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A World Without Ratebase



By Bill Mickey
04/28/2006

The MPA is spending $40 million to beat the drums for magazines as a viable advertising medium against media budget-competitors TV, radio and the Internet. Yet ratebase, a tool long held dear by many magazine publishers as an ad pricing measurement for who and how many are actually paying for a magazine, is contrary to how other media track their consumers.

Ratebase is increasingly criticized as an archaic standard that doesn't give insight into what advertisers are looking for anyway;audience. Jack Kliger, president and CEO of Hachette Filipacchi, has through his role as chairman of MPA been vocal about rolling ratebase back and focusing on audience measurement metrics that help magazines compete with other mediums rather than with other magazines. Folio: asked seven magazine executives, including Kliger, to simply remove ratebase from the equation and imagine in their own words how the publishing landscape might change without it.

Dan Capell President, Capell & Associates
"Trying to deliver ratebase causes publishers to make some of the worst decisions they can possibly make. In order to deliver a set number you may have to go out and spend a fortune to get that last five or ten thousand subs to deliver your promise.

It's like telling McDonald's you can only sell a billion hamburgers next year and then stop. I can't think of any industry that has this hanging over their head to deliver a fixed number. The paid circ becomes the negotiation where the real ad buy is based on audience, so one of the thoughts I've always had is let's go to total audience. In other words, if you're buying on audience, let's just issue audience statements, not paid circulation statements. One of the major publishers has to step forward and say we've either got an alternative to ratebase or we're getting rid of ratebase. But it takes one of the big guys to step forward."

John Squires Co-Chief Operating Officer, Time Inc.
"The question is not what would happen if we didn't have a ratebase but rather how would we price our pages without it? We have an imperfect world today, but at least it's perfectly predictable. To colleagues who argue that we eliminate ratebases I say, 'Fine, drop ratebase guarantees and price off your audience numbers. Have you looked at how they move year to year?'What's not to like about having a stable mechanism to set advertising rates?

"That said, we do have difficulty in getting our goals aligned. Our circulators manage to ratebase and circulation sales data. Our editors manage to newsstand sales and reader study data that have little to do with the sales figures on our ABC statements. And our advertisers manage to audience profiles and, occasionally, audited circulation data. I would like to see the three in harmony. I think magazines would be best served if circulators were focused on bringing in the best customers for advertisers. These would be the best readers for our products;not necessarily the best 'buyers' as presently measured by ABC. But in order to manage readership, we need a far better tool than we currently use to measure our audiences. It must be more timely, more accurate (predictable) and give us benchmarks for reader engagement."

Richard Lawton Senior Vice President, Comag Marketing Group
"If ratebases were to become a thing of the past, it would remove one of the most powerful drivers of oversupply and inefficiency in the single copy distribution channel. It would trigger systemic improvement in how magazines are marketed at retail. While publishers have been able to justify a 33 percent sell-through ('rational bad business' paradox), such inefficiency causes a great deal of friction and collateral costs in the distribution channel representing a threat to the viability of the category at retail.

"The elimination of ratebases would quickly lead to increased sales efficiencies and profits, and reduce the amount of clutter at retail. Additionally, the time and energy currently being misspent in the ongoing tug-of-war (push versus pull, ad-driven versus consumer-based) between channel players over distribution levels could be rechanneled toward cooperatively finding more innovative ways to merchandise and promote the category to everyone's benefit."

David Ball Group Consumer Marketing Director, Meredith
"As a circulator, I don't think there would be a big impact on the ad sellers. They are selling based on audience already; that wouldn't change. As circulators, we are already being asked to take on a role as audience managers as well as circulation managers.

I don't see there being a big impact on us at Meredith because we are focused on maximizing circulation profit, which would not change if we did away with ratebases. We may change the way we measure profitability by switching to profit per audience member instead of profit per net copy.

"It would be good because it would make the buying process for print equivalent to the way that other large scale media such as TV, radio and outdoor are bought and analyzed. No other medium is bought on audience but then paid for based on how many people paid."

Jack Kliger President and CEO, Hachette Filipacchi Media
"This issue is driven in large part by the increased demand by advertisers and their agents for measuring advertising effectiveness and return on investment.

Magazines want to be in that evaluation. In order to do that, we have to have the readership measurement metric that is considered timely and accurate and thus comparable to other media measures. That is not what we have now, but we are working toward creating it.

"When we get to that point, it will absolutely be a much more advantageous evaluation of magazines' power for advertisers and agents to measure us based on audience metrics, readership metrics and consequently advertising effectiveness measurement than the system we have now;which is based on the number of copies in the marketplace.

"We have to present the viable, preferable alternative which we're working on;it is absolutely preferable to a system that does not set up the ability to measure the connection between the advertising buying metric and the measurement of advertising effectiveness and return on investment, and ratebase is an outmoded system that measures input but is not able to measure advertising output and that is what we want to get to."

Jeff Clapper Publisher, Crafts Publishing, Amos Press
"I'd describe a ratebase-free world as efficient. Publishers would find themselves with a much better profit picture, while advertisers would be afforded a greater trust in the quality of the eyes reading their ads.

"For us, if the circulation drops, the advertisers want an explanation or a price break. It's pretty simple. Guaranteeing a certain circulation just seems like a way to slow down that natural model. We already use measurements like renewal rates and reader involvement to show our endemic advertisers the dedication of our readers and the vitality of our titles. With some of our niche titles, circulation is a large majority of our revenue picture, and advertising is the gravy. If we started pushing up circulation in favor of advertisers, not only would we lose our profitability, we'd also lose the quality and clarity of our reader base."

Steve Aaron Publishing Director, Tech & Music and Living Groups, Future US
"For the most part, a magazine without ratebase would have better circulation profitability, especially for larger, more general interest publications that push their ratebases to drive higher ad yields. We target the quality and passion of our audience.

"Publishers would have to refocus their efforts on the meaningful relationship they have with their audience. The strength of this relationship impacts the quality of impressions delivered and overall ROI of the advertising partnership."

By Bill Mickey
04/28/2006







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