COMMENTARY IAB: Consumers Willing to Pay 12 Times What Advertisers Do for Digital

COMMENTARY

IAB: Consumers Willing to Pay 12 Times What Advertisers Do for Digital

• by Joe Mandese  @mp_joemandese, Yesterday

The Interactive Advertising Bureau (IAB) released findings of a remarkable study during its annual conference this morning, showing that consumers would be willing to pay $163.50 per month to continue receiving digital media they currently receive for free, because it is ad-supported.

While that finding was intended to demonstrate the worth that free, ad-supported digital media has for American consumers, it suggests digital media publishers are leaving a lot of money on the table -- more than 12 times what they are currently deriving from advertising.

If I divide IAB estimates for 2024 U.S. digital ad spending by the U.S. population and then divide that by 12, it reveals that digital publishers currently derive only $13.48 monthly from the average American's advertising value. That's 93% less than what they would yield if they simply charged consumers directly based on what they told the IAB they would be willing to pay to continue receiving currently free websites and apps.

Interestingly, even charging Americans $163.50 per month would seem to be a bargain for them, given a second finding from the just-released study: The dollar value they'd be willing to accept to stop using the internet.

While it's unclear whether that value is just for accessing ad-supported digital media, or for what they also pay directly for access and/or premium services, the IAB found the average American would require $37,619 annually -- or $3,135 monthly -- to stop using the internet.

In other words, the average American would be willing to pay nearly half the value of what they believe digital media is worth to them, which is more than 12 times what advertisers currently pay publishers to defray the cost of consumers accessing their digital media.

Needless to say, these numbers are highly theoretical and are based on a comparison of consumer perceptions to actual industry economic data, but the reality is it kind of proves the opposite of what the IAB was trying to demonstrate, according to the study: "This gap reinforces the need for advertising to keep the Internet free and open."

Oddly, the IAB study was intended to demonstrate the underlying "data value exchange" -- presumably meaning that American consumers understand their identity and behavior data is the proxy the digital ad industry uses to monetize their value -- but the study never actually asks consumers how much they believe their data is worth to digital publishers, advertisers and agencies.

If I take a conservative 50% of digital ad spending going into working media buys, with the balance being eaten up by various data-related targeting, identity resolution, and ad servicing costs (you know, the digital "ad tax"), then the theoretical value of consumer data is something like $6.75 per month, per capita.

Mind you, this is just some gross, back-of-the-envelope analysis, so don't hold me to any of these figures.

But I figured it might be worth your while to put the IAB's consumer value research findings into some real-world terms.

I'd be curious to hear what some of you think the real value exchange actually is.