Digital Advertising Sales: Questions on Commissions and Margins
In several roundtables that included station sales managers and leaders, we heard again and again about what the right commission structure is and concerns over margins. There is still resistance from some sellers to embrace digital fully and include it with OTA (over the air) and O&O (owned and operated) proposals.
There are many ways to pay commissions on digital sales, which we discuss in this post. We detail four options:
- Paying on gross revenue
- Determining a percentage based on your market and business climate
- Using a blended digital rate
- Increasing commissions on renewals
There’s no “right” way to pay commission. It depends on your station’s makeup. We’ll be revisiting this topic with commentary from our experts.
Regarding margins, the reality is that digital will be smaller than OTA and O&O because of the cost of goods. However, just because margins are lower doesn’t mean there isn’t revenue potential. Digital budgets are often much larger than those for traditional spots.
We know from the 11th annual Borrell-RAB digital benchmarking report that local businesses are investing more in digital while cutting other budgets. Another important thing to remember is that your station would never get a company’s whole OTA budget, but you can get 100% of their digital spend.
Digital expands revenue without question. Your sellers shouldn’t treat it as either-or. Rather, they should deliver proposals that are omnichannel. Ask for those bigger budgets, and always include multiple digital tactics.
There was much more discussion about digital, too.
Finding Success with Third-Party Digital
Most stations are now offering third-party digital in some capacity. We heard from stations that use platforms like ours and other vendors. Some stations outsource fulfillment to local agencies, which is convenient but decreases profit.
So, what are the biggest challenges that local media faces with digital?
Leadership isn’t supporting you.
For digital to drive revenue, you need top-down buy-in. Without it, you won’t have the technology, training and other tools. Convincing management of the need for new revenue streams can be an uphill battle. Most stations still want to be radio first, but adding digital to complement OTA ads doesn’t impact this philosophy.
Your sellers still need more training.
Most sales teams have a mix of people with varying aptitudes around digital. The Borrell-RAB report did note that most stations are on board with regular training. Your sellers can’t learn everything overnight, and the digital ad ecosystem is ever-changing.
We recommend weekly training on tactics and sales practices in general. Further, your sellers need an on-demand library when they hit a roadblock. The key to increasing digital expertise is to have a digitally savvy resource to guide you. It doesn’t have to be someone on staff. You can look outside your organization for this support. Our customers enjoy relationships with CDMs (client development managers) to help them prospect, pitch and sell more effectively.
You aren’t sure where to start.
Implementing digital ad sales into your station can be overwhelming. There are many routes to take, some less bumpy than others. You’ll need support from leadership and engaged sellers to achieve digital success. Accomplishing this has a lot to do with your partners. You’ll need the right mix of people, processes and technology.
The Changing World of Prospecting
Media sellers are continuing to adapt to a new world of prospecting. Most agree that things changed forever after the pandemic. Consumer behaviors and advertiser sophistication are driving this, as well. So, how do local media sellers convey their value and compete against bigger agencies or entities?
It starts with reimagining prospecting. Sales experts in several discussions laid out some new approaches, including:
- Beginning the conversation from a consultative angle, sharing some industry or relevant content as a first reach-out versus shifting right to sales
- Rethinking your VBR (valid business reason) that highlights what an advertiser will gain from meeting with you
- Demonstrating seller expertise within a specific industry and/or the market. This is an advantage most agencies don’t possess.
- Showcasing results with advertiser case studies
- Setting expectations early on how the relationship will flow, from how you’ll recommend ad mixes for campaigns to post-campaign analysis reviews
- Finding opportunities within your promotional calendar that a current or prospective advertiser could participate in. For example, you may be doing a series on local business leaders and could feature company leadership.
Local OTT/CTV Advertising: Its Impact on Digital and TV Ad Sales
OTT/CTV has been steadily increasing its revenue. Advertisers want to be where viewers are — streaming content. OTT/CTV is still slow on the local level, but the 2022 political cycle showed how effective it can be. Additionally, advertisers plan to spend more on OTT/CTV in 2023.
You and your advertisers have questions about these possibilities. Here’s how it’s impacting digital and TV ad sales.
OTT/CTV should be part of digital.
Adding OTT/CTV to a digital ad campaign is an excellent tactic for targeting and the ability to reach cord-cutters. The ad is also video, so it captures eyes and ears, and it’s not skippable in most cases. Based on projections and market trends, several local categories are ready to up their OTT/CTV spending, including grocery, retail, education, health care, legal services, automotive and restaurants.
Even though there is interest and demand, you’ll still face objections, mostly around developing the creative. However, you can resolve this with options, including working with local production companies, recommending online platforms that make video creation easy, repurposing old videos or suggesting they shoot it themselves.
What’s most crucial is ensuring this is part of your digital portfolio of products. You’ll also need to be able to explain what type of inventory these ads will run on.
Linear TV and OTT/CTV are complements.
Is OTT/CTV a foe for local TV ad sales? It shouldn’t be. Instead, it’s a good complement, so advertisers expand their reach while also being able to target. Combining these two through converged TV will be a primary objective for local TV, so they can generate more revenue and meet your customers’ requirements.
FAST TV sees rising revenue.
Several sessions at NAB focused on FAST (free ad-supported streaming TV). Some examples include Pluto TV and Roku. These FAST channels are available on mobile devices and smart TVs. A new report projects revenues for FAST to hit $6.3 billion in 2023, with 80% in the U.S.
The promise of FAST, according to experts, includes several components:
- The data for targeting must evolve toward standardization and be more credible and accurate.
- Interactivity is an option with this medium, which could drive engagement and action from viewers.
- Personalization is a goal — getting the right content to the right person at the right time.
These OTT/CTV topics will continue to play out, and we’ll be watching and innovating.
Don’t Count Radio Out
Finally, NAB 2023 was an excellent reminder that no one should be counting radio out as an effective advertising medium. Westwood One shared research on the reach of radio, pointing out that it’s still the leader in ad-supported listening time. Their presentation also highlighted how radio advertising converts existing demand and creates future demand.
Radio Works also had an insightful session. Key points presented included:
- The trust factor of radio and its ability to deliver a local voice
- Continuing to discuss radio and its potential with advertisers so they don’t move into a state of thinking it’s past its prime
- Coming to the table prepared to clear up misconceptions with data and case studies
- Using the many RAB resources available for members to assist with overcoming objections and education
What’s On Your Mind After NAB 2023?
Our NAB 2023 recap highlights many trending topics. We’ll continue to report on all the things that impact local media sellers. If you have questions about these things or anything else, we’re here to help.