Tuesday, April 17, 2012

How Advertising Works

Advertising is not a difficult concept to grasp. Or it shouldn’t be. But it seems advertisers and consumers have lately been confused as to how it works.

So allow me to clarify.

First, advertising is a paid announcement (as opposed to “public relations”, where no money is paid). A person, an organization or, more often, a company wants you to know about their product, service or other “thing”. But they may not know you personally, so they pay someone with the means to reach you. That “someone” could be your neighbor, but it’s most likely someone who can reach a lot of people frequently, such as a pastor with a church bulletin, an executive with a TV station or a person running a website. And, oftentimes, the money advertisers pay to announce their “things” actually help sustain (or even create) those very same bulletins, TV stations and websites.

Second, advertising is straightforward. Every time money has traded hands, it should be obvious to everyone. This is for the advertiser’s benefit as much as it is for the consumers’. No one likes to be deceived and no good can come from pretending that an ad is not an ad. In every form of media, space (or time) should be set aside and designated as the advertisers’ or sponsors’. Sometimes it’s dramatic, like a commercial break on TV, or less obvious, like “promoted” hashtags on Twitter.

Third, advertising is not evil. Certain advertisers might be misguided, unethical, or evil, but the act of advertising is not, itself, inherently evil. As stated above, an advertisement is simply a paid announcement.

That said, a tactic like “promotional consideration” has been popping up lately. This is when the sponsor of a television show (or movie) pays a network to feature its products within the content of the program. So one of the characters might drive a particular vehicle and mention it by name during the episode (“Follow that specific make and model of hybrid luxury sedan!!!”). The only indication that this mention has been paid for is a brief line in the credits at the end. Does this pass the “straightforward” test above? Does this set aside a designated space for the message? It certainly pushes the limits.

Fourth, advertising is transactional. This might seem like a reiteration of the first point, but it’s not. In the first point, the transaction is between the advertiser and the media provider. Here the transaction is between the advertiser and the end consumer. This is the point that seems to have been forgotten by both sides; advertisers and consumers should each benefit from the transaction. We, the viewers and readers, allow advertising in our programs and magazines because we understand (or should understand) that the advertiser is supplementing the true cost of the content.

If we watch a program on TV or on the Internet and it features advertising, then we have a reasonable expectation of free content—we pay for it with our time. And, yes, time is most certainly money.

Now, if we prefer to watch the same TV show without commercials, then we should not be surprised when we’re asked to pay a fee to watch the program. The producers need to cover their costs somehow, whether it’s one advertiser paying $2 million or 2 million consumers paying $1 apiece.

Services that try to have it both ways—charge a fee and show commercials—run the risk of alienating their consumers. Examples of this are movie theatres that show multiple commercials and previews (commercials that should supplement the price of the tickets) before the feature and Hulu Plus.

The rampant availability of illegal downloads (music, movies, TV shows, books, etc.) has changed the game, but not it the way that you would think. Most viewers understand that content costs money to produce and are willing to pay for it, within reason. Fewer still believe they are entitled to enjoy whatever content they want for free without advertisements. This is understandable, actually. These people believe they were unfairly price-gouged by entertainment companies for decades and are only getting what’s theirs. But, for the most part, people are actually willing to pay for content and will only turn to illegal downloads if there are no viable options. The comedian Louis CK understands this phenomenon and recently sold his comedy special directly to fans for $5 and asked them not to share it illegally. So far it seems to have worked.

But what does this have to do with advertising? People hate ads. They hate ads because as costs to produce a TV show/movie/song/album/book have gone up, so has the need to increase the amount of ads shown. So it’s actually the responsibility of advertisers and networks to strike a fair balance between too much and too little advertising.

The balance between the wants of advertisers, the needs of media providers and the tolerance of consumers is a win for all parties. Consumers should recognize the benefit advertisers provide in making their content free or reduced in price; advertisers should respect the right of consumers to accept or reject the “thing” being advertised based on its merits; and media providers should strike the right balance between their true costs and desired profits.