Revisited Sector Paper on ISIC 7310 Advertising ISIC

Revisited Sector Paper on: ISIC 7310 Advertising ISIC 7320 Market Research and Public Opinion Polling Matt Berger & Ian Richardson Jiří Šulc United Kingdom ONS Czech Statistical Office

Why are we here? • Substantial investment by VG in independent development of – – SPPI’s Turnover for the Advertising industry • Need to – – Bring these together Complete work on Turnover Determine any recent changes in SPPI’s Expand to Market Research and Public Opinion Polling Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 2

What we shall see • Summary of earlier VG SPPI work on Advertising only • Some details on Advertising Turnover • … and a promise to complete this work Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 3

Overview • History • Status • Classifications • Turnover • SPPI’s – And a discussion on quality Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 4

History • 1993 –French paper on model survey for Advertising (Oslo) • 2001 –Mini-papers on Advertising SPPI’s from France, Australia & UK (Örebro) • 2002 –Advertising SPPI Principal paper from France (Nantes) • 2004 –SPPI paper from Austria –Turnover paper from Spain (Ottawa) • 2005 –OECD-Eurostat SPPI guide Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 5

Status (SPPI) ISIC 7310 Advertising • OECD inventory – 26 of 38 have SPPI for at least part • More detailed queries – Sales & Leasing • 12 of 29 have SPPI for at least part – Creative component • 9 of 29 have SPPI for at least part Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 6

Classification - Industry ISIC Rev 4 NACE Rev 2 NAICS 2007 7310 Advertising 73. 11 Advertising agencies 541810 Advertising Agencies 73. 12 Media representation 541830 Media Buying Agencies Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 7

Classification – Products (CPA only) Code Description 73. 11 Full service advertising services 73. 11. 12 Direct marketing and direct mailing services 73. 11. 13 Advertising design and concept development services 73. 11. 19 Other advertising services 73. 12. 11 Sale of advertising space on a fee or contract basis in print media 73. 12 Sale of TV/radio advertising space or time on a fee or contract basis 73. 12. 13 Sale of Internet advertising space or time on a fee or contract basis 73. 12. 14 Sale of events related advertising 73. 12. 19 Other sale of advertising space or time on a fee or contract basis 73. 12. 20 Resale of advertising space or time on a fee or contract basis Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 8

Classification - Observation • ISIC (& any direct derivatives) do not provide sufficient detail • National & regional classifications split between two types of services – Sales & leasing – Creative • Reflected in SPPI & turnover practices – Even for those countries that use ISIC-based Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 9

Turnover statistics (ONS developments) • Two key variables – – • Sales delineated down by type of medium – • Sales Commission and fees (for services where title is not held) Print, TV/radio, internet Advertising agency services delineated by activity – – Full service Direct marketing Design and concept Other Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 10

Other turnover considerations • Measurement from Advertising establishments – Miss all secondary activity • Sales of time (and space) can follow two different models – Differ by country – Differ by establishment within country Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 11

Two different sales activities • Broker –Bring together customer and media • Distributive trade –Purchase time or space from media • –No change of ownership –Service is “bringing together buyer and seller” Change of ownership of time (or space) –Sell to customer • Change of ownership of time (or space) –Service is like retail • Margin industry Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 12

Entities Media Agency Media Marketer (Sales House) Advertising agency (Creative) Customer Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 13

Entity relationship – Model 1 (Part 1) Media Agency Media Marketer (Sales House) Ad campaign Advertising agency (Creative) Customer Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 14

Entity relationship – Model 1 (Part 2) Media Agency Negotiating - buyer and seller Advertising agency (Creative) Media Marketer (Sales House) Customer Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 15

Entity relationship – Model 2 (Part 1) Media Agency Media Marketer (Sales House) Ad campaign Advertising agency (Creative) Customer Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 16

Entity relationship – Model 1 (Part 2) Media Agency Media Marketer (Sales House) Change of ownership Advertising agency (Creative) Customer Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 17

Service Producer Price Indices (SPPI’s) • Separate indexes for creative and sales activity • Further refinement by type of medium Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 18

SPPI’s for creative advertising services • Pricing methods usually methods based on working time • Productivity issue acknowledged • Labour activities grouped by medium, function and expertise • US use model pricing – Future use in Netherlands Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 19

SPPI’s for sales and leasing • Different indexes for different media • Typical methods: – Pricing of repeated services • e. g. Price per ½ page – Average unit values • e. g. Turnover divided by number of pages Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 20

Typical specifications • Single medium • Allow for discounts – • Incorporate “size of placed advertisement” – – – • Transaction not list prices Length of commercial Size of press advertisement “Banner” size on WWW Incorporate “size of audience” – – TV viewers Radio listeners Web page views Media circulation Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 21

Examples • Germany – press • Spain – radio • Czech Republic – internet • Many countries do this –US does not Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 22

Constant Quality & Size • Size of the advertisement – Important to success of advertising campaign – Limited resource for producer • And can be controlled or changed by the producer – Need to be controlled when considering either the producer or the consumer perspective • Of the “space” or “time” Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 23

Constant Quality & Audience • Number of viewers, or readers, or listeners – Important to success of advertising campaign – Important to producer • • Valued by customers Economic activity of producer aimed to increase audience static – Or at least not decrease » » – TV or Radio broadcaster Newspaper publisher Need to be controlled when considering either the producer or the consumer perspective • Of the broadcast or publication Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 24

Sales and leasing of advertising • Service is not the media production • Advertising sales are a brokering or margin type service • We are considering the service of “selling advertising space and time” – Not broadcasting or publishing • So does this matter? Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 25

Some non-advertising examples to consider first • Bottle of beer – 750 m. L – 330 m. L –Quality is not the same! Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 26

And now some advertising examples • 30 second time slot on TV – 13: 00 Monday – 18: 00 Friday – 21: 00 Saturday – 03: 00 Sunday –Are the qualities of the products the same? • Viewing time Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 27

And now some advertising examples • Viewers for a given time slot on TV – 15% audience share –Are the qualities of the products the same? • Viewing time Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 28

But now look at some associated services • Selling a bottle of beer (retail service) – 750 m. L – 330 m. L –Are the qualities of the service of selling the same? Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 29

Service of selling advertising time • 30 second time slot on TV – 13: 00 Monday – 18: 00 Friday – 21: 00 Saturday – 03: 00 Sunday –Are the qualities of the Service of selling the same? Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 30

Service of selling advertising time • Viewers for a given time slot on TV – 15% audience share –Are the qualities of the Service of selling the same? Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 31

Differences in quality – 5% vs. 15% viewers • Different for the producer of the program • Different for the media broadcaster • Different for the customer • But is selling the air-time a different service? –Compare “Is selling a 330 m. L beer different from a 750 m. L? ” Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 32

Regarding audience figures • The audience figures are important to the customer and the media outlet – And clearly a quality indicator for each of them • But of what relevance are they to the quality of the (third party) advertising sales & leasing agency? • The advertising sales agency has no economic activity associated with changing the size of the audience – • Different from “direct mail” advertising Question to VG – what shall we do? Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 33

Questions? • Thank you Matt Berger Ian Richardson United Kingdom ONS Jiří Šulc Czech Statistical Office Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22 -26 September 2008 34