Very small advertising opportunities are literally not worth advertisers’ time

Written by Michael on November 28th, 2011

…it doesn’t matter how clever the opportunities are.

This is a simple point about the economics of local advertising, but it’s very important. I wish I’d understood it two years ago.

When I started a publishing business, I was told that you should generally not sell ad contracts for less than $100. At the time, I thought that was because ad salespeople priced their time more highly than I was willing to, and that I could bootstrap my way up by underpricing my time, like any respectable scab.

But here’s the thing: My time is only half of what’s at stake. The actual reason you shouldn’t sell for less than $100 is that if your product is worth less than $100, it will not be rational for advertisers to spend time buying your product.

I’m talking about the time required to evaluate an advertising opportunity, to run it past business partners, to obtain and transmit the graphical files, to settle on the message, to write the copy. These tasks sound piddly because they are. They’re obnoxious and time-consuming. That means that no business owner is going to do them unless there’s more than $100 in value at stake.

It doesn’t matter if the advertiser has no affordable alternatives. It doesn’t matter how great your product is. You know your product is great, but your advertiser doesn’t, and your advertisers have the right to evaluate your product. If you’ve designed a product that is so small that evaluating its worth is a losing proposition, then you have just deprived your advertiser of his or her rights.

Now, I’m not arguing that you should overprice your product. I’m arguing that you should make a product that’s worth a decent price.

Simply thinking smaller than everybody else isn’t going to work.

(Creative Commons stopwatch photo by purplemattfish.)

 

1 Comments so far ↓

  1. Michael says:

    A little aftermatter: I think this is actually a special case of Baumol’s cost disease. It’s very difficult to improve the labor efficiency of a media buyer — and unless your product has found a way to do so, it’ll be subject to the constraints above.

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