There’s an old joke in advertising that goes something like this: "I know I’m wasting half my media budget–I just wish I knew which half!"
Except it’s not really a joke. Every year, "Madison Avenue"–an old-timer phrase that equates to "the big ad agencies," spends tens of billions of dollars on media they cannot really measure, media which are actually losing effectiveness with every passing year.
Yes, friends, it’s my response to the recent Wired article.
Again, I’m not here to deconstruct the entire article, but to simply respond to its headline: "How Madison Avenue is Wasting Millions of Dollars on a Deserted Second Life." Specifically, let’s address these two issues in inverse order: "Millions of Dollars" and "Wasting."
"Millions of Dollars"
Millions of dollars sounds like a lot, doesn’t it? Millions of dollars are enough to set someone up for life. Sock away the money in conservative investments, buy your house on the North Shore of Hawaii, and kick back. Done.
But in terms of conventional media budgets, it’s not a lot of money. Two million won’t even buy a single superbowl ad. And that’s just counting airtime, not creative or production. It’s easy to spend eight figures–that is, $10,000,000–on the media, creative, and production of a single superbowl ad.
Similarly, it’s not unusual for companies to spend nine figures–that is, over $100,000,000–to launch key products, or to maintain top brands in the hearts and minds of consumers.
That "millions of dollars" is sounding a lot smaller now, isn’t it?
Let’s deconstruct that a bit further. The Wired article talks about multiple corporate presences, not just one. So those "millions of dollars" are spread across many companies, not just one. This means that the typical investment in Second Life is more like low six figures–that is, $100,000-250,000–or even lower.
The numbers now start sounding really, really small.
Or, in other words, they sound completely in-line with what you’d expect from a small marketing experiment in a new medium. Which is exactly what corporate presences in Second Life are.
"Wasting"
"Wasting" implies that there is a better use for the funds spent on Second Life. So, let’s take a quick look at some of the things you could have spent, say, your $100,000 on.
On the conventional side (choose only one):
- You could get a low-end television commercial produced (but not placed)
- You could get an evening of primetime airplay for that ad (say, 5,000,000 impressions)
- You could get a month of good radio coverage in a single large city
- You could run a single 1/4 page ad in the Wall Street journal
- You could get a prominent billboard produced and installed
- You could produce a nice brochure or catalog
On the online side (again, choose only one, and only if you haven’t chosen one of the tactics from the conventional side):
- You could have a solid website developed for a mid-sized company
- You could have a microsite developed for a single product of a major brand
- You could get a month of ad placements on a few good networks (say, 20,000,000 impressions)
- You could deploy a one-day front-page ad on single large site
- You could get 25,000-65,000 clicks to your website using paid search
- You could deploy a significant 4-drop email campaign
"But wait!" you say. "You mean I could get my ad shown up to twenty million times for that kind of money? That’s insane! How can reaching a few thousand people in Second Life compare to that?"
Well, remember that those are only ad impressions. That only means that they were shown. Somewhere. Sometime. Those ads that flash by as you’re editing your MySpace page? Yep, that’s an impression. Those little buttons on the bottom of the page where nobody scrolls? That’s an impression. The ad Tivo’d out of existence? Yep, that’s an impression.
On the conventional side, networks can’t tell if an ad has been skipped, missed, ignored, or even if anyone was sitting in front of the television set at all when it played. What they can tell you is that it was placed. And that, statistically, X millions of people watch the program the ad was placed on. So tying results to a specific campaign is difficult, except by after-the-fact research.
On the online side, we can measure click-through rates and track the actions of people who clicked through to the endpoint, whether that is a sale or an inquiry. But the numbers are small–for large network buys, clickthrough rates are typically below 0.1% and conversion through to a sale or inquiry can be 1-2%.This means that your $100K might only buy a few hundred people interested enough to buy or inquire about your services.
Those results suddenly don’t seem so great, do they?
And, when you get right down to it, they don’t seem that much different from what you might expect from a Second Life presence that has about the same budget.
How About Those "Tens of Billions?"
"So," you now ask. "What about those tens of billions wasted you teased us with in the headline? Where are they?"
It’s simple. That’s just a reference to the total size of the advertising industry. Every year, it places tens of billions of dollars of media. Mostly conventional media. You know, the kind that is difficult or impossible to measure the direct results of. And there are some indications that they like it that way.
So maybe a better article would have been to compare media attention to media spend, and to evaluate if "Madison Avenue" is changing to meet the times, or clinging to media which decline in effectiveness with every passing year. We already know that for the under-25 demographic, internet use exceeds television use. In fact, it looks like the internet has passed radio and is becoming as indispensible as television for Americans.
However, most big brand ad spending doesn’t reflect this. In fact, spending on online marketing activities is typically less than 10% of the total media budget. Sometimes under 5%. From the numbers, it certainly doesn’t seem that all of the big agencies are spending appropriately online.
Instead, where does it go? Television, radio, billboards, print. Yep. All the stuff that they’re familiar with. And all the stuff you can’t really measure directly.
So We Should All Spend Millions on Second Life?
Not at all. As I’ve said before, blindly rushing into Second Life, or any virtual world, or any online or offline media, simply isn’t a good idea.
Every effective marketing campaign should start with your goals. Is your goal to move a lot of product at an online store? Well, guess what, paid search may be exactly the right thing to do. Is your goal to raise awareness of your brand in a big way across a broad range of demographics? Hey, television might be the right thing for that. Are you looking to create a community of very engaged users in a specific field? A microsite with social media components might be the right thing for that.
Are you looking to get in touch with early adopters, content creators, and social media users? Are you looking to experiment in a medium which Gartner thinks will become a primary part of the greater internet? Are you interested in what people really, really think of your brand–no holds barred, delivered in person and in real time? Then Second Life might be the right place to be.
The reality is that we haven’t discovered even a fraction of the possibilities of virtual worlds. We haven’t explored even a tiny percentage of the business models. We haven’t forged the new techniques that will make stronger, more relevant connections between people and brands.
And we can only do that by, well, a little experimentation. Would you like to experiment with us?
