BEWARE: Digital Advertising Rate Loss Leaders

BEWARE: Digital Advertising Rate Loss Leaders

Digital Advertising Rate Loss Leaders

We are all aware of a concept in the retail world called the “Loss Leader”. This is a product or service sold at near wholesale cost to attract customers into a store to buy other products that are sold at the store’s desired mark-up or even higher than reasonable rates. As a small business owner shopping for digital marketing services, you must be aware that there are “Loss Leaders” in this industry as well. In fact, you would be shocked to know that formerly high-end advertising products like TV, Radio and Print, are being sold as loss leaders. The competition is so high to sell traditional media that prices have dropped and the media companies have had to find their profit elsewhere. Primarily they are finding it in digital media products.

 

I recently sat in a meeting with my largest client and watched a TV station pitch broadcast commercials at $3 cost per thousand (CPM) viewers and then turn around and pitch pre-roll video at $37 CPM. Of course this comparison wasn’t made on the same slide in their deck, and was obscured in large impression numbers and such. Broadcast TV was always the KING of all media and the most expensive exposure. Now pre-roll video is 10X the cost of TV? Actually it is only priced this way because a TV station is selling the pre-roll at nearly double the price one should expect to pay. The tricky part comes when they only give you the discounted rates on TV when you sign on for their over-priced digital services. Stand your ground and don’t budge. Buy the “loss leader” at a slighter higher price or walk out the door. Once you start down the digital road you will never escape.

 

Media companies often have massive physical structures, fleets of vehicles and bloated sales and production staffs. Unfortunately, they have to compete with a person with a laptop being able to enter the same digital networks. This person has none of the overhead of the media company. The same is true for the yellow pages. Traditional media companies and the yellow pages didn’t create any of the digital marketing platforms. In fact, they fought against them until they were forced to grudgingly join the game. Because of this they have no special capabilities or dominance in PPC, SEO, Pre-Roll, Display or any other kind of programmatic advertising. They might be charging you 4 times the display ad rate you can get from another vendor, but they cannot deliver four times the value.

 

When you see big multi-story building, workforce of hundreds, beautiful lobby and amenities, and get baskets of gifts as bribes to become clients, you need to ask yourself where that money is coming from. I can guarantee it is coming from the gap between how much you will pay them for digital marketing services compared to how much you’ll pay an expert with a laptop who can accomplish the results. When they sell you on the benefits of reaching people in their news website, remember that the people who go to that site, visit hundreds of other websites each month as well and you can reach those same demographics in those sites at a fraction of the cost. This extends your budget, broadens your exposure, and could make the difference between you growing or being bled dry by your advertising budget.