Media owners must add value to justify higher prices

Opinion

“Adflation” creates a conundrum for media owners needing to justify higher prices. Here’s how they can beat it.

Inflation, now running at a 40-year high, is affecting everything from the cost of gasoline and groceries to income tax brackets.

Of course, inflation is increasing costs for advertisers and media owners too. Think of it as “adflation.”

As media sellers, people in my company see the effects of adflation from both sides. Media costs have been skyrocketing, not only because of the inflated money supply and the war in Ukraine; the rapid run-up of general inflationary pressure is pushing everything higher, including wages, benefits — even electricity. All media are affected on the expense side.

It is very difficult for most media to recoup this increased expense by raising rates. Television seems to be the exception. According to the Global Advertising Trends analysis compiled by the World Advertising Research Center (WARC), television advertising impressions in the United States are selling at a 40% premium over 2019.

Other media are not in the position to demand more.

The risk of raising rates even higher

Of course, media owners want to believe that ad buyers “have to understand” that the brands’ basic business expenses are rising with inflation, hence the need for adflation.

Just two problems with this wish: first, ad buyers don’t care about the businesses of the media brands, any more than those brands honestly care about the businesses of the ad buyers. Second, and more to the point, the ad buyer is getting paid to produce the most efficient, least expensive media plan for the advertiser. That’s the job.

Competition always gave buyers leverage to force rates down. After all, consider the fundamentals involved in setting basic digital ad rates. Programmatic operators flood the market with inventory at $2 per thousand that can be targeted at least on a prospect’s web history. Why would an advertiser pay, say, $10 per thousand — or even $5 — for an audience that is not much more refined than the one for $2? And, with programmatic already accounting for more than 90% of all digital display ad dollars, how can digital publishers risk raising their rates even higher — adflation or not?

Custom content and bundling can be effective solutions

What can be done? One potent solution is for media brands to sell custom content, leveraging their deep knowledge of their audiences.

One of our clients has created a highly effective custom content studio, through which the staff of the brand helps advertisers create programs that resonate with their technical audience. In tough economic times, engagement — not just exposure — is primary. The medium chosen depends on the job to be done.

Another solution is to create bundles. For example, value added programs: this is not a new idea, but it can still be very effective.

Years ago, print media might have included online advertising as added value. Now, legacy publishers whose business has transformed into primarily digital media may bundle print space as an incentive for advertisers to increase their total spend.

That may sound far-fetched to some but there are many publishers whose print circulations have shrunk (thanks to digital copies) to the point where the hard cost of the printed product doesn’t make using a magazine as a value-added tool quite as horrifying as it once was.

Sellers need to add value if they want to increase price

Advertising sellers can no longer expect to win business by showing up with a shoeshine and a winning personality. They need to create programs that deliver the engagement that each advertiser wants and needs.

Whether that engagement comes from use of data, lists, co-branding, space, impressions, clicks, or attendance at shows, sellers need to learn about all the assets their organization could possibly include in bundles, and then craft a custom program to deliver value for each major client and prospect.

Beating adflation requires a different skillset than traditional media sales, with much greater emphasis on asking the right questions, listening, and then creating solutions that the customer will buy.

Oh, and for a price higher than it was sold the previous year.