoft’s investment is that Zuckerberg’s company was then worth approximately $15 billion. And Facebook had other numbers that looked pretty good. For example, after stalling in 2006, the site experienced a surge in new users. Membership in 2012 was well north of 900 million users globally, making it the number-one social network in the world.

How has the company achieved such phenomenal success? Admirers say that Zuckerberg turned the site into more than a social network. Wired magazine calls it a “full-fledged platform that organizes the entire Internet.” In fact, a big part of what separates Facebook from other social network sites is its willingness to open its platform to third-party developers. These developers help generate the applications that make the site so addictive.

What of the future? Time magazine asked Zuckerberg in 2007 about his grand plans, including plans for advertising. He responded, “It’s tough to say, exactly, what things will look like in three to five years. … [There are] a lot of different applications that are going to be developed to allow people to share information in different ways. I would expect the user base will grow [and there will be] more ways for advertisers to reach people and communicate in a very natural way, just like users communicate with each other. All these things will just get more and more evolved.”

Zuckerberg, like every entrepreneur, has certainly had brushes with controversy and even failure. But these have proven to be minor blips in an amazing success story. Mark Zuckerberg knows how to think big. On May 18, 2012, it paid off. The social network set records at its initial public offering (IPO) for volume traded, and Facebook generated over $14 billion in cash. The valuation of Facebook now exceeds $245 billion, which is more than that of WalMart.

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Entertainment

Social media platforms aren’t always about being serious; some brands utilize social media to breathe life into their company culture, like Zappos.com, or bring entertainment in unique ways to their fan base. Take these two companies as examples: Burger King and Blendtec. Burger King created a Facebook application that asked people to sacrifice 10 friends by defriending them. For sacrificing those 10 friends they earned a free Whopper. After 20,000 users defriended over 200,000 “friends,” Facebook shut down the application for privacy concerns. Sometimes bad news is actually good for a brand image. We mentioned Blendtec, an industrial blender manufacturer, in Chapter 15. It created a YouTube.com channel called “Will It Blend.” In a campy and methodical way, the CEO of Blendtec took to video to literally show everyone that his blenders could blend just about anything. From skis to iPhones to batteries and glow sticks, this channel became a phenomenon and Blendtec quickly stopped all other marketing efforts to focus on creating these episodic videos on what the blenders could handle.

Games and Gamification

We opened this chapter saying that social media’s main benefit is ease of use. Well, imagine if you could play Scrabble or Hangman with someone over 5,000 miles away. You probably don’t have to imagine very hard, because the explosion of companies like Zynga, the makers of Words with Friends and other social games, has made what once was impossible, downright easy. Not only can you play from your PC, but because of the new application-based mobile operating systems for phones, now your smartphone is also a handheld gaming platform.

Games have had an appeal, whether through a console like Xbox and PlayStation or on the PC, for quite some time now. Earning points and advancing to levels has also been a massively addictive rewards system. Massively multiplayer online role-playing games (MMORPG) such as World of Warcraft were quite possibly some of the first social communities that existed online. And their leveling and badging system has been adopted for other more utilitarian applications like Foursquare, creating a whole new way of engaging consumers called gamification. And it works. People crave the immediate rewards and feedback mechanism. These short-term bits of happiness keeps consumers engaged far longer than if the gamification didn’t exist. So apply this gamification with branded online communities and you have a recipe for a long-term engagement with consumers around your brand, quite possibly without having to sell that person anything.20

Reviews and Opinions

We discussed earlier the impact that social media have on word of mouth. Through reviews, everyday people can let the world know what they think of certain products or services. Imagine that you are about to be one of the first to buy the latest shiny new toy, and you look it up online only to find that the three people who bought it before you have commented about how disappointed they were in the product and that they are going to return it. That type of information is invaluable to the consumer and a product killer to brands. CNet.com was one of the first Websites to build around the user-generated content of reviews and opinions. And Yelp.com brings that same infrastructure to local service providers. Wondering if that local plumbing service is any good? Look it up on Yelp.com and read 25 reviews from people like you.

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Not to be outdone by other social media, Snapchat is offering brands opportunities to reach audiences. And because of the platform’s popularity with teenagers, it has the advantage of reaching individuals missed in other opportunities.

Source: Snapchat and IHOP

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Chapter Summary

Social media are unlike any other media to date. They can’t be measured simply by time and place. In fact, there are no standardized advertising placements that can be sponsored. This makes social media platforms unique and challenging. The sharing aspect of social media has helped scale the media and makes them the fastest media of all time to reach 50 million users. They have also quickly changed social media users’ behavior in the number of people they stay in touch with and how they communicate with them. A status update is the new phone call. Social media have changed how companies communicate with their customers as well. They have ushered in a more transparent and open relationship between brand and consumer. Social media platforms are a component of almost every Website on both the wired and mobile Internet. From reviews, to forums, to social networks the connections that form within social media have helped usher in a new era of IMC. There are many different ways in which brands can use social media. From research, to remarketing, to crowdsourcing and entertainment, social media provide brands different ways of connecting with their audience to better understand them, provide products that meet their needs, and create a feedback loop that is unprecedented in the history of advertising and IMC.

Important Terms

application protocol interface (API)

blog

forum

microblog

network

post

Really Simple Syndication (RSS)

social bookmarking

social listening

social networking

software as a service (SAAS)

trending

user-generated content (UGC)

Web 2.0

wiki

word of mouth (WOM)

Review Questions

1. What are ways that social media are different than traditional media?

2. What are the ways in which social media have changed consumer behavior?

3. What are the different ways consumers engage within social media?

4. What are examples of social media ads and what are they used for?

5. Why is transparency so important for companies?

6. What are the different types of social media?

7. How would you describe the advantage of deploying a social media campaign?

8. What is Web 2.0?

The Advertising Experience

1. Using Social Media

As the communications director of a new start-up, you are very excited to tell the world that your company is the next best thing to sliced bread. To be successful your company needs to reach a lot of people, very quickly. What are some of the tactics that you would use to spread the word through social media?

2. Social Media Organizations

Visit the following social media industry Websites and familiarize yourself with the size of the social media world. Be sure to answer the questions for each site.

■ International Social Media Association: www.ismaconnects.org

■ Word of Mouth Marketing Association: http://womma.org/

■ International Network for Social Network Analysis: www.insna.org

■ Social Media Metrics: https://www.kissmetrics.com

a. What is the purpose of the organization that sponsors this site?

b. Who is (are) the intended audience(s) of this site?

c. Who makes up the organization’s membership? Its constituency?

d. How important do you feel this organization is to the advertising industry? Why?

3. Social Media not only allow fans and users to participate in campaigns, they often encourage it. Create a video for your favorite brand and post it. Track to see if your video is acknowledged by the company, how often it is shared, etc.

4. Old Spice is well known for its use of social media. What tools could you use to understand how effective a campaign is in social media? What trends would you look for to determine that you are reaching the right audience?