Revisited Sector Paper on: ISIC 7310 Advertising

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Revisited Sector Paper on ISIC 7310
Advertising
ISIC 7320 Market Research and Public Opinion
Polling
Matt Berger Ian Richardson United Kingdom
ONS Jirí ulc Czech Statistical Office
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Why are we here?

• Substantial investment by VG in independent
  development of
• SPPIs
• Turnover
• for the Advertising industry
• Need to
• Bring these together
• Complete work on Turnover
• Determine any recent changes in SPPIs
• Expand to Market Research and Public Opinion
  Polling

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What we shall see

• Summary of earlier VG SPPI work on Advertising
  only
• Some details on Advertising Turnover
• and a promise to complete this work

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Overview

• History
• Status
• Classifications
• Turnover
• SPPIs
• And a discussion on quality

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History

• 1993 French paper on model survey for
  Advertising (Oslo)
• 2001 Mini-papers on Advertising SPPIs from
  France, Australia UK (Örebro)
• 2002 Advertising SPPI Principal paper from
  France (Nantes)
• 2004 SPPI paper from Austria Turnover
  paper from Spain (Ottawa)
• 2005 OECD-Eurostat SPPI guide

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Status (SPPI)

• ISIC 7310 Advertising
• OECD inventory
• 26 of 38 have SPPI for at least part
• More detailed queries
• Sales Leasing
• 12 of 29 have SPPI for at least part
• Creative component
• 9 of 29 have SPPI for at least part

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Classification - Industry
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Classification Products (CPA only)
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Classification - Observation

• ISIC ( any direct derivatives) do not provide
  sufficient detail
• National regional classifications split between
  two types of services
• Sales leasing
• Creative
• Reflected in SPPI turnover practices
• Even for those countries that use ISIC-based

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Turnover statistics (ONS developments)

• Two key variables
• Sales
• Commission and fees (for services where title is
  not held)
• Sales delineated down by type of medium
• Print, TV/radio, internet
• Advertising agency services delineated by
  activity
• Full service
• Direct marketing
• Design and concept
• Other

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Other turnover considerations

• Measurement from Advertising establishments
• Miss all secondary activity
• Sales of time (and space) can follow two
  different models
• Differ by country
• Differ by establishment within country

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Two different sales activities

• Broker
• Bring together customer and media
• No change of ownership
• Service is bringing together buyer and seller

• Distributive trade
• Purchase time or space from media
• Change of ownership of time (or space)
• Sell to customer
• Change of ownership of time (or space)
• Service is like retail
• Margin industry

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Entities
Media Agency
Media
Media Marketer (Sales House)
Advertising agency (Creative)
Customer
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Entity relationship Model 1 (Part 1)
Media Agency
Media
Media Marketer (Sales House)
Ad campaign
Advertising agency (Creative)
Customer
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Entity relationship Model 1 (Part 2)
Media Agency
Media
Negotiating - buyer and seller
Media Marketer (Sales House)
Advertising agency (Creative)
Customer
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Entity relationship Model 2 (Part 1)
Media Agency
Media
Media Marketer (Sales House)
Ad campaign
Advertising agency (Creative)
Customer
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Entity relationship Model 1 (Part 2)
Media Agency
Media
Media Marketer (Sales House)
Change of ownership
Advertising agency (Creative)
Customer
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Service Producer Price Indices (SPPIs)

• Separate indexes for creative and sales activity
• Further refinement by type of medium

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SPPIs for creative advertising services

• Pricing methods usually methods based on working
  time
• Productivity issue acknowledged
• Labour activities grouped by medium, function and
  expertise
• US use model pricing
• Future use in Netherlands

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SPPIs for sales and leasing

• Different indexes for different media
• Typical methods
• Pricing of repeated services
• e.g. Price per ½ page
• Average unit values
• e.g. Turnover divided by number of pages

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Typical specifications

• Single medium
• Allow for discounts
• Transaction not list prices
• Incorporate size of placed advertisement
• Length of commercial
• Size of press advertisement
• Banner size on WWW
• Incorporate size of audience
• TV viewers
• Radio listeners
• Web page views
• Media circulation

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Examples

• Germany press
• Spain radio
• Czech Republic internet
• Many countries do this
• US does not

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Constant Quality Size

• Size of the advertisement
• Important to success of advertising campaign
• Limited resource for producer
• And can be controlled or changed by the producer
• Need to be controlled when considering either the
  producer or the consumer perspective
• Of the space or time

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Constant Quality Audience

• Number of viewers, or readers, or listeners
• Important to success of advertising campaign
• Important to producer
• Valued by customers
• Economic activity of producer aimed to increase
  audience static
• Or at least not decrease
• TV or Radio broadcaster
• Newspaper publisher
• Need to be controlled when considering either the
  producer or the consumer perspective
• Of the broadcast or publication

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Sales and leasing of advertising

• Service is not the media production
• Advertising sales are a brokering or margin type
  service
• We are considering the service of selling
  advertising space and time
• Not broadcasting or publishing
• So does this matter?

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Some non-advertising examples to consider first

• Bottle of beer
• 750mL
• 330mL
• Quality is not the same!

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And now some advertising examples

• 30 second time slot on TV
• 1300 Monday
• 1800 Friday
• 2100 Saturday
• 0300 Sunday
• Are the qualities of the products the same?
• Viewing time

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And now some advertising examples

• Viewers for a given time slot on TV
• 15 audience share
• 5 audience share
• Are the qualities of the products the same?
• Viewing time

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But now look at some associated services

• Selling a bottle of beer (retail service)
• 750mL
• 330mL
• Are the qualities of the service of selling the
  same?

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Service of selling advertising time

• 30 second time slot on TV
• 1300 Monday
• 1800 Friday
• 2100 Saturday
• 0300 Sunday
• Are the qualities of the Service of selling the
  same?

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Service of selling advertising time

• Viewers for a given time slot on TV
• 15 audience share
• 5 audience share
• Are the qualities of the Service of selling the
  same?

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Differences in quality 5 vs. 15 viewers

• Different for the producer of the program
• Different for the media broadcaster
• Different for the customer
• But is selling the air-time a different service?
• Compare Is selling a 330mL beer different from a
  750mL?

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Regarding audience figures

• The audience figures are important to the
  customer and the media outlet
• And clearly a quality indicator for each of them
• But of what relevance are they to the quality of
  the (third party) advertising sales leasing
  agency?
• The advertising sales agency has no economic
  activity associated with changing the size of the
  audience
• Different from direct mail advertising
• Question to VG what shall we do?

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Questions?

• Thank you
• Matt Berger
• Ian Richardson
• United Kingdom ONS
• Jirí ulc
• Czech Statistical Office