How Time-Based Ads Can Help Media Agencies

Media buying is a thankless job. Success rides on whether creative can hold an audience’s attention and the performance of a client’s sales organization - hurdles that are exacerbated by an increasingly fragmented supply chain. In the end, it’s nearly impossible to measure the value created by a media buyer.

When a consumer can’t easily quantify the value of a good, pricing expectations trend toward production costs. I believe that this, rather than a lack of trust or a desire for transparency, is what drives the agency pricing model towards cost-plus, also known as disclosed.

Think about buying a Ferrari or going to a sporting event; both are products that deliver quantifiable value and are priced as such. Imagine asking a seller to share data around how much either cost to make. Doesn’t “transparency” seem a little silly in this context?

Cost-plus models for service businesses, especially procurement, distort incentives and discourage innovation. A move to a value-based pricing model, or non-disclosed in our vernacular, is key to the survival of the media agency and fostering innovation, which I believe, will benefit the entire ecosystem.

At the center of the existing cost-plus pricing model is the impression, the metric by which most digital brand advertising is bought today. The impression has been a whipping boy of sorts recently. It’s entirely justified; the impression contains absolutely zero information about how much attention is paid to it, and until recently it was commonly accepted that a certain percentage of impressions would never even have an opportunity to be seen. Worst of all, the impression actually motivates publishers to put more ads on a page, thereby decreasing each ad’s share of voice.

The easiest way to move toward a value-based model is to package product in a way that represents its value. At Parsec we’re proponents of time-based advertising, in large part because the amount of time that someone chooses to spend with an ad is an amazing measure of the value captured by an advertiser.

By switching to pricing on a time metric, instead of impressions, agencies can sell a product that contains a quantifiable amount of attention. This will help them price media on the value of attention to advertisers, instead of their costs.

Only then, will the benefits of the massive investments in technology and data be realized, as agencies who more effectively source attention for their clients will be able to increase margins.