March 2005 - The Value of Time

Long-form media buying is a pit. A commodity pit, that is. And to buy avails that will let an infomercial turn a profit, you’d better know what you’re doing.

By Jack Gordon

Long-form DRTV advertising has some nice advantages. Veteran media buyer Dan Zifkin can rattle them off almost without taking a breath.
In a half-hour infomercial, says Zifkin, president of Zephyr Media Group of Evanston, Ill., “you create a name and brand identity and you get to sell your product. You can do it all very cost-effectively, as opposed to a 30-second (general-rate) spot where you just advertise instead of sell…The sales you bring in with a long-form program will help pay for some of your other advertising. And you’ll know tomorrow how well it did at selling your product. That’s incredibly powerful.”

In order to run the infomercial, however, you have to buy a half-hour of television time (actually, 28 minutes and 30 seconds) in which to air it. Media time represents the biggest single expense, by far, that a typical DRTV marketer incurs. Buying the right time slots, in the right markets, at the right prices so as to make a campaign pay is both an art and a specialized science. The vast majority of DRTV advertisers farm out the buying to experienced media agencies that do it for a living.

The industry-standard agency commission adds 15 percent to the cost of the TV time. But you don’t have to wade very deeply into the waters of long-form media buying to realize why most marketers consider that a standard cost of doing business.

The first thing to understand about long-form DRTV is that media time available for 30-minute infomercials “is a commodity, like wheat,” says Mark Ratner, senior vice president of hawthorne direct inc., an agency based in Fairfield, Iowa. He estimates that roughly $800 million to $900 million worth of long-form time is up for grabs annually in the United States. Media time is sold by local broadcast stations as well as by national cable networks. Most of the time is bought (and sometimes resold) either a month or a quarter in advance, though some slots are purchased up to a year ahead and some are obtained on very short notice.

Stations and cable networks set rates for their available long-form time slots (avails) in upcoming periods, but agencies insist that the published rates apply mainly to those who don’t know what various time slots are actually worth. “A TV station will quote you a rate card, and if you don’t know any better, you’ll get taken,” says Steve Nober, president and COO of Mercury Media of Santa Monica, Calif.

An auction would be the wrong metaphor for the negotiating process that determines how most time actually is sold, Nober says. But by the same token, as Ratner puts it, “the highest bidder” for a particular 30-minute slot, or a package of slots, “will generally win.”

Time Is Money-Big Money
By Jack Gordon

How much can a marketer afford to pay a television station or a cable network for a half-hour time slot that will allow an infomercial to turn a profit?

Obviously, the number of orders and the amount of revenue an infomercial generates have a great deal to do with the product, the offer and the creative. But regardless of a program’s quality, there are two standard ways to measure the cost-effectiveness of a particular long-form media buy-or the average of all media buys for an infomercial campaign. Depending on the client’s preferences, agencies can track either or both.

Cost per order (CPO) is determined by dividing the cost of the media time by the number of orders the advertiser receives. If a half-hour time slot costs $100 and the infomercial generates 10 orders, the CPO is $10. This applies regardless of how much customers paid for each order.

Media efficiency ratio (MER) is a snapshot view of return on investment for the time slot a marketer bought. MER is the total revenue generated by an infomercial divided by the cost of the media time. If a 30-minute slot costs $500 and generates $1,000 in sales, the MER is 2.0, also expressed as 2:1.

The revenue factored into the MER calculation includes the price customers pay for the product plus shipping and handling charges. At the marketer’s discretion, it may or may not include additional money generated through upsells by the call center or anticipated revenue from continuity programs.

CPO and MER are only meaningful in relation to an individual marketer’s breakeven CPO and breakeven MER. To calculate these, the marketer must determine his or her total direct variable cost on a per-unit basis: For each exercise machine or cosmetic kit you sell, what is the hard cost to make the product and to pay for telemarketing, shipping, fulfillment, administration, royalties to the talent and production people who made the infomercial, etc.? Agencies can help with the per-unit calculations.

The breakeven CPO is the total amount charged to the consumer minus the total direct variable cost per unit. Suppose the product sells for $20 plus a $6 shipping charge. The consumer thus pays $26 for the order. If all other per-unit costs (except for the media time) add up to $12, then the breakeven CPO is $14. If the price you pay for the time vs. the number of units you sell gives you a CPO of $14.01, you lose a penny on every order. (Remember, however, that CPO generally does not account for upsells or continuity sales and says nothing about the value derived from branding, driving traffic to retail outlets, and so on.)

The breakeven MER is the total charged to the consumer divided by the breakeven CPO. If the consumer pays $26, and your breakeven CPO is $14, and you’re not factoring in upsells, the breakeven MER rounds to 1.9.

In practice, agencies agree that the average MER for a successful infomercial campaign is about 2.0. That’s the actual MER, not the breakeven ratio. In other words, a $500 time slot that generates $1,000 in revenue is usually a pretty good buy. “I would typically consider anything above a 2.0 great,” says Chris Homer, president of Media Power of Portland, Maine.

If the average long-form advertiser can make a buck with an MER of 2.0, the math above has a striking implication: The cost of media time is not only the biggest single expense to a typical DRTV marketer but is at least a little greater than all other expenses combined.

“As a rule of thumb, that’s true,” confirms Steve Nober, president and COO of Mercury Media in Santa Monica, Calif. “You might make a little money on shipping and handling.” But if you’re spending $1 million a week on media and getting a 2:1 MER, he says, “you can make a lot of money.”

Special thanks to Peter Koeppel of Koeppel Direct Inc. in Dallas.

Long-form media buying operates in a kind of parallel universe to general-rate advertising of the 30- or 60-second variety. Most television stations do their programming quarterly, Ratner says. That is, they decide which programs to plug into which time slots. Their salespeople then try to sell commercial time in those programs to general-rate advertisers.

When a broadcast station in Boston or Boise, Idaho, (or a cable network such as Lifetime or Pax) finds that long-form DRTV marketers will pay more for a half-hour slot at 1 a.m. than general advertisers will pay to run spot ads in reruns of “I Love Lucy,” Ratner says, they offer the slot as infomercial time. The economics get sweeter because “the station doesn’t have to buy the “I Love Lucy’ episode. We send them the [infomercial] tape, they put it in the machine-it couldn’t be easier. And they don’t have to worry about a general advertiser canceling out. If an infomercial cancels, they can always find another one to fill the slot.”

Indeed, the station probably has the phone numbers of several agencies that are always on the lookout for “fire sales”-time that can be bought cheap, on short notice, for a client’s infomercial.

A station that starts running infomercials at 1 a.m. often will continue running them until 5 a.m. or 6 a.m., Ratner says. Thus, that block of time is added to the national commodity bank of avails.

From the point of view of the station or cable network, the balancing act has to do with Nielsen ratings. Ratings determine general-advertising rates, and infomercials usually draw lower ratings than regular programming. A station that runs too many infomercials, or runs them in primetime, risks cutting its own throat in the ratings game, Ratner says. A station that runs too few will find itself filling blocks of time far less profitably.

This is why most infomercials appear late at night and on weekend mornings. John Shearson, vice president of long-form advertising for Euro RSCG 4D DRTV, an agency whose media buying is done out of San Diego, Calif., sums up the relationship between general-rate advertising time and long-form avails like this: “When stations and networks have high ratings and low general-rate inventory, that usually means lower availability for 30-minute infomercial slots. When the supply of general-rate time is high and ratings are low, the station will open up more half-hour inventory to beef up revenue.”

Stations generally send out their list of avails, with rate cards, at the beginning of every quarter, explains Peter Koeppel, president of Dallas agency Koeppel Direct Inc. Experienced buyers essentially ignore the rate card and bid on avails (most often a month, rather than a quarter, in advance) based on their historical knowledge of how many orders an infomercial for a particular kind of product is likely to generate in a certain market at a certain time. “Maybe your bid won’t win you the time,” Koeppel says. “But people who bid too high will give the avails back” when they or their clients discover they’re running infomercials at a loss. This is often the reason an agency can grab the time cheaper in a fire sale.

“In a perfect world,” notes Shearson, “I’d be able to buy all of my time during the week [my client's infomercials] are to air. Fire sales allow clients to maximize their revenue potential.”

According to Koeppel, the cost of a 30-minute avail can range from under $100 (for a late-night slot on a small-market broadcast station) to about $50,000 for a weekend-morning slot on a national cable network such as USA.

Ratner agrees with that range. The rough average, he adds, is $700 to $800 in the local-broadcast market and $3,000 to $3,500 for national cable.

Dealing in the commodity pit is complicated by the fact that some of the people buying avails from stations and networks are brokers who intend to resell the time. Many agencies criticize brokers as unnecessary middlemen-speculators who add costs but not value to the system. Even the critics admit, however, that brokers can lose as easily as they can win if they guess wrong about long-form buyers’ willingness to pay more for the time than the broker did.

Zifkin says that Zephyr Media brokers some of the avails it buys, and that the practice serves a purpose by helping to keep prices in line with market realities. “Brokers have been a convenient whipping boy” for many agencies, he says.

A $50,000 avail may be a great buy or a $75 avail a lousy one, depending on how much revenue it generates for the advertiser. The cost-effectiveness of a media buy is determined by looking at two standard measurements: cost per order (CPO) and media efficiency ratio (MER)-see sidebar on page 46 for more information.

Agencies agree that the average MER for a particular media buy or an entire infomercial campaign is 2.0 (or 2:1). This means a $500 buy usually is considered successful if the infomercial generates at least $1,000 in sales.

“It really depends on the campaign, but in today’s world a 2.0 is a pretty good ROI,” says David Savage, executive vice president of ATC Agency Services of West Chester, Pa. “We have clients who can generate 3:1s and 4:1s, but those are generally results for higher-priced products.”

Once in a blue moon, an infomercial hits a spectacular home run. Shearson of Euro RSCG says the best ROI he ever saw was “an 80:1 ratio on a $25 media buy.”

Nancy Marcum, CEO of Marcum Media & Associates of Phoenix, says the greatest return she ever got from a media buy was for “one of the first infomercials that ever aired: “Paul Simon: Get Rich With Real Estate.’ The ROI was 300:1.”

Such anomalies aside, a 2:1 ratio is considered plenty difficult to hit consistently. And the never-ending battle to avoid overpaying for time slots is complicated by seasonal variations. For instance, Savage and others say that in the second quarter of every year, consumer response tends to fall off while stations try to maintain their first-quarter rates. The commodity market eventually recovers its equilibrium, but this makes April a notoriously troublesome month for media buyers.

Similarly, agencies say, “Bloody October” is problematic because stations try to cash in on phantom holiday shoppers who are still out enjoying the fall weather instead of watching television.

In the third quarter, July-September, television viewers are scarce, lowering the value of-though not necessarily the asking price for-long-form avails. Marcum summarizes the next two upcoming seasonal challenges like this: Second quarter: “High rates.” Third quarter: “Low HUT (households using television) levels.”

Joel Gable, media manager for Ellison Media Co. of Phoenix, says the long-form media game has become more competitive over the past five years, but that many changes are for the better. “Not long ago, direct response was the dreaded bottom-feeder of media investment,” he says. “Now, with the proliferation of quality shows and products, increased consumer at-home spending, and broadcast outlets trying to maximize revenues, the big slice of DRTV media buying enjoys a more favorable status.” Gable points out that some traditional general-rate advertisers-car dealers, for example-have begun to test and sometimes show results from long-form DRTV programs.

If long-form advertising has proliferated in the United States in the past few years, it has exploded in the United Kingdom. “Five years ago, there were probably two channels taking long-form airtime in the U.K. Today, there are probably close to 100,” says Michael De Vere of London media agency 2B on TV. The increase in availability has fueled “a dramatic expansion” of long-form advertisers in the U.K. market.

Sky TV, the “main platform for long-form in the U.K.,” now serves about 7.5 million households, approximately double the figure of five years ago, De Vere says. “And the growth of digital TV has spawned another platform, Freeview, which now has a further 5 million homes available.”

Whichever side of the Atlantic you’re on, buying long-form time wisely isn’t likely to get easier any time soon. Nancy Marcum is right in suggesting this as the last word on the subject: “Knowledge is power.”

Media Buying Sources

Following is a reference list of domestic and international media buying companies for DRTV.

Note: this is a partial list based on companies that are listed in ERA’s 2004 Membership Directory and other industry reference guides. Please visit for a more complete list.

2B on TV
+44 (0) 20 7351 0700

Acorn Intl.
011 86 1088 118685

Affiliated Media Group
(904) 642-8902

Apex Media Sales
(480) 596-6320

ATC Agency Services
(610) 430-7800

Best Direct (Intl.) Ltd.
+44 20 8868 4355

Canis Media
+44 (0) 1494 878 078

Cannella Response Television
(262) 763-4810

Capital Media
(949) 305-0670

Cesari Direct
(206) 282-1492

Chief Media
(212) 300-8970

(503) 222-0025

CPO Direct Inc.
(312) 645-7700

Danoz Direct
+61 2 9490 6066

David Chaladoff Media
(641) 472-6700

Diray TV
(203) 544-8855

Direct Response Media
(610) 995.0200

E&M Media Group
(212) 455-0177

E&M West/Camelot
Media Inc.

(818) 780-1761

Ellison Media Co.
(602) 404-4000

(503) 228-5555

Fairway Media Inc.
(480) 585-1886

Glomail Intl.
(905) 881-3302

GoodTimes Entertainment
(212) 951-3000

hawthorne direct inc.
(641) 472-3800

Home Run Media Inc.
(773) 244-1882

Home Shopping
Service (HSS)

+33 1 43 90 65 00

Icon Media Direct Inc.
(818) 995-6400

Industex SL
+3493 254 7100

Infotainment Media
(310) 312-9570

InfoWorx Turnkey DRTV
(561) 852-1818

InterMax Srl
+39 0731 21 39 68

iTV Direct
(619) 954-0025

JBT Media Management
(480) 777-8811

Kingstar Media
(416) 869-0631

Koeppel Direct Inc.
(972) 732-6110

Lockard & Wechsler Direct
(914) 591-6600

Lockard & Wechsler
West LLC
(818) 557-8313

Longform Inc.
(818) 832-0964

Marcum Media LLC
(602) 953-8558

MediaCorp Worldwide
(913) 317-8900

Media Partners Worldwide
(562) 439-3900

Media Power
(207) 775-4363

Mercury Media
(310) 451-2900

MoreMedia Direct
(786) 276-8626

(407) 206-6577

New Day Marketing Ltd.
(805) 965-7833

Northern Response
(Intl.) Ltd.
(416) 261-6699

Onyx Productions Inc.
(323) 692-9830

Palisades Direct
(310) 828-9100


(949) 859-3100

Premier Solutions
(305) 577-8282

Premiere Exclusives
+5255 5395 4847

(310) 996-5800

Respond2 Inc.
(503) 276-4094

Results Media Group
(602) 257-0007

Revenue Frontier, LLC
(203) 328-0678

SBS Broadcasting
+352 26 12 15 1

Simply Media TV Ltd.
+44 (0) 20 8104 0493

Strategic Media
(207) 871-9958

Studio Moderna
+386 1 47 33 800

The Media Agency
(310) 226-6720

Tower Media
(312) 856-9200

Vector Direct UK
+44 1628 405 119

(310) 996-5873

Warren Direct
(512) 479-8300

Williams Worldwide TV
(310) 449-4506

Zephyr Media Group
(847) 328-1519

Jack Gordon is editor-at-large for Electronic Retailer magazine. We would appreciate your feedback. To submit comments, point your browser to


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