Digital Advertising Spends Article by me in FE on 24-12-2018

An article written by me that appeared on Financial Express on 24-12-2018

https://www.financialexpress.com/industry/your-working-media-may-be-reducing-when-you-spend-on-digital-heres-why/1423060/

Digital has its own set of advantages with near real-time reporting, live reactions, addressing user grievances and boosting sales during flash sale events, just to name a few.

Digital advertising spends have been on the rise. It is estimated that India will be spending `13000cr in 2018 on digital advertising, up from `8000crs in 2016. This is 19% of the total advertising pie, more than OOH and Radio combined. While this is small as opposed to developed markets where digital’s share of the total advertising pie is ahead of 50% (including that in China), the Indian digital advertising spends continue to grow at 20-25% year on year and don’t show any sign of slowing down.

Part of the reason is the efficacy of the medium itself. Digital has its own set of advantages with near real time reporting, live reactions, addressing user grievances, boosting sales during flash sale events just to name a few. Other media may have similar customer reactions but the high of seeing it live is pulsating. Another big advantage of the medium is very low entry cost.

Having said that, there could be other reasons why digital spends may be on the rise. In the absence of credible third party data, the sellers of the medium are throwing metrics which we have no option, but to believe. Meanwhile digital media agencies make two to three times their commission on digital as opposed to on traditional media. The net effect is that while the advertiser may have gained efficiency at one level, owing to the wastage and the high fee, his ‘working media’ may be compromised.

If you observe how a typical advertiser has spent his media budget over the last two decades you would notice that in yesteryears almost all the money earmarked on media went on media. Agencies would keep a small percentage as fee to manage the account. However in digital media, one has to not only pay the agency fee which is way higher than traditional media management fees, but also pay other intermediaries such as technology fees, reporting fess, content margins etc. which are estimated to be in the range of 30% of total digital spends.

This is however one part of the equation. Money in digital media has given rise to unscrupulous practices such as bots and clickfarms and viewability has become an issue. As per our estimates, only 50-60% of ads are actually seen on digital. In some cases the figure has been noted to be as low as 30% even on CPM buys. Many reports have suggested ad fraud rates to double this year from previous year rising to $19 billion globally.

Essentially, as an advertiser, this means that your ‘working media’ may be reducing when you spend on digital on account of high intermediaries cost as well as viewability issues.

So should we stop spending on digital? Of course not! But before we do, let’s ask the following questions related to transparency:

-        How much of the budget is actually deployed to reach my consumers as opposed to fees paid to intermediaries and sellers of digital media?

-        Is my brand served in a safe environment? How can I be sure?

-        What is the viewability ratio? What is the proof of the same?

-        Most importantly, do we have enough transparency in the medium to allow us to investigate the above?

Please note that while some may say digital buying is via programmatic and hence difficult to deep dive, the reality is quite the contrary. Programmatic offers transparency. And as a buyer of digital media, you have every right to transparency. After all it’s your money!