If you want the math done right, ask a creative director: Traditional media is overpriced by 58%
According to Kathy Durham, VP of Marketing at HP, 40% of the media people consume today is online, yet advertisers spend only 5% of their money in the online space. Allow me to do a little math for you. This means 95% of media budgets are directed at 60% of media consumption. This means that advertisers are overpaying for traditional media by 58%. On the other side of that coin, it means they are underpaying for interactive media by 87%.
Now, the mossbacks will immediately come that advertisers know what they’re going to get for their investments in traditional media, whereas they’re unsure what they’ll get for their investments in the interactive space. Set aside for the moment that we know with some certainty that 21st-century consumers are more likely to believe a recommendation for a product they receive from a friend or independent third party online than they are to believe pitch that comes uninvited through their TV set. Just because something is easy to measure doesn’t make it the right thing to do. Advertisers and agencies alike have been slow to take the steps that are necessary to build compelling mathematical models capable of breaking out ROI by individual media. Make no mistake, not only is this possible, some of the better brands in America already do it and do it well. The math required is complex, but very doable.
The math about how much advertisers are overpaying for traditional media, however, isn’t complex at all. A child could do it. Why do the numbers seem not to bother anyone?