Your ‘working media’ may be reducing when you spend on digital; here’s why

Published: December 24, 2018 3:02:54 AM

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 commerce, e-commerce, digital payment, digitalisation, online commerce, online transactions, online shopping, payment, online payment, online market, e-market, digital market, digital IndiaSo should we stop spending on digital? Of course not!

By Vineet Sodhani

It is estimated that India will be spending Rs 13,000 crore in 2018 on digital advertising, up from Rs 8,000 crore 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% (even in China), Indian digital advertising spends continue to grow at 20-25% year-on-year, and show no sign of slowing down.

On a growth curve

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 and boosting sales during flash sale events, just to name a few. The ability to track and report engagements adds to building confidence in the medium. Another big advantage is the very low entry cost.

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 around metrics that we have no option but to believe. While we are able to measure the response of a campaign to a reasonable extent, the numbers it seems are not reliable with frequent reports of exaggeration in reported engagements. Meanwhile, digital media agencies make two to three times their commission on digital, as opposed to 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.

No smoke without fire

If you observe how a typical advertiser has spent his media budget over the last two decades, you would notice that almost all the money earmarked on media was spent 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 fee — but also pay other intermediaries such as technology fees, reporting fees, content margins, etc, that are estimated to be in the range of 30% of total digital spends. Furthermore, money in digital media has given rise to unscrupulous practices such as bots and click farms, making viewability an issue. As per estimates, only 50-60% of ads are actually seen on digital. Many reports have suggested ad fraud rates could double this year from the 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 intermediary cost as well as viewability issues.

So should we stop spending on digital? Of course not! But 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; how can I be sure that my brand served in a safe environment; what is the viewability ratio, and what is the proof of the same? Most importantly, do we have enough transparency in the medium to allow us to investigate the above?

Meanwhile, advertisers will need third-party auditing under joint UK/US web standards. Please note that while some may say digital buying is via programmatic and hence difficult to deep dive into, the reality is that programmatic offers transparency. And as a buyer of digital media, you have every right to transparency.

The author is CEO, Spatial Access

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