1. 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

2. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 2 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

3. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 3 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

4. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 4 Overview History Status Classifications Turnover SPPI’s –And a discussion on quality

5. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 5 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

6. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 6 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

7. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 7 Classification - Industry ISIC Rev 4NACE Rev 2NAICS 2007 7310 Advertising73.11 Advertising agencies 541810 Advertising Agencies 73.12 Media representation 541830 Media Buying Agencies

8. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 8 Classification – Products (CPA only) Code Description 73.11.11 Full service advertising services 73.11.12 Direct marketing and direct mailing services 73.11.13 Advertising design and concept development services 73.11.19 Other advertising services 73.12.11 Sale of advertising space on a fee or contract basis in print media 73.12.12 Sale of TV/radio advertising space or time on a fee or contract basis 73.12.13 Sale of Internet advertising space or time on a fee or contract basis 73.12.14 Sale of events related advertising 73.12.19 Other sale of advertising space or time on a fee or contract basis 73.12.20 Resale of advertising space or time on a fee or contract basis

9. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 9 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

10. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 10 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

11. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 11 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

12. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 12 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

13. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 13 Entities Customer Advertising agency (Creative) Media Agency Media Media Marketer (Sales House)

14. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 14 Entity relationship – Model 1 (Part 1) Customer Advertising agency (Creative) Media Agency Media Media Marketer (Sales House) Ad campaign

15. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 15 Entity relationship – Model 1 (Part 2) Customer Advertising agency (Creative) Media Agency Media Media Marketer (Sales House) Negotiating - buyer and seller

16. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 16 Entity relationship – Model 2 (Part 1) Customer Advertising agency (Creative) Media Agency Media Media Marketer (Sales House) Ad campaign

17. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 17 Entity relationship – Model 1 (Part 2) Customer Advertising agency (Creative) Media Agency Media Media Marketer (Sales House) Change of ownership

18. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 18 Service Producer Price Indices (SPPI’s) Separate indexes for creative and sales activity Further refinement by type of medium

19. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 19 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

20. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 20 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

21. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 21 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

22. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 22 Examples Germany – press Spain – radio Czech Republic – internet Many countries do this –US does not

23. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 23 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”

24. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 24 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

25. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 25 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?

26. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 26 Some non-advertising examples to consider first Bottle of beer –750mL –330mL –Quality is not the same!

27. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 27 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

28. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 28 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

29. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 29 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?

30. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 30 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?

31. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 31 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?

32. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 32 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?”

33. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 33 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?

34. Voorburg 2008 ONS/CSO Revisited Sector Paper on Advertising, Market Research & Opinion Polling 22-26 September 2008 34 Questions? Thank you Matt Berger Ian Richardson United Kingdom ONS Jiří Šulc Czech Statistical Office