Madison and Wall: A Chinese Balloon And The National-Local Advertising Divide

Last week’s news of a Chinese balloon flying more than 60,000 feet above Montana (and eventually the rest of the United States) brought about an array of feelings for many people.   For me the event immediately reminded me of the dynamics between national and local advertising around the world.   I’ll explain why.

Shortly after I first made the transition from Wall Street to agency-land in 2003, I asked a very senior media buyer the following question: “if we could identify the 20% of cities that drove 80% of contribution to whatever key performance indicators our clients wanted from their campaigns, would we direct all of our spending to those cities rather than national media owners?”.   I was politely told most of our clients didn’t “do” local.

I didn’t initially understand this seemingly illogical reality, but upon further exploration realized a few key issues were at play for many large brand owners:

·        Executing against local campaigns requires significantly more labor than national ones, and clients typically structure their contracts with agencies to reduce labor costs (because marketers' procurement teams characterize it as so-called “non-working spend”), independent of whether or not more labor could lead to less overall media spending and more effective campaigns

·        However effectiveness is defined for a given marketer, measurement of impressions and outcomes is substantially easier and cheaper to perform at the national level vs. the local level

·        Marketers who do not own consumer relationships directly (for example, manufacturers rather than retailers) have to manage relationships with partners who are themselves often nationally-oriented.  If a marketer-manufacturer told a distributor-retailer with a national footprint that an advertising campaign to support a brand would only occur in limited parts of a country, the retailer would probably de-prioritize the manufacturer’s products vs. its competitors.

Given these issues, there are ways in which geographically-constrained media owners must alter their sales efforts if they wish to pursue any revenue from national advertising budgets.  For example, radio stations usually allocate some of their programming time to networks they affiliate with for certain programs, which then have advertising inventory to sell on a national basis.  Similarly, television stations and cable operators allocate some of their inventory on an “unwired” or other pooled basis to sales houses who then sell to national advertisers in a manner intended to “look and feel” like national TV.  

By contrast, for some forms of outdoor advertising it was always going to be harder doing the same thing.  Sure, the rise of digital out-of-home screens has made it easier to create networks of inventory which could be sold nationally, but the original form of outdoor advertising – the static billboard – seemed like it was destined to remain a mostly local medium, only appealing to national advertisers willing to put a lot of extra effort and cost into their campaigns to realize the benefits this form of advertising can provide.   

To describe the obstacles local media owners often faced in growing their businesses, during public presentations I would often make an argument that effectively said “until someone places a billboard in the sky running from Los Angeles to New York, outdoor advertising will be viewed as a local medium.”   Although there wasn’t any marketing message in last week’s incident, a balloon that travels across the country, visible to people below comes as close as anything I could practically imagine to this national billboard concept.   Blimps at sporting events remain a purely local equivalent, by contrast.

Of course, “national balloons” aren’t going become an advertising-based media format any time soon, and neither will the divide between national and local advertising close, at least for most marketers.  So long as this is true, marketers who work around the aforementioned obstacles to find value from local media will inevitably benefit as will locally-skewed media owners who find new ways to organize their ad inventory in order to meet national advertisers’ needs.