How much does it cost to create and execute a digital media plan?

Experts agree that creating and executing a digital media plan is far more expensive than traditional media. We set out to answer the question “how much does it cost?” in terms of time and money.

As we surveyed industry pros, we consistently got the answer “it depends.” The cost of a digital media plan depends on myriad factors such as:

• Compensation structure of the agency (i.e. project fee, hourly rate, commission, etc.)
• Agency structure and assignment of roles and responsibilities to each position
• Salaries for each position
• Experience level of each person within each position
• The efficiency of agency operations process and work flow
• Changes in objectives, strategy, and campaign parameters
• Account management demands dependent on client
• Amount of research that needs to be conducted
• Number of teams/agency partners involved (i.e. media, creative, promotions, CRM, etc.)
• Size and number campaigns and the number of sites / placements considered
• Complexity of deal structure (i.e. banners vs. custom integration)
• The number of creative executions and formats
• Implementation errors caused by media vendors
• Tracking requirements, reporting needs, analytics, etc.

So, we narrowed the scope of our inquiry to “How much does it cost to create and execute a digital media plan where the client budget is $500,000 and will be spent on guaranteed buys on 10 websites with an average of 10 placements each with standard iab ad units?”

Answer: it costs more than $40,000 per campaign

With the narrowed scope, we went back to media pros and asked the “how much?” question again. After gathering and analyzing the responses, the numbers showed us that it costs more than $40,000 to create and execute a digital media plan.

$40k seemed high. So, we went back again to validate the number.  Considering the scenario of a $500,000 budget, the cost of works out to ~8% of spend. We heard that a typical rule of thumb for digital is 10-12% of media spend getting lower as the budget goes up. So, our number is at the low end of the spectrum.

Where does all that money go?

We dug deeper. We wanted to know where the time and money is being spent.  We used an activity-based costing methodology to break down the number by task and by job function. Then we applied a “heat map” to visualize the data and to identify the hot spots.  As you can see from the attached digital media planning heat map, there are hot spots throughout the process.

Download the workflow calculator

We realize that no situation is “typical” and that every organization has a different structure, process, and tools. To calculate your costing, download the Digital Media Planning Workflow Calculator.  It’s an Excel-based workbook that’s easy to tailor to your unique situation.

Note: if you have download the file from above and it looks like XML code, you are probably using an older version of Excel.  Alternatively, you can download the Digital Media Planning Workflow Calculator (Excel 97-2003 version). It seems to work fine. However, please note that Excel warns of a “significant loss of functionality” when saved to this older format.

Acknowledgments

This study would not have been possible without the help of many digital media experts. A special thanks goes out to:

• Michelle Burnham and Jason Burnham of Burnham Marketing for providing job descriptions, typical rates, and typical hours.
• Hollis Thomases of Web Ad.vantage for validating the costing model
• Dave Smith of Mediasmith for sharing his 17 variables of media plan costing
• Carl Fremont of Digitas for validating that the bottom line number
• Brian Ramirez, our summer intern from the Tuck School of Business, for his work to define and refine the costing model

Shameless self-promotion

We love doing this kind of research, but must admit we commissioned this study for a reason. NextMark is building the next generation of digital media planning tools and we wanted to get a solid understanding of the “before” picture. Frankly, we think we can do a lot better as an industry and want to be part of the solution. This baseline enables us to measure and prove the value of the solutions we deliver.

Let us know if you would like to be one of the first to gain access to our Digital Media Planner or Media Magnet.