This article exposes the common use of Ad Value Equivalency (AVE) as a proxy for PR Value and why you need to re-examine how your PR agency is reporting its impact on your business. You would be interested in this if you want to better understand how the value you are getting from PR efforts.
You’re at a board meeting with your PR agency. They’re presenting their report for the last campaign.
“You gave us $50,000 to spend last year and we generated over $1,000,000 in PR Value. We completely surpassed your target of $200,000. We’re the best. Pay us more.”
That sounds awesome, doesn’t it? An ROI of over 1,900%! What other marketing activity would generate such a great return-on-investment? Your sales are going to skyrocket this year!
But will it?
But there has always been this nagging voice in your head. What is this ‘PR Value’? Why is the ROI so high? Is there really going to be such a huge impact on our business?
Well, you’re on the right track there. Where there’s smoke, there’s fire.
More of than not, you will discover that your PR company is simply using Ad Value Equivalency (AVE) as a proxy for PR Value.
What’s wrong with that?
What is Ad Value Equivalency (AVE) / PR Value?
Ad Value Equivalency is a widely used metric pushed by public relations companies to measure the effectiveness of their efforts by measuring the column inches or coverage generated.
The official definition from the Institute of Public Relations Commission on PR Measurement and Evaluation is “The calculation of space or time used for earned media (publicity or news content) by comparing it to the cost of that same space or time if purchased as advertising.”
With ruler in hand (or some expensive third party software that they charge clients for), they scour magazines and newspapers and measure the size of the article in which the client’s name appears.
They then multiply those inches with the publication’s rate card and add some sort of multiplier. They add the multiplier because they claim (without basis) that a third party endorsement from a journalist is worth more than simply taking out an ad.
So the formula is:
AVE = (column Inches) x (publications’ rate card prices) x (some arbitrary multiplier)
The normal argument is “This is how much it would have cost you if you had bought advertising instead. And because editorial content is so much more authoritative than advertising, we’ve slapped on a multiplier of 3x there. See, we’re worth the exorbitant amounts of money you’re paying us. Pay us more.”
Why AVE is a Bad Measurement
However, AVE is largely seen as an outdated (and unethical) way to measure the effectiveness of public relations efforts. Below are some reasons why.
The PR Industry Itself Has Denounced AVE
As early as 2010, AMEC (the International Association for the Measurement and Evaluation of Communication), IPR (Institute for Public Relations) and PRSA (Public Relations Society of America) convened in Barcelona to deliberate on the future of public relations as an industry. These organizations help set the direction for the entire industry and are comprised of some of the greatest minds in public relations.
In it, they denounced AVEs as “not the value of PR”.
A special task force was created by the IPR to better explore the issue of AVEs and this is what they came up with:
“AVE is not a proxy for measuring the return-on-investment of public relations… Even more problematic is the use of AVE to represent a public relations outcome, and a meaningful measure to represent a financial return on investment. This obfuscating practice often prevents or misdirects focus from quantifying the more meaningful outcomes of public relations.”
There is a report available on their website here.
I can stop my article here and still have made my point. PR Value as measured by AVEs has no sound basis and has been widely discredited by the PR industry itself.
But I’m not going to because the view on the ground is quite different. We have first hand accounts of PR agencies espousing AVE (or some weird variation of it and calling it ‘PR Value’) as if it’s the bee’s knees.
So let’s really drive that nail into the coffin.
Know That Multiplier They Use? Well, It’s Nonsense (So Says the PR Industry)
This argument is primarily based off a report published by the IPR and you should read it in full if you have the time.
As mentioned, several PR companies go a step further and add a multiplier to the total reported circulation. There is no ‘industry standard’ as to the multiplier used and it can range from 2.5 to 8.0.
They attempt to justify the use of a multiplier based on the assumptions below:
- “Pass-Along Circulation” – Which assumes that more than one person will read each publication after it is purchased.
- “PR Value” – Which assumes that a third party endorsement by the journalist and the publication has more authority than an advertisement.
- “All Hits Are Created Equal” – Which assumes that every section of a publication and each time of airing for a broadcast has the same circulation or audience figures.
Each of these justifications have glaring problems that most would see for themselves if they just gave it a little thought.
Pass-along circulation is a very fuzzy number when it comes to measuring circulation. It is usually measured by the publication or a third party asking readers how many other people read their publication after it is purchased. The total circulation figures are the sum of the primary circulation and the projected pass-along circulation.
While it’s obvious to see that pass-along circulation distorts circulation figures, the greater argument is that if these people really valued the publication they would purchase it and become part of the primary circulation themselves. Let’s also not forget that there is no guarantee that they read the article your brand was mentioned in.
By now, you probably already realize that pass-along circulation is a fuzzy number; how much more inaccurate would it be if you added an arbitrary multiplier to it?
Those using PR value claim that editorial content is more authoritative due to the implied endorsement provided by a seemingly neutral third party.
However, according to the Institute for Public Relations, there have been no studies to support these claims. In fact, some studies claim that advertising has more impact in increasing brand awareness and preference.
Also, when reporting circulation or broadcast numbers, PR agencies typically take the highest number of the time period without adjusting for variations in readership or viewership. Again, this number is usually overstated and using a multiplier exacerbates the problem.
The recurring theme here is that total circulation numbers are already overstated. Using a multiplier to further artificially inflate the numbers borders on the unethical.
It seems that “many reputable researchers believe the use of multipliers may tend toward being unethical and dishonest”.
There are many other criticisms of AVEs such as
- No advertiser buys ads at rate card prices. It’s an open secret that rate card prices are just for show. If that’s the case, AVE is inflated when measured with them.
- PR value is not restricted to media relations. There is more value to PR than simply blasting press releases and making follow up phone calls.
- Different PR companies use different measurements for AVEs. This makes it almost impossible to compare effectiveness or set benchmarks.
- Advertising and PR are inherently two different things. There is no such thing as PR Equivalency in advertising. It just doesn’t make sense for PR companies to measure themselves against advertising agencies.
- No consensus on how much of the article is to be included. It doesn’t matter if it’s a one-line brand mention on a full page article – most PR companies will calculate AVEs based on the full article length.
- There is no such thing as negative AVE. Will your PR agency include a negative AVE if you received a bad review? And how would that be measured? We all know that it takes a lifetime to build a good reputation but just one negative mention to lose it. See Kryptonite’s case.
If It’s So Useless, Why Is It Still Widely Used?
By now, you have realized that it’s an outdated metric that was intrinsically flawed to begin with and has been (rightly) disowned by its own industry.
It’s almost impossible to find a reputable PR professional defending AVEs in person or in print. Meltwater tried, but were promptly rebuffed by the Public Relations Consultants Association (PRCA) and the International Communications Consultancy Organisation (ICCO).
But what’s confusing is why it’s still so commonplace on the ground here. You’d think that by now, credible PR companies would have moved away from such dishonest measurements. That’s not even close to being true.
I can think of three reasons:
Lack of Client Education – Some clients simply don’t know better and take AVEs at face value. The PR company happily reports highly inflated PR Values every quarter without taking a second to educate their clients. They would rather have ignorant clients that pay the bills instead of educated clients that constantly challenge them. If you’re a PR agency that has read this article and don’t bring this up to your clients, then you’re guilty.
Outdated PR Agency – The PR agency you’re working with is a laggard in its industry and report AVE because that’s what they have been doing all along. They just go through the day-to-day grind, push out press releases and pat themselves on the back whenever they get a sliver of coverage. And they sincerely believe that they are doing a good job.
While there’s nothing inherently unethical there, do you really want that kind of agency in charge of your communications strategy? A laggard in this ever-changing digital age?
Easy to Understand – Despite its shortcomings, AVE is easy to calculate and understand. Most clients want to place a dollar value on PR efforts and AVE is the go-to method. So they ask for it. But shouldn’t an agency worth its salt be able to provide more viable alternatives?
Attempts at Alternatives to AVE
There have been several interesting attempts at replacing AVE.
One interesting suggestion is ‘gAVE’ or Google AVE – AVE in the age of Google, as the PR company claims. They propose gAVE to be the advertising equivalent value of Google editorial coverage.
gAVE = Cost per Click * Search Volume
There are so many issues with that that it’s hard to start.
Firstly, they still want to use a multiplier of four to estimate the total AVE for the digital advertising industry. Yet again, the multiplier makes absolutely no sense here. If it did, then every SEO would use that to measure their effectiveness.
Secondly, they’re essentially talking about search engine optimization – increasing visibility online by ranking on the first page of Google. If you do decide to use this, you’re going to realize that it is a much harder job than you reckon. Just because an online publication published your article does not mean you will rank for it.
Yes, links from authoritative publications do help increase search engine rankings, but that’s not the only factor. What if the client built their website on Flash? Or used a robots.txt file to block search engines? Or was slapped by Penguin because of the action of the previous SEO or PR company (since we now have to worry about public relations agencies dabbling in ‘SEO’) did or because a competitor executed a negative SEO< campaign against them?
Thirdly, every SEO knows that the top three results get the most clicks and there is a difference between being on the first spot and the tenth spot of the first page.
And how do you account for the constant movement of SERPs? Due to factors such as Query Deserves Freshness (QDF), search results are in a state of constant flux. Will they report a higher gAVE in the first month and a negative gAVE in the second? Even if the ranking persists, are they going to cumulatively measure gAVEs each month?
Good luck measuring search volume for long tail keywords as well.
I keep thinking that if this is the way you want to go, why don’t you just measure website visits? Frankly, no competent digital marketer cares about SERP impressions.
Essentially, it’s the outcome you get when a traditional PR company dips its toes into digital marketing. It’s good that they acknowledge the problem and suggest a solution, but this is far from winning the war.
Another alternative to AVE that seems more promising has been proposed by the International Association for the Measurement and Evaluation of Communication (AMEC). We would love to have a better look at it since it looks well thought out.
What to do if Your Public Relations Company Uses AVE?
So, now that you know the dirty little secret behind ad value equivalency, what should you do? Should you immediately fire your PR agency if they are using AVE to measure PR Value?
Of course not. You don’t want the tail to wag the dog.
Their PR activities might still have value. It’s the measurement of it that is left wanting. And of course, the attitude of some PR agencies that are trying to hoodwink their clients with this ‘PR Value’.
The next time they show up with a performance report, ask them:
- How do you measure this ‘PR Value’?
- Are you using a multiplier? If so, what multiplier are you using? Why are you doing this even when your industry has discredited this?
- If we stop using AVE, how else can you show the value of your work?
Do digital marketing companies have the same issues with measurement?
Of course, especially for activities such as social media and content marketing (for activities such as lead generation, measurement is straightforward – we measure how much money we’re putting into your bank account).
But the major difference here is that the industry acknowledges the issues they have and are constantly experimenting with better measurement frameworks. It is that attitude that has led many companies to make great strides in measuring their effectiveness.
The leaders of the PR industry seem to be trying hard to get their practitioners to move away from AVE, but the view from the ground suggests that they have a long way to go.
Too often, we’ve encountered PR companies espousing their ‘PR Value’ with as much conviction as they could muster hoping that clients won’t dig deeper.
But that’s not going to be you anymore, is it?