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Aug 11, 2009

Advertising 101, Comparing Online, TV, Cable, Radio, Newspaper, Magazine, Billboards, and Twitter

Q: I’m trying to decide between newspaper, magazine, billboards, online, radio, local cable… how do I evaluate different media opportunities?

A: Every media form has different strengths and weaknesses. Some are better for long-term branding, some better for driving transactions.

But there’s a simple formula that will help evaluate your options… the CPM, or “Cost Per Thousands.” (‘M’ being the Roman numeral for a thousand.)

CPM = [Cost of Advertising Package / Projected Impressions] x 1,000

Writers sometimes approach math as though it were a dead language only spoken in Mel Gibson movies.

But math can sometimes be your friend. Especially when it prevents you from getting screwed by someone with an ad to sell.

Let's start with the definition of Ratings. The Super Bowl – doing a national 42.6 rating – translates to 93,890,400 adults watching the big game. Thus, each Super Bowl ad delivered 93.4 million “Impressions,” or sets of eyeballs that had the potential to view the commercial message.

Impressions are the universal currency of media planners. Every time you run an advertisement, you should have an idea how many potential impressions it will deliver. Some other examples:

One ½-page newspaper ad in Columbus Disptach à daily circulation of 231,881

One radio spot on San Fran’s KFOG à 2.0 rating (with each rating point translating to 1% of the population or 52,432 adults) = 104,864 impressions

One ½-page magazine ad in Entertainment Weekly à1,760,815 paid circulation x 3.5 pass-along readership = 6,162,853 weekly impressions

One freeway billboard on I-105 in Los Angeles à 188,000 daily commuters passing sign x 30 days = 5,640,000 monthly impressions

To figure out the CPM for the above examples, take the cost of the advertisement, divide by the potential impressions, then multiply by 1,000.

Super Bowl TV: $2,600,000 per spot / 93,890,400 x 1,000 =$27 CPM

Columbus newspaper: $6,680 per insertion / 231,881 x 1,000 = $29 CPM

San Fran KFOG radio: $900 per spot / 104,864 x 1,000 = $9 CPM

Ent Weekly magazine: $72,025 per week/ 6,162,853 x 1,000 =$12 CPM

LA freeway billboard: $20,000 per month / 5,640,000 x 1,000 = $4 CPM

Comparing the different options, you can see that the freeway billboard is the most cost-effective way to reach 1,000 people.

Does that mean that everyone should start putting all their ad budgets into outdoor advertising?

No, because there are other factors in play… like how long consumers get to spend with your message (60 seconds in radio vs. 2 seconds as you’re zooming past that freeway billboard while late for a meeting and still trying to scarf a double cheeseburger).

Typical Advertising CPMs

Outdoor = $1-5 CPM

Cable TV = $5-8 CPM

Radio = $8 CPM

Online = $5-30 CPM

Network/Local TV = $20 CPM

Magazine = $10-30 CPM

Newspaper = $30-35 CPM

Direct Mail = $250 CPM

Generally, the more targeted the advertisement towards a certain demographic, the higher the CPM. So something with broad appeal like TIME Magazine (3,882,000 subscribers) can have a $15 CPM, while American Police Beat Magazine (60,000 subscribers) will have a CPM closer to $50.

But if you’ve written a mystery that has specific appeal to beat cops, advertising in American Police Beat might still be your best option – despite the high CPM – because of the low out-of-pocket cost ($3,000) and minimal waste. If you’re spending $150,000 on a ½ page TIME Magazine ad in the hopes that it’s noticed by a bunch of police officers, when 99.9% of TIME’s readers are not in law enforcement, that’s a bad decision.

CPMs are a guide, but used properly, they can help you negotiate for a better rate. Let’s say your buddy offers to let you run a banner ad on his website, which gets 2,000 homepage views per month. If he wants to charge $500 per month – which would be a $250 CPM – you need to tell that so-called “buddy” to stop smoking crack, or get more homepage views… because his CPM is nearly 10 times higher than a Super Bowl commercial. If he were to slash his price to $50/month ($25 CPM), now you’re in business.

Definition of Twitter Impressions

  • Tweets * Followers = Impressions
  • Waste factor = high
  • View time = seconds
  • Cost to service = lowest among ad channels
  • CPM = cost per million??

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