Media Buying Power: The True Cost Of Advertising

Buying power is an interesting concept. On its face, it makes sense. The more money you have, the more power you wield in a given market. While there was a time when this held true in the media industry, it was wildly overstated and now obsolete. Thanks to technology and a shift in thinking, marketers are getting smarter with their ad budgets. Let’s take a look at the misconception about media buying power and how to truly think about your media.

Media Buying 101

Before we dive into how buying power may or may not affect your cost of media, we should start with some of the basics. Media buying is the purchase of advertising time and/or space from a media outlet. This includes TV networks, blogs, newspapers, radio stations and more. In regards to television buying, different factors influence the price including time, space, ratings, demand on inventory, and more. Websites look at different price considerations. Factors like ad placement, number of pages, size, a website’s traffic, and length of time all play a role.

Some aspects of pricing involve personal relationships between media buyers and sales reps. This is where the influence of media buying power comes into play. The art of negotiation can have an impact on media rates. A skilled negotiator will be able to get the most value for their clients. It certainly is a talent that shouldn’t be overlooked. However, using media buying power as a tool for negotiation may not be as effective as you think.

The Myth About Media Buying Power

Many advertisers believe that if they partner with a large media buying agency, they’ll get preferential treatment when it comes to the cost of media. This concept works for manufacturers who reduce their rates due to economies of scale because of limitless potential to manufacture. In other words, the more a product you buy, the less you pay per unit. The opposite is true for media buying. Why? Because media publishers must protect their rates by getting the bulk of revenue from the big players first.

Wingman Media’s President and CEO, Steve Dubane, explains “broadcasters with media buying history with an agency will often have rate integrity, especially with the largest agencies. Rate integrity means that broadcasters will keep the same rate that the agency normally pays, even if they could discount the rates based on other factors like ratings or demand. Rate integrity helps broadcasters hit their budgets.”

The truth is that ad inventory is actually limited in supply. Broadcasters know that if they sell to the biggest buyers at the lowest rates, they can never make it up with small agencies. As a result, the size of the agency makes no difference to the media rate.

Programmatic Media Buying Leveled The Playing Field

Whatever buying power large agencies claimed to have had is now dead in the water. The killer? Programmatic advertising. Namely, programmatic real time bidding. Real time bidding, or RTB, is an open auction where buyers bid on inventory in real time. Advertisers and publishers prefer RTB auctions because it’s a cost-effective programmatic buying strategy. RTB allows advertisers to set their prices and targeting variables so they can be matched with the best inventory to reach their target audience.

Furthermore, programmatic advertisers also have access to Private Marketplace (PMP) deals. PMP’s are invite only and typically have more premium inventory than RTB. As a result, advertisers get access to specific inventory or unique ads, that they otherwise wouldn’t get with RTBs. The common theme with all these bidding strategies is that buying power has no effect on rates. In this biddable media environment, it doesn’t matter how big your agency.

Keeping Costs Low With Remnant Advertising

Another media strategy that buying power has no, well, power over is remnant advertising. When broadcasters are unable to sell all their inventory, they try to cut their losses by selling remainder inventory off at heavily reduced prices [2]. This unsold inventory is called remnant media. In some cases, media publishers may discount their inventory by as much as 90%. Buying power and negotiation play little to no role in remnant, because the broadcasters are eager to sell the inventory before it expires.

Remnant advertising [3] does have its challenges. Inventory can be limited and scalability reduced. But if you approach it strategically, you can turn remnant media buys into real results. The trick is to know where the remnant advertising is and who can get it. Furthermore, you should make sure the remnant ads still reach your target audience Otherwise, you’re wasting your budget, even if it is heavily discounted.

Speak To An Experienced Media Buying Agency

The most important thing you can do for your brand is to consult with a media agency that knows what they’re doing. Don’t be fooled by big agencies that try to sell you on their size alone. You need a team that has the experience, knowledge, and proven track record of getting your brand the most value. At Wingman Media, we’ve been doing this for nearly two decades. We’d love to walk you through our process and show you exactly how we can deliver a media plan that makes the most out of your budget. Give us a call today.