Advertising Costs

 One thing in math we never seem to discuss is the cost effectiveness of advertisements via television or radio.  We know the price goes up during the Super Bowl because it makes the news but what of other times a year.

Most advertisements on television run between 15 and 60 seconds with an average of 30 seconds in length.

The cost of all advertisements is based on CPM or cost per thousand viewers or how much it costs for 1000 people to see the ad.  The cost varies according to several factors, location being the most important one.  Each market has a different CPM cost.

A local commercial might cost $5 per 1000 viewers but for a nationally seen advertisement, a 30 second spot can run on average $115,000.  If the same ad is shown during the Super Bowl, it could run around $5.25 million.

The way to calculate the actual cost of the commercial is to take the number of viewers divided by 1000 and the result is multiplied by the CPM so if you have 500,000 people watching the add in Kansas City it would be 500,000/1000 = 500 x 14.36 or $7180 but the same ad in Los Angeles would be 500,000/1000 = 500 x $34.75 or $17,375.  Los Angeles costs more than New York City or Detroit.

The factors affecting the CPM include the age group and since those between 25 and 54 do the most watching, this is the group targeted by advertisers. They also look at the gender of the viewer because certain shows appeal to the males while others are preferred by females.  The more popular the television show, the more the network can ask.

Is the show on a broadcast station such as NBC or is it on a cable station such as TNT.  Usually cable channels can demand a bit more because those who watch cable usually have more money available.  Is the program live or is it recorded.  Usually live programs such as sports events cost more which is why the Super Bowl costs so much.  Furthermore, the time of day, time of year, and location.  The best time of the year is the fourth quarter because of the upcoming holidays while the period between 8 PM and 11 PM is when the most people watch.  Also it cost more to advertise in a large city area versus a small rural area.

Even national events such as presidential debate will drive up the cost of any advertisements.  Usually there are 4 two minute breaks in each half hour show.  This means there is limited space for advertisements.

In addition, there is a cost involved in creating the advertisement and I'll cover that another time. So advertisers must look at the price of advertising via television, perhaps radio, or print.  Today's entry gives an idea of how costs are calculated.

Let me know what you think, I'd love to hear.  Have a great day.