A critical response to the eight main arguments against AVEs in Macnamara’s paper

Hamish Pringle offers below a critical response to a recent paper by Jim MacNamara, which outlined 8 key arguments against use of the AVE metric. Hamish brings an advertising perspective to the debate, based on his 44 years’experience in the industry. He was for 10 years the Director General of the IPA and for the past 6 years a Council member of the Advertising Standards Authority. The views expressed in Hamish’s paper are his own.

Jim MacNamara’s full paper can be found here: http://amecorg.com/wp-content/uploads/2011/10/Ad-Values-to-Measure-PR-Paper.pdf.   Hamish’s responses are in green.

The argument against AVEs

A critical analysis shows that the method has a number of serious practical and ethical flaws as follows. At least eight factors render advertising-editorial equivalency arguments fundamentally flawed:

1. Editorial publicity can be negative. Clearly, it is spurious to compare negative publicity with the best creative advertising. Yet most AVE calculations do just this. Few proponents of this method go to the time-consuming trouble of deducting negative articles and negative paragraphs or sections within articles;

There’s no reason not to apply judgement to articles generated by PR activity.  It would be foolish to ascribe a positive financial value to a negative piece.  In an annual assessment of a PR agency’s, or in-house department’s achievements in terms of editorial coverage gained, it would be perfectly reasonable to score each item of coverage, good, indifferent, or bad, on an agreed basis.

2. Editorial publicity can be neutral. Even this type of publicity cannot be validly compared with advertising because advertising is never neutral;

The flaw in this argument, which is repeated below, is that there should be no attempt to compare editorial publicity with advertising in terms of its content.  The point is that the readership of magazines and newspapers trust the editorial, but are more cynical about the advertising.  Indeed trust in advertising, as measured by the Advertising Association, has been falling over time.  A reader’s relationship with a magazine in particular is a close one.  Often part of relaxed ‘me time’ the magazine’s editorial is authoritative and influential.  A key reason why advertisers place their ads within the pages of carefully chosen titles is because of this positive relationship – they believe the editorial context will enhance the effectiveness of their advertising.

3. Editorial articles often contain coverage of competitors including favourable references to or comparisons with competitors. Advertising never favourably compares competitors and usually does not mention competitors;

This argument misunderstands the nature of journalism.  A key reason why journalists are disinclined to write a story about just one brand is because they know their readers value their balance and objectivity.  So while it’s not impossible to get a solus article it’s much more common (and easier) for the brand to get into an editorial feature with competitors.  The journalist is creating a mini marketplace which is of value to their readers, and in the process may comment favourably on some brands, or not.  Which? Have built an enormous business on this basis.  It’s generally true that advertising doesn’t promote competitors, but like every rule there are exceptions.   Avis Rent-a-Car’s “We’re No.2, we try harder” was a hugely successful campaign despite the fact, or indeed because of referring to Hertz.  But comparative advertising is an important genre and, like editorial, tries to help the customer make up their mind.  The key difference is that the advertiser is always vulnerable to the Mandy Rice-Davies dismissal “Well he would (say that) wouldn’t he?”

4. Editorial coverage can be poorly positioned which affects its impact. Advertising is almost always positioned prominently, often with guaranteed prominent positioning through payment of loadings or volume bookings;

The relative positioning of an ad is a function of the negotiating skill of the advertiser or their agency, and money.  There are many ads which may not appear to be “positioned prominently”, but which are relatively inexpensive, and thus can be cost-effective – for example direct response ads in the classified section.  Similarly editorial coverage doesn’t have to be in the front of the book to be influential.  A short piece in the recipe section could have a galvanic effect on the sales of a new kitchen gadget.

5. Editorial coverage can be poorly presented – e.g. with ambiguous headlines, the client’s name buried in the story, and even errors. Advertising is prepared by creative professionals for maximum impact;

See 1. Above.  Macnamara doesn’t appreciate that the client’s name being buried in the story can be a good thing.  The reader comes across it having already taken on board positive comments and they’re less likely to see it as a paid-for plug.  Advertising is always created in the hope of maximum impact, but read any publication, listen to commercial radio, or watch an evening’s TV and you’ll see that a huge proportion fail in the attempt.

6. Editorial coverage can be in non-target or low priority media – i.e. media that do not reach key target audiences and markets, or media that are low circulation and strategically less important. These are media in which advertising may never be placed, rendering comparisons meaningless. Points 1-6 show that AVEs are methodologically invalid;

Of course editorial can appear in off-strategy media, but then these off-target articles can have their value discounted.  See 1. Above.

7. AVE calculations are usually based on casual advertising rates which are higher than the rates negotiated for advertising campaigns. This further inflates the so-called value of publicity in many cases and makes AVEs statistically invalid;

The correct term in the UK is ‘rate card’ not ‘casual advertising rates’.  The client and PR agency can agree which rate they use in the evaluation.  In the case where the advertiser is either negotiating media space themselves, or through an agency, then their private rates can be used.  Where the advertiser is relying on PR and spends no money on advertising, then they have to use rate card prices.  For syndicated monitoring services, rate card also has to suffice as it’s too complicated to apply individual negotiated rates to each brand.

8. Perhaps most significant of all, even if editorial meets all the key characteristics of advertising – i.e. it is positive, only promotes the client organisation, is well positioned in strategically important media and well presented – Advertising Value Equivalents only calculate the cost of buying equivalent media space and time for advertising; they are not a measure of value. Advertising is not evaluated in terms of what it cost (suggesting that advertising is valuable simply because it cost $X million is spurious – even silly). Advertising today is measured in terms of audience reach, share of voice, recall of messages, and increasingly in outcome terms such as inquiries, leads or sales generated.  ‘Value’ is gained from achievement of such objectives.  Therefore, AVEs are also financially invalid as they mix metrics from two different sides of the balance sheet.

Here is the other major flaw in the argument.  Macnamara refers to AVE as an evaluative tool when it’s not.  An advertisement may cost £1,000, but that’s not the same as the value it delivers, which may be less, or more, depending on multiple factors.  See the IPA Effectiveness Awards for the gold standard on evaluation: http://www.ipa.co.uk/effectiveness/case-studies

Similarly the AVE ascribed to a piece of editorial is merely the theoretical cost of buying that space as if it were an ad, not an estimate of the value it’s added to the brand.  The cost is theoretical, because editorial space, often the most prominent and most read, isn’t for sale – that’s why appearing within it is of value to brands.

The role of the AVE can be seen as a measure of comparative opportunity costs between PR and advertising.  Given the choice between buying an advertising space for £1,000, or spending £1,000 on PR, what should one do?  If the PR activity generates an amount of net positive editorial, the space it occupies is costed in terms of advertising rates, and this adds up to more than £1,000, then surely it’s been a worthwhile investment?  If an agreed 2x or 3x factor is applied in recognition of greater trust and thus credibility for the brand bestowed by editorial, then that’s an added bonus.

A fairer calculation would include all the costs involved in securing the editorial coverage compared to those needed to produce the advertising.  This would include agency fees, productions costs, and related expenses.  This total should be netted off the AVE achieved to see if the PR activity is as cost-effective as the advertising channel when its production costs are added to the media cost and pro-rated per single column centimetre.

As analyses of the IPA Effectiveness Awards case histories have proven, brands need a mix of paid-for, earned, and owned media communications.  The main priority is achieving fame, and successful PR is a key way of doing so, as is advertising.  The question is, if allocating money to PR delivers as much or even more ‘earned’ space than the equivalent spend on ‘paid for’, then surely it should be given a fair share of the available budget?

It’s also worth bearing in mind that though there is an apparently rigid separation between editorial and ad sales departments within media owners, both are fully aware of who the brand advertisers are, and this can have a mutually reinforcing effect.

Hamish Pringle

LinkedIn: https://www.linkedin.com/in/hamishpringle/

Twitter: @hamishpringle