October 2005 - Per Inquiry

The Naked Truth: Why Media Demand Outstrips Supply

Let’s face facts: The successful direct-to-consumer advertising model that relies on a surge of up-front sales generated by an infomercial is becoming about as difficult to find as a Beanie Baby collector still willing to spend a thousand bucks for a rare little bear. One of the primary reasons is that, while media fragmentation has splintered audiences into smaller tribes of consumers, a commensurate decrease in media rates that reflects these shrinking audiences has failed to materialize. Those of us gray enough to recall the forgiving media landscape of the 1980s, when achieving a campaign’s goals was about as difficult as pulling off close-up magic on a kindergartner, are left to wonder: How can media rates continue to sustain themselves in light of this diminishing returns scenario?

The answer lies in some basic math that is fortunately so simple even I can explain it. It begins by accepting the statistics that suggest the entire amount of available domestic inventory for infomercial advertising is closing in on $1 billion. When a paid program is successful, its appetite for such airtime can be as high as $500,000 in media buys per week, and in some extraordinary cases, north of $1 million. If a program can sustain its run for a year, that means it’s not inconceivable that one smash hit could consume over $50 million or 5 percent of all available inventory! Imagine what this phenomenon would do to other economic markets. Say, for example, one party began buying 5 percent of all available bottled water? Do you suppose there would be an irrational rush on H2O?

That rare grand slam sets the bar for all others competing for the time periods, and if there are a handful of such programs running, you can begin to see how all it really takes is a few shows to prop up the entire market. When you layer in the perennials that sell no money down real estate, remedies for reducing anxiety, resin rods to help you get fit and the frequent “Diddy” aimed at zapping a zit, the mélange makes for healthy competition that belies the reality of the struggling marketplace.

As a result, this squeeze on the infomercial industry has forced it to evolve into a model that relies on multiple channels of distribution where the long-form advertising becomes an energy hub, which all the other spokes of the wheel-whether it is the Internet, radio, catalog or retail-get their juice. Hence, what once started as an accountable alternative to the nebulous world of general advertising is still driving measurable sales, but is beginning to sound a lot like, forgive the unsavory expression, general advertising! Could it be that the future of the ad industry may be in the grasp of a rambunctious group of entrepreneurs akin to pioneers blasting a trail in the Wild, Wild West? If so, then posters should paper Madison Avenue warning that the not-so-meek shall inherit the Earth. The question remains: Will the suits be looking at the ground or the horizon?

Rick Petry, a partner with Downstream, is a consultant to the direct marketing industry. He can be reached via e-mail at [email protected].


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