Spending Per Person/Hour: Advertising, Ad-Supported Media

• by Joe Mandese  @mp_joemandese, April 2, 2018

On Friday, Research Intelligencerpublished a back-of-the-envelope analysis calculating the “hourly rate” Madison Avenue pays American consumers by underwriting the cost of the ad-supported media they access and consume. It turns out to be a nice round number: $1 per hour.

Today we’re following up with a more granular analysis analyzing the hourly rate based just on the advertising time, extracted from the content. Based on estimates that PQ Media calculated for Research Intelligencer, the average American is exposed to 1.59 hours of advertising time daily, making the hourly rate of advertising exposure $2.87.

Remarkably, these estimates are the first of their kind to calculate the amount of advertising exposure and advertising spending in the most human of terms -- the value exchanged with the humans who are being exposed to the ads.

Needless to say, most of that value isn’t being paid directly by advertisers to consumers, but comes in the form of underwriting or subsidizing the ad-supported content they would otherwise have to pay for.

The analysis was triggered by Publicis Groupe Chief Growth Officer Rishad Tobaccowala’s recent projection that the supply of consumer attention to advertising will decline 20% to 30% over the next five years, mainly because consumers are shifting their attention -- and pocketbooks -- to subscription-based media such as Netflix that has no advertising in it.

We’ll publish a follow-up analysis with Tobaccowala in tomorrow’s edition explaining the math he used to derive those projections.

Friday’s report generated some interesting reactions from readers.

“Curious why you guys used total time with ad-supported media vs. just the [ad] time that consumers saw,” pondered Tim Spengler, a long-time agency media chief who most recently has served on the supply-side. “Isn’t that the real metric? Time interrupted with ads divided by total ad spend?”

Our response was that this is the logical industry way of looking at the value exchange, but it’s not the way consumers would look at it, because advertisers don’t pay consumers directly -- they pay them indirectly with ad-supported content and media access. And that was the original point Tobaccowala made when he said the ad industry doesn’t respect consumers and is “paying them less than minimum wage.”

Either way you look at it, the value is considerably less than minimum wage: $1 per hour for ad-supported media, or $2.87 for pure advertising time. It’s also a lot less than most consumers would say is the value they would expect to receive for their time, suggesting that core of Tobaccowala’s thesis is indeed correct.