How to create an ABC in your country?

In a country/market where an ABC has formed, there has been a strong need for more accountability of media in general, and the printed press in particular. This demand for accountability usually comes from advertisers and their partner advertising agencies. It also is driven by publishers who believe that accurate sales figures reflect the social responsibility demanded of independent media not only their editorial and information freedoms but also in competing fairly in a free market system.

The advertisers are interested in transmitting their messages to the public in order to increase sales, promote products or for purposes of developing corporate image, etc. The transmission mechanism is the media itself, which is creating communities of potential message consumers, and product or service buyers.

The advertising money flows in one direction – from the advertisers to the media, either directly or via media/advertising agencies. This is, in essence, an investment of advertisers in the media.

At the other end, the media is doing everything possible to be part of the advertising investment, in order to secure the advertising expenditures.

The media/advertising agencies play the role of intermediate. They handle advertisers’ media budgets, including planning, media mix, selection of media and schedules, selling, and optimising the media. They also maintain an ongoing trade relationship with the media in order to acquire the media space and schedule that is necessary to carry out the media plans agreed upon with their advertisers.

This activity is a continuous competition among clients for budgets and campaigns.

Here is a list of the more important media elements related to circulation, and represents the criteria that an advertiser uses to make media purchase decisions:

• Cost Per Thousand (CPM)

  The cost to disseminate an advertising message per 1,000 copies:

  CPM = (unit advertising cost – i.e. 1/1 page)/(number of copies distributed/1,000).

• Penetration Rate

  The percentage of distributed copies in a market sector:

  Penetration = (number of copies)/(number of households) [%], for the consumer press.

  or

  Penetration = (number of copies)/(number of businesses) [%], for the B2B press.

• Costs of Insertion

  The number of insertions to be run in one issue is directly related to the number of copies printed/distributed.

• Readership per copy (RPC)

  The number of readers of one issue of a publication related to the size of the distribution of the given issue:

  RPC = (number of readers)/(number of distributed copies)

  This is a quite disputed index (many analysts are challenging the comparison of number of readers to number of copies); nonetheless, it is widely used in the industry. In any case, this is a benchmark index, showing the total readership circulation within a given market.

The decision to buy advertising should be based on actual circulation and reader/user demographics. It is a business decision which should be quantitative versus solely qualitative or one of reputation and perceived image.

There is a need to estimate the worth of future advertising investments in different publications/media. On the other hand, the information used to make these estimates (the media performance data ) is not directly controlled by the advertisers, nor the advertising agencies, but rather by the media itself. Trust is not enough; rather, to use the old political adage used in arms control during the Cold War: Trust, but verify.

• Readership. Advertisers or advertising agencies normally do not conduct direct readership research. This information comes from research companies, who are in general financed by media.
• Circulation. This information comes directly from the publishers, if no ABC is in place. In some cases, the clients of the publishers use indirect methods to find out their circulation. For instance, they might request printing invoices, or they use monitors at printing houses where print runs occur.
• Rate cards (advertising unit nominal price). Setting the rate-cards is the exclusive privilege of media owners.

Taking the above into consideration, the advertisers are facing a series of risks with respect to circulation and readership data:

• Circulation. There is a high risk that publishers inflate these figures. Even the printing house invoices should be treated with extreme caution because they can be easily manipulate and inflated. In addition, the number of printed copies is not a direct sign of the real performance of a publication because it does not provide any information on how many copies were actually distributed and sold.
• Rate cards. These are nominal prices, and they can be highly overvalued. If there is no media information to support the level of the prices, the advertisers face a great deal of uncertainty related to the real value of the advertising to be acquired.

Taking all of the above into consideration, an advertiser is facing a series of risks when dealing with uncertain media information. The weapons against uncertainty in the hands of the advertisers are the discounts (the ratio of discounting off the nominal rate-card level). The more uncertain the performance of a campaign, the higher the discounts an advertiser (media agency) will desire.

This discounts warfare has a direct effect on the income of a publisher. In a competitive environment each publisher will tend to maximize its advertising money income by using a variety of tactics.