Pulling back the curtain on ABM’s BIN Report

In March, ABM reported that total media industry revenue from digital advertising was $6,352 million in 2011. A few days ago, ABM reported that the digital total for 2011 was actually $3,557 million. A 44 percent drop is quite a revision! Why did ABM change its reporting for digital ad revenue so drastically?

Well, first off, it’s me, Mike Alterio, who made the revisions, and it seems a little funny to speak of myself as “ABM” in the third person. So for this blog post, do let’s ignore the “great and powerful” title of Research and Content Director and instead pay attention to the little guy behind the curtain (me), and especially to the the levers and switches I usually play with out of view.

When I joined ABM at the start of the year, I learned that the data from three of the four revenue components of the BIN Report came directly from our partners at CEIR (for events), IMS (for print advertising) and Outsell (for data). The digital advertising numbers, I was told, use publicly available data from the Internet Advertising Bureau (IAB). However, IAB reports TOTAL digital ad revenue, and does not break out a business-to-business component. I learned that our methodology was to multiply the IAB total by 20 percent to calculate the amount spent on b-to-b advertising.

“20 percent?” I asked. “Why 20 percent?” Due to some staff turnover (a familiar result of the Great Recession), no one currently at ABM had an answer. The 20 percent figure seemed kind of arbitrary to me, to be frank. But for the year-end 2011 report, I went with it, as reported in March. Since then, I’ve taken a deeper dive.

IAB puts out a richly detailed Advertising Revenue Report, compiled by PricewaterhouseCoopers. That’s where we’ve been finding our data on digital revenue. This report breaks the digital stream into a number of sub-components, which IAB refers to as “advertising formats”: display advertising, sponsorship, email, search, lead generation, classifieds and auctions, rich media, digital video and mobile advertising. For more on these formats, check out the appendix on page 22 of this PDF. IAB breaks out separate revenue figures for each of these advertising formats.

There’s a case to be made that b-to-b media companies are using all of these formats – except one. In my opinion, the “search” category is not a significant driver of revenue in b-to-b. Take a closer look at IAB’s definition for search:

Fees advertisers pay internet companies to list and/or link their company site domain name to a specific search word or phrase (includes paid search revenues). Search categories include:

• Paid listings—text links appear at the top or side of search results for specific keywords. The more a marketer pays, the higher the position it gets. Marketers only pay when a user clicks on the text link.

• Contextual search—text links appear in an article based on the context of the content, instead of a user-submitted keyword. Payment only occurs when the link is clicked.

• Paid inclusion—guarantees that a marketer’s URL is indexed by a search engine. The listing is determined by the engine’s search algorithms.

• Site optimization—modifies a site to make it easier for search engines to automatically index the site and hopefully result in better placement in results.

Pretty clearly, this category applies to the Googles of the world. We’re talking about big search engines, programs like Google’s AdWords, and so on. I just do not see this being a significant source of revenue in the b-to-b media advertising landscape. I took the IAB totals and subtracted out the search advertising format.

However, search is a huge part of the IAB calculations. According to the IAB, search is actually the largest advertising format! Since the first quarter of 2010, for example, search has made up no less than 43 percent of ALL digital advertising, and has ranged as high as 48 percent. The next biggest category, ad banners and display ads, has never gotten higher than 24 percent of the total.

So removing search makes the remaining total for all digital advertising much smaller. And from that pool, only a fraction goes to b-to-b media advertising. But what fraction? For some reason, I was told to go with 20 percent. Well, I was not satisfied with that, so I looked for more authoritative numbers.

As it turns out, ABM’s partners at IMS not only deliver b-to-b magazine advertising totals, they also calculate consumer advertising totals. They do this by subscribing to just about every magazine in America, counting the ad space in every issue, and calculating the dollar value of that advertising. Add up all those ad dollars and you get data on total revenue from print advertising – total overall, which is the sum of consumer and b-to-b.

I was able to compare the total revenue for all print magazines to the total for b-to-b. Here is what I found. In the first half of 2012, b-to-b advertising was 22.3 percent of the total. Going back over earlier six-month periods, the numbers were 20.5 percent, 21.5 percent, and 19.5 percent.

“Huh!” I said to myself. “That 20 percent number is not too far off after all.”

So I made a leap. If we assume the marketers of America are putting the same percent of their advertising dollars into b-to-b print ads as they are into b-to-b digital ads, then I can take that percentage, apply it to the non-search revenue figure from IAB, and create data for total b-to-b digital ad revenue for the industry.

Finally, the IAB has not released its figures for the full first half of 2012 – just the first quarter. So I had to make a projection to cover the gap, until the 2Q figures are released next month.

And that’s how I calculated my revised numbers: $12,490 for the industry total revenues in the first six months of this year, 15.6 percent of that, or $1,942, in digital Internet advertising. For more on the actual totals in the most recent BIN Report, click to read my news article on the topic.

By Michael Moran Alterio

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