Cheap Foreign Media: It Ain’t Just the Exchange Rate

by Tig Tillinghast, Jan 23, 2002, 12:00 AM

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Our online media markets aren’t very efficient, and those inefficiencies give media buyers some great opportunities - like the foreign media buy opportunity.

Where it’s easy to buy – networks with large economies of scale and long client lists, for instance – the prices can be high. Where it’s difficult to buy, prices have to be lowered to attract demand.

The international markets haven’t had a good time of it. The very small media budgets in other countries, coupled with an infrastructure and user sophistication that tends to lag behind ours in the U.S., have combined to make online media difficult to sell. To get advertisers to pay anything at all, most vendors are giving media away for less than a dollar CPM. Just this week, a South American correspondent of mine told me of a $0.10 CPM deal.

There aren’t “online media buyers” in most countries. Instead, reps have to sell to all-around buyers who need heavy incentives to get involved with the new media.

What makes this phenomenon of interest to U.S. buyers is the fact that somewhere around 40% of the traffic coming to many of these sites – typically major national newspapers and other traditional media outlets – comes from the U.S.

That means that, despite having 60% wastage, the incredibly low rates of international media more than compensate

Take that $0.10 CPM media buy (granted, it’s probably not representative of the market as a whole), and apply it to a former client of mine, McDonald’s. The Hispanic market is a big deal to McDonald’s. They have their own budgets set out for it, typically in the low-tens of millions. But what about the other $400 million they spend?

Even considering a 60% out-of-universe wastage, I can assure everyone that a $0.25 CPM is an entire order of magnitude better than the current prices clients like McDonald’s pay.

Better yet, if the U.S. funds were to flow in this direction, it would quickly accelerate the ripening of these foreign media markets, providing still better competition for media vendors in and outside the U.S.

However, two primary obstacles stand in the way of such an outflow. First, it’s difficult to marshal together foreign media buys with great enough scale to make transactions convenient. Some of the large ethnic networks make this easier, but at the expense of making the media about as expensive as our own domestic breed. Some new companies are already trying to bridge this gap by providing automated transaction systems that allow agencies access to multiple foreign sites’ media.

The second obstacle – perhaps greater – is the unwillingness of agencies to mix their existing media buys with ones that have only several percent the equivalent cost. Buyers feel open to sharp questioning, possibly even ridicule, if they can’t answer the question: why is it that this is so cheap? Have we been wasting our money on previous buys?

Before we condemn the insecurity of the agency employees, though, we have to recognize that they have good reason for such defensiveness. Most clients punish agencies for winning media deals that prove previous transactions to have been expensive. That sort of training leads to further inefficiencies.

But agency people owe their clients at least a look at foreign media. They should present it as a test, merely an inexpensive experiment. The results – if positive – can then be used to further negotiating clout among domestic media vendors as well.

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