2 The need for credible media information

2.2. Making proper advertising investment decisions

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.

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