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Issue for May 2014

Pay-for-Performance Ads

Posted on Thursday, May 29, 2014 at 11:39 AM

A reader's question: Should I accept ads for which I get paid only based on how well the ad performs for the advertiser? Is there a formula for determining how it would work out for me?

By William Dunkerley

Q. In the last six months we've been approached by three different advertisers with basically the same proposition: run their ads for free and they'll pay based on performance. I don't know whether to go for this idea or not. My publication is a monthly print magazine. We've always billed for space based on a rate card or contract price. But these advertisers are suggesting that if we don't go along with a pay-for-performance arrangement, they may just go away. We're still bouncing back from the losses we incurred during the recession. I'd hate to see advertisers pull out now because we're not flexible. I asked them why they're insisting on a different arrangement. According to all three, it's because they're moving ad dollars from print to digital.

A. The request your advertisers are making sounds like a print version of the pay-per-click paradigm that is so prevalent in digital. But with pay-per-click it's clearly defined what you're getting paid for -- i.e., each click. You didn't say what specifc metric these advertisers have in mind for the pay-for-performance scheme.

The closest parallel would be if the ads included QR codes and payment was contingent on how many QR clicks occurred. If that's what they're pitching to you, there are several concerns that you should keep in mind.

How would you price a QR click? That question has two parts to it. The first is what's the value of the QR click to the advertiser? There's a big difference between a click on the Internet versus a QR click in a magazine that has a regular subscriber base. Internet clicks could include activity by casual browsers, visitors who misunderstood what they were clicking on, or people with a relatively low level of interest in whatever the click leads to.

QR clicks from a subscriber base, on the other hand, would likely be more focused. If your readership consists of people within an advertiser's target audience, your clicks should be more valuable than those generated by curiosity seekers who just happened upon a link in an Internet search.

A related factor: what is providing the printed space going to cost you per QR click? Preparing and distributing electrons for people to click on via the Internet is fairly inexpensive. Printing and distributing an ad with a QR code in it costs more.

So what it is worth to the advertiser and how much it will cost you to produce it are both important factors in pricing.

But "performance" may not be just a simple click in the minds of the advertisers. Through experience, a lot of online advertisers have come to realize that a click is a far cry from a sale. And when they are talking about pay-for-performance, they may be thinking of payment based on sales that can be traced back to the clicks.

That's not a new idea, even in print publishing. For instance, consumer electronics companies have long advertised products and made offers for purchase. The ads may have included a department code as part of the postal address, or an offer code, or a special telephone number. More recently, QR codes have been added to the list. The advertisers compute how much they're willing to pay the publisher for each sale based on a percentage of the revenue from each sale.

This is a no-risk venture for the advertiser. But the publisher must invest its paper, printing, and distribution costs. Frankly, I've not seen many instances where this has paid off well for the publisher. It may be a convenient way to fill a hole at the last minute if an advertiser drops out or if an editorial item doesn't materialize. But it may not be of much greater benefit.

Throughout, I've assumed that your advertisers are doing direct-response advertising. You certainly couldn't readily assess the performance of an image ad. But even direct-response ads produce other benefits for the advertisers. Whether or not by design, they do contribute toward the image of the advertiser, and the presence of the ad in your magazine lends credibility to it.

There is no universal formula for determining how well a pay-for-performance arrangement will work for you. Before setting any prices, I recommend that you do some experimentation. Do you have house ad data that might be helpful? If not, use a house ad as an experiment to test the viability of pay-for-performance. You might also propose an experiment with one of those advertisers.

Be cautious when considering any pay-for-performance scheme. The performance for which you will be paid will not be yours alone. Those results will also depend upon the effectiveness of the ad supplied by the advertiser, the attractiveness of the offer, the reputation of the advertiser, the ease of ordering, and the market demand for the product. You don't have control over those variables, yet your chance at revenue will depend on them all.

By the way, publishers are not the only ones who are being approached. According to the May 19 issue of Advertising Age, "Marketers increasingly want to pay agencies based on results they deliver, but agencies aren't alone in some unease at the prospect. Even the consultants that marketers hire to help pick agencies think it's a bad idea." The article quotes a search consultant who urges, "Don't work for free.... We're devaluing ourselves as an industry when you start working for free."

Whether or not running pay-for-performance ads amounts to working for free remains to be seen. I urge you to do your homework and experiment with the paradigm, and then you'll discover the answer in your specific case.

William Dunkerley is principal of William Dunkerley Publishing Consultants, www.publishinghelp.com.

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Ads on Covers?

Posted on Thursday, May 29, 2014 at 11:37 AM

In the news: Time and Sports Illustrated magazines to hit newsstands with advertising on cover I.

In the last week, issues of Time and Sports Illustrated have hit newsstands with small Verizon ads on their covers. The move is controversial; until now, magazine publishers have avoided running advertorial content on cover I in keeping with American Society of Magazine Editors (ASME) standards. To add fuel to the fire, AdAge.com reports that Time Inc. is considering running small ads in its tables of contents, another piece of magazine real estate that typically remains ad-free.

The move may spark a new trend in the magazine industry, but it may also do more harm than good. AdAge points out that magazine in violation of ASME's rules may be snubbed at the National Magazine Awards. Read the full write-up here.

Also Notable

PBS Mediashift on Multi-Platform Magazines

In a recent PBS.org's Mediashift column, Susan Currie Sivek discusses how the concept of magazine success has changed in today's multi-platform world. She calls upon Samir Husni ("Mr. Magazine"), Trish Hagood of MediaFinder, and MPA president Mary Berner for insight. Their perspectives vary, but all three experts agree that print still plays a vital role in most successful magazine brands. Read the discussion here.

Jet Magazine Shutters Print Edition

Earlier this month, Jet magazine's publisher announced plans to go digital-only in June, thus closing the door on six decades of print publishing. The magazine, which played an instrumental role in the civil rights era, has long covered lifestyle, entertainment, and fashion for African-American readers. Read more about its move away from print here.

Zinio Expanding Its Digital Publishing Presence

Zinio, a digital magazine subscription app that offers up more than 5,000 titles, is expanding its mobile publishing presence. Last month, the app acquired Audience Media, a content management system that will streamline multi-platform publishing (including online, print, and apps). Read more here.

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