How can I verify the value we receive from media trading?
You’re used to buying and selling for cash, so trading your surplus assets for advertising may seem somewhat abstract and therefore, its value difficult to measure. You may have heard that media trading is something that looks good on the books but you’re not sure there’ is an objective way to verify the value you receive.
In fact, the value you can gain from media trading is abundant and very simple to verify. It comes from the cash you save through that portion of advertising placed by the trading company.
Your advertising agency plans out your media by establishing your media buying guidelines and the cost to you. The media trading company uses that plan to execute your media and you use an advertising credit to pay for a pre-determined portion of the otherwise 100% cash buy. If you want additional validation of the buy, utilize a third- party media audit firm and establish your KPI’s to confirm that the media buys are in strict accordance with your cash buys.
As an example, say you have sold Evergreen Trading an excess inventory for $1MM that is worth only $300,000 in cash. You have a $5MM fourth quarter cable buy yet to be placed. Your agency can place it for you at a cost of $5MM in cash, but using trade, Evergreen Trading can place that same buy for $4MM in cash plus the excess inventory that you sold for $1MM. You know the value of the asset since the best offer you received for the inventory was $300,000. You know the value of the cable buy since your agency gave you a plan for which you would have paid $5MM.
The math is simple. You paid Evergreen Trading $4.3MM ($4MM for the media and $300,000 worth of inventory) to buy $5MM of advertising. The incremental value you received was $700,000, or more than a 230% ROI on the inventory. Pretty good for merely letting a trading company work with your agency to place a portion of your overall media.
Unsure of the final value of the asset sold to the trading company? Evergreen Trading is happy to share proof of funds received from the sale. Unsure of the final value of the media? Your agency will evaluate the post buy report, and as mentioned earlier, you’re free to utilize a third party auditor.
Transparency is a hallmark of Evergreen Trading, and as such, we eagerly share with our clients the important numbers and educate them on as much of the transaction mechanics as they wish to know. Anyone claiming the value of a trade is complicated to calculate and is unwilling to share the financials of the trade may not have your interest closest at heart.