Back to basics…
Today’s NY Times ran a very interesting article about Joel Moss Levison, a 28-year old college drop out who has made more than $200,000 in prizes entering his own online digital commericals in contests.
As the Times headlines it “Finding a Gold Mine in Digital Ditties”
But I think it is far more than that.
TV commercials used to be created and produced by ad agencies.
The agencies charged millions to come up with the ideas and then to produce them.
It was a very expensive proposition, and on a per-minute basis, more expensive than most Hollywood films.
We all understand the application of the ‘digital revolution’ to the news business. Cheaper cameras, cheaper edits, cheaper content in greater volume.
But what happens when the new technology hits the ad side of the business?
This is something we should pay more attention to, because ad income is the engine that drives the content side. We have a million ideas on how to arrange the content but when it comes to the revenue side, we kind of lower our heads and mumble a few words and hope that God will provide.
Perhaps it is time to rething the income side along with the content side, and apply the same lessons.
For the past two years, we have been producing daily content for a major cable provider in Washington, DC. It’s a hyperlocal news channel, and it has been extremely cost effective. Extremely. The VJs all work from home, the overhead is next to nothing. But the ad revenue side has been disappointing. While we were very revolutionary with the content creation, we left the ad sales and fabrication to a conventional agency.
This was a mistake.
Now, we are engaging in an equally radical experiment both in ad sales and ad creation, and ironically, we are borrowing from the ‘Avon Calling’ or Mary Kay Cosmetics model. But in this case, instead of selling nail polish or lipstick, our door-to-door sales force is selling ad spots on cable.
How does it work?
We have been able to cut the cost of producing local television content do low, that our break-even for ad sales is in the double digits. The very low double digits. Thus, we can afford to sell advertising commercial spots for local cable at $50 per spot. That’s pretty good for a local cable ad.
And because the rates are so low, we can attract a whole new class of potential advertisers – people who had never even considered buying TV commercials, because they thought it would be too expensive.
We’re commissioning a small army of ad maker/sellers (there is no term for this, because it never existed before). Their job is to go, quite literally, door to door, to the local pizzaria, the local shoe store, the local dentist and create a funny and clever 30-second spot (like Mr. Levison, using a camcorder and laptop), and then sell the spots. The creator gets 25% of the income from the spot sale, no matter how long the ad runs, they get paid 25% every time. The merchant gets a lot of face time on local cable for next to nothing. And we don’t need ad agencies or sales people. It’s all done door to door, and can be done by housewives (or househusbands), or students or retirees. Extra income and some fun at the same time.
Will it work?
I think so.
And I think it’s a very scalable business model.
Rosenblumtv 
hmm – given the state of the economy – how would this scale in smaller communities? I mean if you’re selling ads at $50 each, and there’s a 25% commission – that equates to $12.50 – I may end up having some agreement here from those whom I usually disagree with, but that’s not enough to live off of.
Now maybe I’m misunderstanding your last bit about what the charge is – are you saying that the creator gets 25% for creation then each time the ad airs, another 25% commission each time?
FMPOV, that’s a lot of selling just to make a living wage – and I have to admit, it will more than likely result in mediocrity of content if one is trying to produce quantity over quality for that living wage.
Can you clarify on this Michael?
Hi Cliff
In theory, at $50 you would get $12.50 every time the spot aired. Like a royalty to SAG actors in an ad. You make it once and sell it once. If the ad runs 100 times (not unreasonable at these rates) you would receive $1250. If the ad runs 1000 times, if the client keeps renewing, you get $12,500. Does this help?
The ads, after all, are 30 seconds long. Places like Current are paying $250 for 3 minute videos. And only paying once no matter how often the video is viewed.
I think this is a pretty good deal.
Yes – that changes the whole thing completely – that creates a more desirable income stream – Thanks for clarifying that 😉
It’s an interesting idea but think you are underestimating the amount of selling and creative effort that you would need to invest in this project.
Once again it’s never been the production crew or the technology that has driven the costs of commercials, it’s the creative’s that charge like wounded bulls and they are the ones you would be competing with.
Good ad’s are an art form all of there own. If you are writing, directing, shooting as well as editing something will suffer. Even a poorly acted, badly written cheap ad will close more doors than open and just because the client is paying very little won’t stop them from demanding the universe. By the time you are on day three of the 16th re cut how many spots do you need to sell to pay for the time you have wasted?
This ad was shot on a camera that cost $345 but it still took a hefty budget to get made… the client was paying for the concept not the ad.
Can do better concepts???
I guess it comes back to how good do they need to be for a local business on a cable channel? Good enough that the clients keep paying for them, good enough that the clients, brother’s, hairdressers sister thinks it was ok or you are stuffed, cause the client will pay more attention to what they think than you tell them 🙄
We ran a competition at Current for best TV spot. Lots and lots of entries. Some very clever. One was picked up by L’oreal for 10k! I think there’s an opening here for young creative types. Did you see the NY Times article?
Lots and lots of entries and one was picked up… do you see what is wrong with that equation?
Even the article about Joel, lots entries in lots of competitions but only one winner… the same winner over and over. That doesn’t give much hope to anyone other than Joel.
How many thousands of unrewarded hours work for the majority?
I can see how it works for the channel. No effort, no outlay, no expenses just paid spots filled with pre made ads by paying customers generated by an eager/naive unpaid sales force.
They take all the risk, do all the work and deal with any client problems.
Then there are safety issues, insurance cover, liability insurance… lots of small stuff that builds up costs and expenses that have to be paid now in the hope that one day they might get some return if someone likes their stuff and can see the need to keep paying for it… and all the while they are bleeding money they have to keep on selling… most, like the Travel Academy students will never get so much as one paid spot on air.
Heads you win, tails they lose.
This is not a contest that might lead access to prestigious accounts and a potential career in advertising, your idea is pure exploitation.
Verizon has its own advertising sales staff and production department, if they can’t sale time on your show it only means that there are not enough viewers to justify spending any time on it, and don’t blame the advertising agency either, they are bound to show viewer’s activities before attempting a sale, the same reason here, if there are no viewers they have nothing to sale. No matter how cheap the ad spot costs, if nobody is going to see it its ineffective and a big waste of money.
Cable companies have been giving free or reduced cost production for 20 years for clients who purchase advertising packages; the problem has been that a poorly shot commercial actually have adverse effect on the advertisers, it drove business away, and this was a study conducted by several marketing companies. A slice of pizza photographer by someone with no experience will make you puke, while good photography will turn the same slice into an appetizing item. The public don’t take into consideration that it was a low cost commercial; they compare the visual value with other existing commercials.
At 12.5% the advertisers would have to spend $10,000 for the photographer to make $1,250, good luck in getting a small pizza place to spend $10,000 in cable advertising, it will never happen.
$1,250 its about one third of the going cost of even the cheapest commercial, keep in mind that the photographers has to find the businesses, make the sales, write the proposal, get the contract signed and approved, write the script, get that approved, make changes, plan the shoot around the schedule of the business, get all the appropriate releases, shoot the commercial, edit it, get it approved, make appropriate changes, and submit the video; and if the advertisers do not like the spot he can reject it and the photographer must start over, and if or she doesn’t because isn’t worth the hassle he and your station could be liable for breach of contract.
The problem with offering cheap cable commercials to small retail businesses has always been that these businesses have a very limited radius that they attract business, nobody would travel 5 miles for a slice of pizza or to buy a pair of shoes from a small shoe store; and if the pizza is so good that people would travel afar then they don’t need advertising. The problem has always been that cable cover a large area far beyond what a potential client will travel to, meaning that most of the advertising is wasted away. This is why advertising that target only specific zip codes, like Val-Pak or similar programs have always been the ideal marketing tool for small local businesses.
My 50/50 partner in the Verizon venture from the beginning was, and still is Carl Spielvogel.
Carl was the Chairman and CEO of Backer Spielvogel Bates, at one time the largest ad agency in the world. He also founded the company. He is a man who knows the advertising business.
We would not have embarked on this course unless Carl thought is was a smart idea that would work.
He does.
As does Verizon. (no dopes either, and not particularly unacquainted with the advertising business).
They and we (and ad agencies as well) are looking for new models in a far more fractionalized world.
We think this is one that will work.
“We think this is one that will work.
I’m sure it will work too, with equal success as everything else you did.
The issues that I brought up above are the same that anyone thinking of becoming involved with your project will or should ask, as they would also expect that you reply to those issues. I don’t think that “you and Carl Spielvogel think that’s a good idea” would be a satisfactory and an honest explanation for those who are thinking to invest a lot of time and their money to follow your concept. I seriously doubt that Carl Spielvogel even heard about this little advertising rescue operation of your. With his knowledge he would shot the idea to the ground in a heartbeat.
You said that: “For the past two years, we have been producing daily content for a major cable provider in Washington, DC. It’s a hyperlocal news channel, and it has been extremely cost effective. Extremely. The VJs all work from home, the overhead is next to nothing. But the ad revenue side has been disappointing.”
For two years we’ve also been hearing from you of how successful the Verizon Hyperlocal operation in Wahshington is. I know that I asked this question before but never got an answer from you.
What criteria do you use to measure success, other than revenue? And how would a business stay in business without revenues.
Michael any chance you can give us the audience reach for this network? Actual subscribers? Your model if successful would make a very good business case for future rollout, but no doubt thats the plan.
You Have An Awesome Blog Keep Up The Good Work ..Cheers 🙂
We think it takes access to about 250,000 households to make the model work. Our general feeling is if a community can support a local newspaper it can support this. The key, of course, is driving down the production costs for the content so that the break-even for the spots is within the range of pennysaver paper ads.
A lot of local advertising $$ is spent on special interest, targeted publications and supplements. Maybe you should consider special versios of Push Pause — like a music/art/ entertainment edition that would attract nightclubs/bars/art galleries. Or a food edition that would attract restaurant advertising.
You still haven’t answered my questions Mike. I feel that anyone believing of such potential would want to know the answers.
Why isn’t Verizon advertising sales and production supporting your Hyperlocal. Are you part of Verizon of just leasing a channel under the FCC and congressional mandated commercial lease program?
What is your projected and minimum required contract per advertisers, as this will determine the potential revenue.
You can’t just charge $50 per spot across the board. Rates are assigned per time period meaning that the busiest hours gets the most and it drops off from there. How are you distributing and assigning the spots. This will make a huge difference or the revenue of those who sale and create the commercials. Even if you can get 20 spots per hours that’s only $125 of revenue to be divided among the makers of the commercials. Not a very good financial incentive for the time invested.
Who is creating and handling the contract and who is responsible for the content, Verizon, hyperlocal or the generator of the sale and the production. This could have huge potential liabilities and I doubt that Verizon will want any affiliation with your concept.
Who is carrying and who is responsible for liability insurance.
Lastly, can you show some proof of where in Europe is this system a success as you indicated on Craiglist?
I have a dozen more questions, but this can get you started.
My typo, that’s 10 spots per 1/2 hours, as I believe you told us your programs consists of apx. 5/5 minutes video segment per 30 minutes of programs produced daily. That I believe would leave room for ten commercials spots.