Electronic Retailer - April 2011 - 46

WHY IS IT TOUGHER TO MAKE DRTV PAY?

“As the environment becomes exponentially more complex, it becomes increasingly challenging to identify and buy the audience you’re looking for. That is probably the most critical challenge facing the DR advertiser today: How can you mitigate your risk?”
– Dick Wechsler, Lockard & Wechsler Direct

And don’t forget all those eyeballs that now watch television on the internet, adds John Barnes, president of Mercury Media of Santa Monica, Calif. Think of websites such as YouTube and Hulu, and you realize that fragmentation isn’t just occurring among networks and service providers but “across platforms,” he says. What’s more, some of the eyeballs watching TV on the internet platform are doing so on mobile devices.

What it Means for DRTV
In a reversal of a decades-long trend, the percentage of households served only by free broadcast TV has actually risen slightly in the past two years, says Rob Medved, CEO of Canella Response Television of Burlington, Wis. He attributes this both to the economic recession and to the array of new HD channels launched by local broadcasters since the national conversion to a digital broadcast platform in 2009. “My local NBC affiliate now has a weather channel,” he says to illustrate. “And I get a digital HD movie channel over the air.” It isn’t only channels and networks that are fragmenting but delivery systems, Medved points out. A few years ago, consumers could choose TV service from broadcast, cable or satellite. Now phone companies have jumped into the game. AT&T and Verizon both are adding television subscribers faster than traditional cable or satellite providers, he says. The main effect of all this fragmentation, from an advertiser’s perspective, is that fewer people are likely to be watching any given program at a given time. But media rates have not fallen to reflect that new reality, says Bob Yallen, CEO of InterMedia Advertising of Encino, Calif. Referring specifically to short-form DRTV, he says, “I believe that media rates are out of control… Audiences are decreasing and rates are going up.” What’s more, Yallen says, “Consumers aren’t responding [to DRTV offers] the way they used to because there is more competition for their dollars. They get hit by social media, mobile media, traditional media – everywhere they go they get hit with advertising and messaging that encourages them to spend money. So with media overvalued, it’s difficult to make traditional DRTV campaigns profitable.” The effect is so dramatic that it has changed the whole DRTV model, Yallen says. The old approach was to “run DR as long as you can, and then go to retail when you stopped making money.” Today many DRTV advertisers count themselves lucky if they can achieve a media efficiency ratio (MER) of 1:1, meaning that direct sales from a commercial pay back the cost of the media time but nothing else –amounting to a loss on every direct sale. The upshot is that short-form DRTV often makes sense today only if the product involves a continuity program or if the marketer can take it to retail “almost simultaneously” with the launch of the DR campaign, Yallen says. “And if you can no longer use DR profits to fund a

523324_IMS.indd 1

electronicRETAILER | April 2011

3/21/11 3:21:20 PM

Electronic Retailer - April 2011

Table of Contents for the Digital Edition of Electronic Retailer - April 2011