Russian billionnaire Alexander Lebedev has announced that the London Evening standard will be given away for free from 12^th October.

Lebedev bought a majority stake in the Standard from Associated Newspapers earlier in the year.  With News International’s free London Paper closing down last month, there will be speculation about the fate of the London Lite.   Despite being owned by Associated and getting much of its content from the same source as the Standard, the Lite competes directly with its ‘sister’ title and has demonstrably taken readers away from the paid for daily.

Lebedev maintains that quality standards will be maintained: “The Standard has been producing exceptional journalism since 1827 and that is not going to change under my ownership”.  He is predicting the circulation will more than double from 250,000 to 600,000 copies a day – higher than the 450,000 circulation the Standard enjoyed before it had to compete with free rivals back at the turn of the millennium.

Lebedev is also predicting other newspapers will go free: “The London Evening Standard is the first leading quality newspaper to go free and I am sure others will follow”.  But doesn’t this move to free media fly in the face of Rupert Murdoch’s plans to charge not only for newspapers but for online content too?

Murdoch’s argument is that people will pay for quality content: “Just make our content better and differentiate it.  If we are successful, we will be followed by all the media.”  This reasoning works for a niche business site such as the Wall Street Journal which has enjoyed an increase in subscriptions by offering unique content to those that value it but will this be the same of commodity news and celebrity gossip?  Critic of the traditional media owners approach Jeff Jarvis argues that commodity news inevitably ends up being free - “if the news is that important, it will find me”.

A recent Harris Interactive poll backs this view up.  Faced with their favourite news site starting to charge, three in four people would find another free site at an alternative.  In the UK there is a long term ‘free’ competitor in the form of the BBC.  Many media owners are concerned that this forces them to offer free content in response.  However as media commentator Matthew Horsman has pointed out, it’s difficult to point to the BBC since exactly the same problem is happening in the States where commercial sites have deliberately chosen to become free in order to compete with one another.

The strange thing about this is that many of us are willing to pay for content for TV – indeed Ofcom figures show that nearly half of all television households in the UK are now choosing to pay for additional TV channels.  We pay for TV primarily because we like the content but we also we like the convenience of paying for something as a bundled subscription, and then consuming what you want, when you want, without worrying about the cost.

With the relaunch and apparent success of SkyPlayer (which allows sky TV content to be viewed over the internet) maybe the solution for the Murdochs is to bundle subscriptions to their key newspaper brands in with the Sky subscripton.  At least it would keep everything in the family.

This is part one of a six part series about measuring the return on investment of public relations.

As the recession has really taken a stranglehold over the last eight months or so, there has naturally been a renewed interest in public relations' return on investment.  The incentives for the PR industry are clear, as money has drained away from advertising at an alarming rate, there is a real opportunity to channel some of that budget towards forms of marketing that are more cost effective.  For example direct marketing did very well out of the last recession because it could demonstrate its effectiveness both in terms of targeting and in its response rates. But there is the rub, many of us anecdotally feel that PR is cost effective but how do you prove it. 

One of the problems with PR ROI is its very definition.  At its most basic level ROI is a ratio between the profit generated from an investment and the cost of the investment itself. 

As venerable London Business School Fellow Tim Ambler has demonstrated in his paper ‘ROI is dead, now bury it!’ this basic bit of maths leads to some big problems.  According to this definition the best way to maximise ROI is to spend no money since anything divided by zero is infinite.  It would therefore follow that we immediately cut all marketing budgets back to nothing, stand back and watch as the economy pulls sharply out of recession and grows at a phenomenal rate…or maybe not.

So maybe we should look to a more general definition of ROI as what to I get for the money that I invest.  That’s the easy bit, but how do we work out what the ‘R’ actually is. 

Over the next five posts we will look at some of the methods that are used to calculate PR return on investment. 

Next: Advertising Value Equivalents

The posts have been published in reverse order, contrary to blog protocol, so that they read as a consecutive series of articles as you scroll down the page

This is part two of a six part series about measuring the return on investment of public relations. 

Advertising Value Equivalents

The method of placing a value of editorial coverage based on what it would have cost if it were advertising is and old and increasingly discredited one.  However it remains the most popular method of demonstrating ROI.  A feature in last week’s PR Week demonstrated its continued widespread use while Metrica’s soon to be released ‘PR Measurement, Research and Planning in the UK’ research shows that the percentage of PR professionals who use AVEs has increased from 28% to 49% over the last decade.

The appeal of AVEs is that they are relatively easy to work out and they give a number with a pound sign in front of it.  The problem is that it is not showing any form of return, it is merely showing how much advertising would have cost if were in the same place (which it wouldn’t be) at rate-card value (which it wouldn’t be). 

The rise of online content makes life difficult because online advertising works in a very different way from print advertising.  In print the same ads appear in the same place in every copy of the newpaper or magazine.  Ad-servers mean that this is very much not the case for online sites.  As a good example, try refreshing The Sun’s homepage a number of times and see that different adverts are displayed while the content remains the same.

AVEs are also causing problems as the advertising industry is hit.  Trying to place a value based on something that is in sharp decline is probably not a good idea.  Plunging ad rates are leading to much lower AVE figures even though the quality of coverage may be just as good.  We recently had a client who, for historical reasons, used AVEs to report to their board.  Unfortunately their AVE totals fell by over 50% despite their volume of coverage more that trebling over the same time period.

The following four posts will show some credible alternatives to AVEs as a way of demonstrating the ROI of PR.

Next: Part 3 – Cost of Reach

Previous: Part 1 - Introduction

This is part three of a six part series about measuring the return on investment of public relations.

Cost of Reach

This is part four of a six part series about measuring the return on investment of PR.

Market Research

This is part five of a six part series about measuring the return on investment of public relations. 

Correlation with Business Outcomes

We have talked about ‘out-takes’ but what about ‘outcomes’?  We got the coverage, we changed people’s attitudes but did they then go to the website, call our call centre, walk into the shop, sign up for the trial or buy that iPhone?  There are a number of approaches that can help with this.  First and most simply we can plot a media analysis metric (say favourable coverage) against our outcome (say website visits).  We may feel this shows a correlation, but can we prove it, can we quantify this?

 

Luckily, if you have Excel, there are a couple of easy functions that can help.  CORREL() and PEARSON() both effectively do the same thing which is to give you something called the correlation coefficient.  The correlation coefficient is a number that goes from -1 to +1 that shows the strength of a correlation between two sets of data.  +1 is a perfect positive correlation (as one thing gets bigger the other thing gets bigger), -1 is a perfect negative correlation (as one thing gets bigger the other gets smaller) with zero being no correlation.

 

The correlation coefficient while showing a strength of correlation, doesn’t show how statistically significant it is.  The significance is a function of the correlation and the number of data points (which is why more data points generally gives better results).  There are a couple of advanced functions in Excel will provide this information, but it is also available from statistical textbooks and websites.

 

There is a danger with using this type of correlation work to analyse data over time.  The maths behind the analysis assumes that two points in time are totally independent of one another when in reality this is not true.  In the graph below we have an advertising campaign where the sales always spike two weeks after the adverts.  The correlation in this case would be close to zero.  By shifting the advertising forward by two weeks the correlation becomes close to one.

 

 

Advertisers have got around this problem by introducing the concept of ‘ad-stock’, where the effectiveness of an advert declines with a set ‘half-life’ over the following weeks.  In the example below the advertising has a half-life of two weeks.

 

 

 

Correlation work on its own can work in simple situations where PR is the major factor affecting an outcome.  Unfortunately in many real-world situations, things are more complicated where there are many factors at play from multiple marketing activities through to effects from pricing or seasonality.  To this we need to look at econometrics, the subject of the next post.

 

Next: Part 6 – Econometrics

 

Previous: Part 4 – Market Research