News & Insights

Premium inventory – The emperor’s new clothes?

Across the media landscape, both in offline and digital environments, clients are today being encouraged to invest in ‘premium’ media, claimed to offer benefits such as precision targeting and unique audiences.

However, media vendors first and foremost have a commercial agenda, focussed on their own P&L column, not an advertiser’s campaign performance. By establishing a premium market for ‘special inventory’ they see an opportunity to retain investment that would otherwise be headed to the digital marketplace. In many instances, the benefits of these investments are little more than the Emperor’s New Clothes.

Advertisers employ media agencies to act as their advisors and executional experts; offering clarity in a convoluted marketplace. The premiumisation of media by vendors offers agencies an opportunity to demonstrate their true value by vetting, evaluating and then negotiating or discarding this premium inventory.

Online video, a market sector with a dramatic spread in both pricing and quality is currently the fastest growing area of advertising expenditure in the UK. The IAB reports ad spend of £700m in H1 2017, a 46% YoY increase. Based on current trends it is now approximately one third the size of the UK TV ‘spot’ advertising market.

Cost per thousands (CPMs) for ‘Broadcaster VOD’ or premium online video inventory, typically ranges from £25 to £35. For an advertiser targeting ABC1 Adults, their audience on TV could be expected to cost in the region of £10-15 per thousand. So broadcasters are charging a significant price premium to access their online audiences.

Despite this well-understood price premium, VOD investment is accelerating at a much quicker pace than audience video consumption. Estimates suggest that online video viewing now sits at over 141 minutes per week, or 20 minutes per day.

Whilst this represents a significant increase on previous years (three years ago this figure sat at 7 minutes per day) the figures are still dwarfed by linear TV viewing. The average TV viewer watched over 1,000 minutes of linear commercial TV per week, or 150 minutes per day. VoD investment is over-indexing its audience reach by a factor of two.

There is no doubt that online video offers significant opportunities; incremental reach, targeting and often high-quality content. It can play an integral role in campaigns targeting young audiences where pricing ratios are much more balanced versus linear TV as pricing continues to inflate rapidly. However, in its current form, the relative size of the online video market far outweighs its true value to many brands.

Another area where the trend towards premiumisation could adversely impact a client’s media value is Out of Home (OOH). OOH digital inventory is being charged at a five to six-time price premium on print inventory for certain formats.

Despite the fact approximately 94% of sites are print, digital’s share of OOH expenditure has increased from 27% of the market in 2014 to over 44% in the first half of 2017.

Like online video, in many instances the inventory being offered can provide ‘premium’ opportunities. One only need look at the research of vendors such as Exterion on the TFL network to see there are significant efforts being undertaken to demonstrate its value.

However, in many instances digital inventory is now being purchased across second-tier sites such as roadside digital six sheets, offering the same audience as was previously available at a significant price increase.
Advertisers’ budget efficiency is being reduced as cost-per-reach increases with higher digital inventory blends.

A similar pattern has emerged in the TV market, where media owners, pressured by declining audiences and turbulent revenue forecasts, are charging ever greater price premiums to access ‘TV specials’ in order to balance their trading accounts.

Over the years the definition of a ‘special’ appears to have changed beyond recognition. A programme that offers limited additional reach or adds minimal unique audience does not justify a premium cost. What was once standard inventory such as a 7pm soap, 8pm observational documentary or a 9pm drama series is now being offered exclusively to those willing to pay a premium.

Equally, the price for this ‘special programming’ has increased, driven by yield hungry commercial teams. This trend hurts clients, weakens ROI and has a short-term benefit for media owners. Only programmes that truly offer a unique audience and immersive environment (recent examples would include The Great British Bake Off or X Factor Final) should be considered as valuable additions to a media plan.

When a client is undertaking any form of activity be it a small ‘burst’ or major brand campaign they should always undertake due diligence to ensure plans reflect their needs and objectives. In recent years the media metronome appears to have swung towards premium inventory at a dizzying pace and marketers risk suffering as a consequence.

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