Old television trading model is now past it's sell-by-date

The storm caused by the recent publication of the IAB web ad revenue figures, their claim this time that the figures have overtaken TV and TV’s refutation of their claims because they’re based on total revenue (including Search) and not just display (as TV’s published revenue figures are) is resonating through the industry, and is in danger of becoming a regular event.

The row over the published figures is a harbinger of a much more important issue – how advertising money is traded in the future.  Because the growth medium for the web is once again Search, which is a medium which trades in a completely different way to nearly all display advertising (with the worthy exception of some direct response advertising), in that the risk taken by advertisers is shared with the media owner and constantly updated with new data.

There are clear attractions to this model for advertisers, based as it is on the outcome in short term response to the space booked (ie cost per click) as opposed to current display trading models which are based on audience ratings deliveries.  And even online display showed a decline in the IAB’s figures.

We will not be moving to a world where everything is based on cost per click and immediate response.  There is still, and will continue to be, a role for advertising based on creating desire and building brands.  However if TV chiefs (and there are about to be some new ones on the scene), want to create a tide of demand back into TV it is definitely time for them to consider moving to new trading models, and I am quite sure that the best of them, and all of those new candidates for ITV and C4, are in the process of doing so.

For it is time to call time on the old legacy trading models in television and consider new ways of trading the medium that respond faster to new data, and are more sophisticated in targeting specific audiences – we are already seeing this on BSkyB with their move to allow targeted serving of advertising through their set top boxes.  This future will surely also see ways of trading that link TV’s success to the success of the advertisers who invest in the medium by some kind of shared risk.  This might be based on product sales, or advertising effect but certainly not just on ratings delivered against discounts from an average price for a proxy audience – which may or may not correspond accurately with the actual target market for the brand.

In this new paradigm true success for any medium – on or offline, brand display or direct response – comes from the growth of the client’s business.

As seen at Mediaweek.co.uk

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