The Proof Is in the Details

Large, multifaceted deals with portals are very exciting. Many dot-com clients are eager to sign these large deals, which tend to involve distribution, content, and co-branding in addition to run-of-the-mill advertising.

Not only can these deals ramp up a new dot-com company’s ability to reach its target in a convincing manner, but they can also make or break a business. Investors like to see alliances (especially exclusive ones) with the top brands on the Internet, and this is helping to keep “portal mania” alive and well.

Increasingly, portals are asking for large sums of money without detailing exactly where the money is going within the context of the deal. To avoid unwanted difficulties later, media planners who cut these deals need to avoid nebulous “integration fees.” And ambiguities over what the portal is charging for tangibles – like advertising – and intangibles – like slotting fees, co-branding, etc.

By way of example, let’s suppose that our friend Peter Planner is negotiating a deal between his client, Widget.com, and one of the largest sites on the web, PortalX.com. Peter tells his sales rep at PortalX that he wants to have an advertising presence in all widget-related content on PortalX. Additionally, he would like to integrate Widget.com’s widget research tools into PortalX, which seems like a win-win situation. After all, PortalX definitely could use some widget-related tools to beef up its content offering, while Peter’s client couldn’t care less where his tools show up, as long as he sells widgets at a profit.

A week later, PortalX comes to Peter with a proposal: For $10 million a year for three years, Peter can get an estimated 300 million ad views a year in widget-related content. Additionally, PortalX will be happy to grant Widget.com category exclusivity and integrate Widget.com’s tools into its widget category. The PortalX rep tells Peter that he should take this deal back to the client, and they can both go out and celebrate at a steak restaurant after work when the client signs off.

Peter is confused. And he should be. Not only is $30 million a huge chunk of dough, but Peter’s not entirely sure what he’s getting for that investment.

The first thing Peter should do is talk to the sales rep about breaking the deal into its component parts. How much in total will be spent on advertising? How much will be spent on slotting fees for integrating tools? To break it down further, what do the ad units look like? How many different placements are there? Will multiple placements show up on the same page? What is the CPM for each placement?

These facts are all very important to know. For all Peter knows, the 300 million ad views could end up being 100 million widget-related page view requests with three ads for Widget.com per page. That might not be as effective as running one ad per page.

Furthermore, if Peter decides to cancel a portion of the agreement (perhaps because a certain placement isn’t doing well), how do Peter and his sales rep agree on the dollar value of the cancelled portion? Without attributing a value to each ad placement up-front, this is next to impossible.

Paying close attention to each component of a deal is a planner’s responsibility. As everyone knows, advertising deals evolve over time as advertisers test inventory and optimize it. Without breaking a deal into individual components, there’s no way to tell which ad inventory is performing best and which is performing worst – you wouldn’t be able to formulate cost metrics.

Be sure to get the most bang for your buck. Pay close attention to the little details of the big proposals. Most likely, you’ll uncover several areas where you can either save money or save your client from making a big mistake.

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