19 Aug 2013

Is Ad Value Equivalency always bad?

Monty Python and the knights of the Holy Grail screenshot for ad value equivalency blog post

One of the most lambasted metrics in public relations is the heavily-demonized Ad Value Equivalency (AVE). For those unfamiliar with it, one of the ways that has been used to measure the effectiveness of PR is to ask the question, if you had to buy the same level of impact, how much would it have cost you? For example, to get a quarter page of the New York Times is a listed national rate of 31.5 inches at an inch rate of $1,207 per inch, or $38,020 for a single weekday national ad. A well-placed editorial piece costs the time, effort, and connections that your PR team or agency can leverage for your benefit.

The reason that AVE has been so demonized in the PR world is that, from the perspective of public relations professionals, it greatly understates the impact of PR and confuses PR with advertising. In the example above, the ad in the New York Times simply does its work, and you get some results per dollar spent. The media placement, on the other hand, is sometimes syndicated, sometimes reprinted, sometimes blogged about, sometimes shared, and is generally considered more trustworthy by the average reader than an ad. None of the sharing that happens – especially in the digital editions of news media – is accounted for in AVE. The AVE formula simply treats PR as another form of advertising, which is functionally incorrect. Paid media and earned media aren’t the same, and shouldn’t be measured identically.

So AVE is a broken metric that should be consigned to the dustbin of history and never be spoken of again, correct? Not so fast. Is Ad Value Equivalency always bad? There are limited situations in which using AVE does make sense. It does shine when it’s used as an intermediary metric to assess a financial value to a non-financial outcome for a future goal.

For example, let’s say you’re a politician running for office. At the bottom of the funnel there is a non-monetary outcome that has no ROI, so you can’t use traditional financial-based metrics to calculate the effectiveness of any given marketing channel, including your public relations and media relations efforts. The outcome is binary: either you’re elected or you’re not. The outcome is also in the future: by the time you can assess the effectiveness of the campaign overall, you’re either in office or not, and you’re not able to course-correct.

One of the metrics that feeds into the momentum you’re seeking for election is email list subscribers. This is a situation in which you could use AVE: what would have been the cost for your campaign to purchase any given email list address instead of acquiring it organically? AVE answers that question. If you dig through the pricing in any publication’s advertising, you’ll find things like price per email address. That’s the AVE of this intermediary goal – the cost of acquisition for that email.

How would you use that information? You’d plug it into your web analytics software, as a financial goal for achieving a newsletter subscriber:

Google Analytics

Now you can assess the relative financial value of the different channels in their effectiveness of generating email list subscriptions for a future goal that hasn’t been achieved and make course corrections before the end goal is reached.

The reason that marketers and public relations professionals no longer rely on AVE for the overwhelming majority of their work is that better metrics are almost always available. The widespread availability of solid web analytics packages like Google Analytics means that more, better data is available about what actually happened, versus estimates of what may have happened or what could have happened. The increasing affordability of CRMs and marketing automation packages gives us better data to work with most of the time, and so AVE continues to be – and should be – used less and less.

Christopher S. Penn
Vice President, Marketing Technology

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