A False Dichotomy in Today’s Media World: “Working” v. “Non-Working” Budgets

By Caroline Desmond, Director of Media Strategy

Setting The Stage: Today’s Media Landscape

In the last twenty years, internet accessibility and the growing connectedness of consumers has led to a sea change in the way people consume content. From the early days of the search engine, to the emergence of e-commerce, to modern day “on-demand” content apps like Netflix and Hulu; consumers have grown accustomed to being in greater control of how and when they consume content from brands.

In an age where consumers can choose to opt-in or out of content, advertisers can no longer count on the captive audiences that they were accustomed to during the era of “must-see TV.” To illustrate this point, consider what has happened to TV-viewing audiences. Back in the mid-90s, a primetime show like ER could reach 20% of US TV viewing households (Washington Post). In contrast, last fall the average rating across the big four TV networks was a 1.6 rating (meaning on average, only 1.6% of TV viewing households in the US tuned into a show).

In addition to greater control, consumers also have more choices than ever before. US adults now spend half their day consuming media, and it is within digital channels that we are seeing consistent year-over-year growth (eMarketer). Growth in the consumption of digital media channels presents unique challenges for brands. Notably, by 2019, about a quarter of internet users had blocked advertising on connected devices (Statista), and between 35–42% of online banner ad impressions were reported unseen by consumers (Integral Ad Science).

Moreover, US adults spend about an hour a day on social networks, with the vast majority of this time on mobile devices (eMarketer). In this environment, with limited screen space, advertisers are forced to compete with vacation photos, baby pictures, and cat videos. The risk of being skipped or scrolled over is high.

So, what is an advertiser to do? The proliferation of consumer choice and control over media consumption means it is no longer enough to merely buy impressions, and the old dichotomy of working versus non-working budget no longer applies. In order for media to truly “work,” advertisers have to invest in better content to populate media and give consumers a reason to pay attention.

Breaking Down The False Dichotomy

There is a temptation among some marketers to categorize only paid media as “working” budget and everything else — earned media, owned media, web content, web videos, social media curation, agency fees, production, and consumer research — as “non-working” budget. The trouble is that this dichotomy is based on the false premise that paid media alone does the work of accomplishing a campaign’s objectives. This premise essentially assumes that paid media operates in a vacuum, divorced from creative content and consumer behavior.

In reality, paid media only works — that is, it garners attention and generates results — to the extent that the creative message grabs the attention of, and resonates with, a target audience. In fact, “the top creative campaigns are 11X more efficient at delivering business results” (Institute of Practitioners in Advertising). This is especially true in light of today’s fragmented media landscape referenced above.

Additionally, with the complexity of today’s media landscape, it is critical that an advertiser’s paid media plans be informed by a thoughtful, consumer-aware strategy pre-launch. It is true that advances in media technology — e.g., programmatic media and machine learning — have helped automate some media planning decisions and that this does create some efficiencies in agency process. However, it is also true that the output of programmatic media is only as good its strategic inputs and that not all media is programmatic-enabled. As a result, there is still an investment in agency time required to think through how programmatic media complements other media channels and how advertisers can seamlessly integrate into what is now a more complex channel mix consumed by target audiences.

Furthermore, advances in media technology have led to greater data availability and an increased need for someone to make sense of that data. That too requires agency time, but the potential reward is great since such analysis can lead to more precise media targeting and calibrated messaging. It would seem illogical to consider this time, that directly contributes to the performance of media, to be a non-working or a non-contributing piece of an advertiser’s overall investment.

On a related note, greater access to real-time performance data means that advertisers have more opportunities than before to adjust creative messaging throughout a campaign. Before the prevalence of digital media, agencies would produce creative to fill traditional channels like TV, print, radio, and outdoor billboards upfront. The creative would be trafficked to media vendors, posted, and the advertisers would receive reporting only as to the fact the creative ran and nothing more. In the age of digital media and real-time data, advertisers can know within days whether a message is resonating with an audience. Now, advertisers can see, for example, how much time someone spends with an ad, whether they share it with a friend, or even whether they purchase the featured product as a result of seeing or clicking on an ad. By the same token, advertisers can see whether a particular creative version drives these actions more than other versions and make changes accordingly; but this is an empty opportunity without the creative resources and production budgets to feed the need for optimized creative. In this way, production and creative resources are also closely intertwined with paid media performance, and this is but another example of how paid media is dependent on outside factors sometimes mislabeled as “non-working” aspects of a campaign.

In light of these considerations, it is possible, probable even, that advertisers will see an increase in the ratio of agency fees relative to paid media even as our paid channels become more sophisticated, the targeting more precise, and the data availability more vast.

Shifting The Focus Back To Campaign Objectives

Rather than looking to a working v. non-working budget ratio as a metric, advertisers should instead focus on benchmarks directly tied to campaign objectives; whether that is awareness, engagement, or return on ad spend. This is particularly true as consumers demand content from advertisers that does not feel like an ad. 78% of consumers say personally relevant content increases purchase intent (The Personalization Imperative), and 90% of consumers between Gen–Z and Gen-X want custom content from brands (Time, Inc. via Ad Week).

Looking to the cost to develop the content misses the point that branded content, although sometimes more expensive to develop than traditional ad formats, results in greater returns that compensate for the difference in production costs.

Sharethrough, a leading authority in the field of branded content, partnered with IPG Media Labs in 2017 to survey the impact of branded content on consumers compared to traditional digital ad formats. Survey results revealed that branded content delivered 18x the engagement of traditional display banner ads and that branded content delivered a 22x return on ad spend. More recent survey results reveal that “native ads [featuring branded content] registered 18% higher lift in purchase intent and 9% lift for brand affinity responses than banner ads,” and that 32% of respondents said they would share branded content with a friend of family member “versus just 19% for display ads” (Sharethrough/IPG Media Labs). Focusing on the old model of working vs. non-working budgets obscures the true value potential of branded content, because it does not recognize the greater potential return from branded content that compensates for the cost to develop that content.

The Value of a Small-to-Moderate Investment in Content + Paid Media

Even if you consider Sharethrough and IPG Media Labs to be biased, the value of investing in content is further evidenced by the fact that advertisers in the consumer-packaged goods (CPG) and fast food categories — categories with a long history of traditional advertising practices — have recognized the value of investing in content. Not only have they recognized this value; they have also realized success in the process.

The Shorty Awards, an annual awards show that recognizes excellence in short-form content designed for social channels, posts case studies for previous years’ winners. Content designed for social channels is not typically high production value, but still demands at least a moderate investment. Included among past finalists are fast food/CPG brands like Pizza Hut and Nutella.

With modest targeted digital media campaigns supporting each piece of content, these brands were able to generate between 100–228 million impressions including earned impressions. To simply buy these impressions, an advertiser would need to pay between $1 million to $2.3 million based on average digital media cost-per-thousand impression (CPM) planning rates. Whereas, the heightened engagement associated with branded content means a greater likelihood of earned impressions.

To illustrate this point, consider Sharethrough’s reported 13% lift in content sharing for branded content vs. display ads (32% for branded content vs. 19% for traditional display ads). Even if the people an advertiser pays to reach only share content with one other person, this would result in 13% more impressions as a result of sharing. So, the advertiser running branded content would only need to pay $870K to achieve 100 million total impressions, whereas the advertiser running traditional digital display ads would likely need to invest all $1 million to achieve the same result. If only half of the $130K saved by the branded content advertiser were invested in production, the branded content advertiser would still come out ahead of the advertiser who eschewed branded content production costs in favor of more traditional ad formats to save on production.

Conclusion

In summary, today’s complex media landscape demands more nuanced value measurements that tie back to the specific campaign’s objectives and not a one-size-fits-all ratio. Imposing such a ratio ignores the fact that paid media does not work on its own. Rather, creative content, strategic resources, production, earned and owned media all constitute “working” inputs that drive the performance of paid media. Rigid ratios and categorization of working vs. non-working budgets also ignores the potential to drive greater earned impressions from an investment in branded content despite the potentially higher cost of production and creative resources.