Fun With Calculators
Exercise #1 - Compared to a vehicle wrap
The value of the mobile ad space on a Spark truck compared with a semi-permanent graphic wrap was discussed here the other day. $9,300 total cost to wrap a truck, and then rewrap it when one tires of the original design. That is contrasted with $400 to install an ad that wraps around all sides of a Spark Expo, and another $400 to completely change the ad. $9,300 vs $800.
Exercise #2 - Other forms of advertising
Spark manufactures products in Alabama, Georgia, North Carolina, and other states. Selecting a few competing forms of advertising in those states makes a quick calculator exercise.
Background: Today's lease rates for a new Spark Expo, including the truck chassis, average $790 per month (no money down, 60 months, $1 residual). Assume that the truck owner only shows 3 ads per side, for a total of 9 ads. (Of course, one could display up to 30 per truck, but it’s better to keep the numbers conservative.) That means that each of the 9 scrolling ads would have a monthly cost to the truck owner of $87.77 (lease payment of $790 divided by 9)
Comparison #1 -- It costs $199.95 to run a classified ad in the Charlotte Observer. The ad has 6 lines of text and runs in the newspaper for 14 days. Double that cost for a monthly rate. That's $399.90 per month for a one-inch high by two-inch wide text-only ad. Back to the calculator. Remember, the comparison is for nine ads on the Expo. Nine classified ads in the Observer will cost $3,599.10 per month vs $790 for 9 ads on the Spark Expo MUV.
Comparison #2 -- Lamar Outdoor Advertising charges $3,200 per month for a single billboard in Marietta, Georgia. Lamar’s rate sheet indicates that one must rent six billboards in Marietta for $19,200 per month to achieve total market coverage. Six posters on an Expo would cost $526.62 -- and remember, that includes the cost of the truck.
When one looks at the cost of radio and TV advertising, the comparison number start to look silly. The calculator is good at this.
Exercise #3 - Fantasyland
$1,000 per month is a commonly quoted price that some mobile advertising truck owners charge their customers for each individual ad. Thirty ads on a truck, at $1000 each, equals $30,000 per month gross revenue from one truck. INCREDIBLE. How about a scrolling system that has double the capacity? Sixty ads per truck -- that’s $60,000 per month from a single truck! Are you starting to think you’re in the wrong business?
This financial model, which is often promoted elsewhere, bears no resemblance to reality. Just because one can show twenty ads on a scrolling display doesn't mean one should show twenty ads. The speedometer in your car might go up to 180 MPH, however it's not recommended that you drive that fast. The faulty part of this financial model is any assumption that advertisers will regard it as a good idea for their $1,000 ad to be displayed in rotation with fifty-nine others.
With a twenty-ad scrolling system, if each ad is shown for ten seconds, and if it takes three seconds to scroll to the next poster, it’s impossible for each ad to be displayed more than 14 times per hour. Each individual ad is shown for only two minutes per hour. While it's theoretically possible to sell sixty advertisers on the merits of investing $1,000 a month for an ad that is shown for only two minutes per hour, it's not likely.
The sweet spot for mobile advertising vehicles is between three to six ads per side. It's enough to be entertaining, but not so many that an advertiser's message is lost in a clutter of other ads.
Exercise #4 - Realistic business models
Take a look at the Business Model series on this web site. Calculators get a real workout there. Over the years, Spark has shared the best practices of many customers around the world and the company publishes that information to help potential customers understand the realistic opportunities and costs of buying and operating Spark products.
If you plan to start a mobile advertising business, the Spark business model series gives a sobering look at what you might reasonably expect to earn after you consider all of your expenses. It's always important to remember how difficult advertising sales can be. If it were easy, everybody would do it. It's not, and they don't.
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* All rates are from the 8/21/08 web published advertising rates for each of the companies listed.
