The Faulty Comparison of Analog Dollars to Digital Dimes

Data-Driven Thinking"Data Driven Thinking" is written by members of the media community and containing fresh ideas on the digital revolution in media.

Today's column is written by Matt Shanahan, SVP of Strategy for Scout Analytics.

The comparison of "analog dollars" to "digital dimes" is often an attempt to explain that paltry digital revenue is coming from commoditized advertising prices. When you dig deeper into rate cards, the reality is quite the opposite – digital rates are more expensive than print! The digital dimes issue does not stem from pricing but from size and quality of audience. Here some math to explain.

I reviewed individual media kits from 10 B2B publishers that contained both print and digital advertising units to get apples to apples comparison of print vs. digital within one publisher. A consistent theme emerged – digital advertising rates were higher than print advertising rates. For example, one publisher's media kit offered a full-page, color print advertisement to a controlled circulation of 115,000 with readership of 322,000 for 1 issue at a price of $28,325. This same media kit offered a welcome interstitial advertisement (closest digital ad to full-page print ad) for a $10,000/day with a guarantee of 15,000 unique visitors. The price per unique in print is $0.09 ($28,325/322,000), whereas in the digital, it is $0.66 ($10,000/15,000). The media kit's CPM rate for a leaderboard advertisement was $115 or $0.115 per unique. All of the digital ad units in the media kit when compared to print counterparts were more expensive per unique.

What makes the higher digital prices surprising, is the difference between print and digital advertising units. A full-page print advertisement is usually considered to be a higher quality unit than a digital leaderboard, and yet the leaderboard CPM is more expensive than a full-page print advertisement. For instance, another media kit offered a single full-page print advertisement for $3,995 to reach 46,000 readers or a price of $0.086 per reader. This same media kit offered a leaderboard advertisement to reach an online audience of 11,500 unique visitors for $1,175 or $0.102 per unique -- 16% higher.

And when you account for out-of-market visitors, the "real" price of digital advertising increases another 20-30%. In print, the controlled circulation maximizes in-market readers both registered and anonymous because pass-alongs are likely to be colleagues. In digital, search engines draw in the vast number of unique visitors including a large number of out-of-market anonymous visitors. As shown in my previous research, the out-of-market online visitors can effectively create a "real" price per unique that is 20-30% higher than the list price.

These pricing dynamics are not unique to B2B. In the case of B2C premium inventory, my previous research showed 29 minutes/day of reader attention delivered $286.84 of annual revenue to a newspaper whereas 1.2 minutes of online visitor attention delivered $28.89 dollars of annual revenue to digital news sites. Even ignoring the contribution of circulation to newspapers' revenue, the newspaper delivered advertising to the reader at a price of $0.027/minute in contrast to online news that delivered advertising to the reader for $0.065/minute or almost 2.4 times more expensive.

Summing it all up, the comparison of "analog dollars" to "digital dimes" is not about low prices in digital. In many cases, digital rates are higher than print rates. Digital revenues are lower than their analog counterparts because of the size and quality of the audience online does not match the size and quality of the audience in print. More on that later.

Follow Scout Analytics (@ScoutAnalytics) and AdExchanger.com (@adexchanger) on Twitter.

 

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