Media Planning Basics 4: The Budget

So, you know what the client wants, you have explored what happened before you got involved, and you’ve established clear KPIs. Now you’ve got to solidify the budget.
The budget might come to you in any of the following ways:

• You (the media planner) come up with it, and you propose it (internally or to the client).
• The client gives it to you directly.
• Someone in your own company allocates it to you out of a larger budget that also includes creative costs, etc.

Each scenario has its advantages and disadvantages, but it comes down to this. If you’re coming up with the budget yourself, base it on the goals and the KPIs that you’ve already established. Assume an average CPM, an average CTR, a success according to your KPIs (say, a lift in client site traffic of over 10%), and then back into your budget.

Say, for example, that you’re going to run on premium sites those in the CondeNet network (disclaimer: I used to work for Conde), so you need to assume a CPM of about $25. And let’s say that to get the lift, you’re going to need a million new pageviews to the site over the course of a month. And let’s say that, based on a similar campaign, you estimate that, if you get a typical CTR of 0.3%, you’re going to get a conversion of about 1%. (Meaning: Three out of every thousand users will click. One out of every hundred clicking users will buy.) So, given the lowball results you’re predicting, how many impressions will you need to get the results you want? And given the (high) CPM you’re predicting, how much money will it take to buy those impressions?

Of course, this is all somewhat arbitrary. You don’t know the publishers for sure yet, and you don’t know the CPMs until you start negotiating with the publishers. And there’s no sense negotiating until you know how much you have to spend. It’s easy to see the situation as a moebius strip, but it’s frustrating and not productive. At some point, you have to start estimating prices and/or performance in advance, and then fill in the blanks. Make your price estimates high and your performance estimates low, and then do your best to negotiate lower prices and drive better performance than what you predicted.

photo by Jeff Keen on Flickr