Revisited Sector Paper on: ISIC 7310 Advertising Matt Berger & Ian Richardson United Kingdom ONS Jiří Šulc Czech Statistical Office ISIC 7320 Market Research and Public Opinion Polling

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Why are we here? Substantial investment by VG in independent development of –SPPI’s –Turnover for the Advertising industry Need to –Bring these together –Complete work on Turnover –Determine any recent changes in SPPI’s –Expand to Market Research and Public Opinion Polling

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September What we shall see Summary of earlier VG SPPI work on Advertising only Some details on Advertising Turnover … and a promise to complete this work

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Overview History Status Classifications Turnover SPPI’s –And a discussion on quality

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September History 1993 –French paper on model survey for Advertising (Oslo) 2001 –Mini-papers on Advertising SPPI’s from France, Australia & UK (Örebro) 2002 –Advertising SPPI Principal paper from France (Nantes) 2004 –SPPI paper from Austria –Turnover paper from Spain (Ottawa) 2005 –OECD-Eurostat SPPI guide

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Status (SPPI) ISIC 7310 Advertising OECD inventory –26 of 38 have SPPI for at least part More detailed queries –Sales & Leasing 12 of 29 have SPPI for at least part –Creative component 9 of 29 have SPPI for at least part

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Classification - Industry ISIC Rev 4NACE Rev 2NAICS Advertising73.11 Advertising agencies Advertising Agencies Media representation Media Buying Agencies

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Classification – Products (CPA only) Code Description Full service advertising services Direct marketing and direct mailing services Advertising design and concept development services Other advertising services Sale of advertising space on a fee or contract basis in print media Sale of TV/radio advertising space or time on a fee or contract basis Sale of Internet advertising space or time on a fee or contract basis Sale of events related advertising Other sale of advertising space or time on a fee or contract basis Resale of advertising space or time on a fee or contract basis

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Classification - Observation ISIC (& any direct derivatives) do not provide sufficient detail National & regional classifications split between two types of services –Sales & leasing –Creative Reflected in SPPI & turnover practices –Even for those countries that use ISIC-based

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Turnover statistics (ONS developments) Two key variables –Sales –Commission and fees (for services where title is not held) Sales delineated down by type of medium –Print, TV/radio, internet Advertising agency services delineated by activity –Full service –Direct marketing –Design and concept –Other

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Other turnover considerations Measurement from Advertising establishments –Miss all secondary activity Sales of time (and space) can follow two different models –Differ by country –Differ by establishment within country

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Two different sales activities Broker –Bring together customer and media –No change of ownership –Service is “bringing together buyer and seller” Distributive trade –Purchase time or space from media Change of ownership of time (or space) –Sell to customer Change of ownership of time (or space) –Service is like retail Margin industry

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Entities Customer Advertising agency (Creative) Media Agency Media Media Marketer (Sales House)

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Entity relationship – Model 1 (Part 1) Customer Advertising agency (Creative) Media Agency Media Media Marketer (Sales House) Ad campaign

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Entity relationship – Model 1 (Part 2) Customer Advertising agency (Creative) Media Agency Media Media Marketer (Sales House) Negotiating - buyer and seller

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Entity relationship – Model 2 (Part 1) Customer Advertising agency (Creative) Media Agency Media Media Marketer (Sales House) Ad campaign

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Entity relationship – Model 1 (Part 2) Customer Advertising agency (Creative) Media Agency Media Media Marketer (Sales House) Change of ownership

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Service Producer Price Indices (SPPI’s) Separate indexes for creative and sales activity Further refinement by type of medium

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September SPPI’s for creative advertising services Pricing methods usually methods based on working time Productivity issue acknowledged Labour activities grouped by medium, function and expertise US use model pricing –Future use in Netherlands

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September SPPI’s for sales and leasing Different indexes for different media Typical methods: –Pricing of repeated services e.g. Price per ½ page –Average unit values e.g. Turnover divided by number of pages

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Typical specifications Single medium Allow for discounts –Transaction not list prices Incorporate “size of placed advertisement” –Length of commercial –Size of press advertisement –“Banner” size on WWW Incorporate “size of audience” –TV viewers –Radio listeners –Web page views –Media circulation

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Examples Germany – press Spain – radio Czech Republic – internet Many countries do this –US does not

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Constant Quality & Size Size of the advertisement –Important to success of advertising campaign –Limited resource for producer And can be controlled or changed by the producer –Need to be controlled when considering either the producer or the consumer perspective Of the “space” or “time”

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Constant Quality & Audience Number of viewers, or readers, or listeners –Important to success of advertising campaign –Important to producer Valued by customers Economic activity of producer aimed to increase audience static –Or at least not decrease »TV or Radio broadcaster »Newspaper publisher –Need to be controlled when considering either the producer or the consumer perspective Of the broadcast or publication

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Sales and leasing of advertising Service is not the media production Advertising sales are a brokering or margin type service We are considering the service of “selling advertising space and time” –Not broadcasting or publishing So does this matter?

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Some non-advertising examples to consider first Bottle of beer –750mL –330mL –Quality is not the same!

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September And now some advertising examples 30 second time slot on TV –13:00 Monday –18:00 Friday –21:00 Saturday –03:00 Sunday –Are the qualities of the products the same? Viewing time

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September And now some advertising examples Viewers for a given time slot on TV –15% audience share –5% audience share –Are the qualities of the products the same? Viewing time

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September But now look at some associated services Selling a bottle of beer (retail service) –750mL –330mL –Are the qualities of the service of selling the same?

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Service of selling advertising time 30 second time slot on TV –13:00 Monday –18:00 Friday –21:00 Saturday –03:00 Sunday –Are the qualities of the Service of selling the same?

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Service of selling advertising time Viewers for a given time slot on TV –15% audience share –5% audience share –Are the qualities of the Service of selling the same?

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Differences in quality – 5% vs. 15% viewers Different for the producer of the program Different for the media broadcaster Different for the customer But is selling the air-time a different service? –Compare “Is selling a 330mL beer different from a 750mL?”

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Regarding audience figures The audience figures are important to the customer and the media outlet –And clearly a quality indicator for each of them But of what relevance are they to the quality of the (third party) advertising sales & leasing agency? The advertising sales agency has no economic activity associated with changing the size of the audience –Different from “direct mail” advertising Question to VG – what shall we do?

Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling September Questions? Thank you Matt Berger Ian Richardson United Kingdom ONS Jiří Šulc Czech Statistical Office