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Media Buying Agencies in the US - Industry Risk Rating ReportProduct Type: Market Research ReportPublished by: IBISWorld Published: April 2008 Product Code: R538-18835 Description Industry Risk Ratings SynopsisThis Industry Risk Ratings report from IBISWorld evaluates the inherent risks associated with the Media Buying Agencies in the US industry. Industry Risk is assumed to be 'the difficulty, or otherwise, of the business operating environment'. The report looks at the operational risk associated with this industry. Three types of risk are recognized in our analysis. These are: risk arising from within the industry itself (structural risk), risks arising from the expected future performance of the industry (growth risk) and risk arising from forces external to the industry (external sensitivity risk). This approach is new in that it analyses non-financial information surrounding each industry. Industries are scored on a 9-point scale, where 1 represents the lowest risk and 9 the highest. The Industry Risk score measures expected Industry Risk over the coming 12-18 months. Industry Definition This industry comprises establishments primarily engaged in purchasing advertising time or space from media outlets and reselling it to advertising agencies or individual companies directly.In this process establishments generally have to liaise with media representative companies (NAICS 54184) which are contracted by media owners/operators to sell spot (other than local) advertising on their behalf.Media buyers perform two main functions:they negotiate the terms on which advertising is purchased on behalf of their clients. However, large advertisers may still prefer to negotiate rates directly with media representatives (see NAICS 54184) or media owners through using their own in-house media buying team, or by being part of the negotiations between media buyers and media representatives and others. Media buyers generally negotiate advertising deals on behalf of a number of clients in aggregate, although they will have separate agreements with each, to obtain the best advertising rates and discounts. Generally the rate negotiations may take place with media representatives and owners annually; and also plan individual campaigns through their media planning functions and monitor the daily results of the advertising placements against the agreed target audience reach and impacts and make the necessary changes to the advertising schedules and/or payments to media owners. This is the basis by which media buyers pay for advertising and also the basis on which they are paid their commissions or fixed fees by clients. Some clients also hire media auditors to monitor the effectiveness of and the outcomes achieved by their media buyers.The demand for the media buyers' industry services is directly related to the overall aggregate level of advertising expenditure by clients (including, under agreement from a number of advertising agencies and individual businesses), and which is used as leverage in negotiations with media owners and media representatives to obtain the best advertising rates and placements (in terms of both impact and reach against the agreed target audience) on their clients' behalf. Report Contents Risk Overview The Risk Overview chapter includes sections on Industry Definition and Activities, Industry Risk Score and Risk Rating Analysis. The Industry Definition and Activities section provides a detailed definition of the activities carried out by operators in this industry as defined in NAICS. A list of the primary activities of the industry is also included. The Industry Risk Score section provides the Overall Industry Risk Score as well as the Risk Scores for each of the three types of risk covered that combine to form the Overall Industry Risk Score. These three types of risk are Structural Risk, Growth Risk and External Sensitivity Risk. The Risk Rating Analysis section discusses the underlying factors contributing to the Overall Industry Risk Score. Structural Risk The Structural Risk chapter looks at risk arising from within the industry itself and provides a detailed discussion of the industry’s level of exposure to seven key indicators. These key indicators are Barriers to Entry, Competition, Industry Exports, Industry Imports, Level of Assistance, Life Cycle Stage and Volatility of Industry. The Overall Structural Risk Score is a weighted aggregation of these seven key indicators. Each of the key indicators is discussed in detail in this section. Growth Risk The Growth Risk chapter looks at risks arising from the expected future performance of the industry. The Overall Growth Risk Score is determined by amalgamating the scores for Recent Industry Growth and Forecast Industry Growth. Detailed analysis is provided discussing the reasons for the growth scores of both. Sensitivity Risk The Sensitivity Risk chapter looks at risks arising from forces (sensitivities) external to the industry. The Overall External Sensitivity Risk Score is determined by identifying the most significant (up to 6) external factors and weighting them to represent how significant each sensitivity is to the performance of the industry. Examples of External Sensitivities are Exchange Rates, Interest Rates, Commodity Prices and Government Regulations. There is also a detailed analysis of the affect each of the sensitivities has on the industry, including charts and data tables where appropriate. Industry Risk and Industry Risk Scoring Methodology This chapter provides an overview of how IBISWorld defines Industry Risk and discusses the methodology used to arrive at an Industry Risk Score. There is also a table that provides a definition of the seven levels of Industry Risk. Table of Contents
Industry Definition & Activities Industry Risk Score Risk Rating Analysis STRUCTURAL RISK Barriers to Entry Basis of Competition Domestic and International Markets Industry Assistance Life Cycle Industry Volatility GROWTH RISK Recent Growth Analysis Forecast Growth Analysis SENSITIVITY RISK Downstream Demand - Advertising and Related Services Real GDP Growth Total Media Expenditure (Advertising) INDUSTRY RISK AND INDUSTRY RISK SCORING METHODOLOGY What is Industry Risk? The Industry Risk Scoring Methodology Risk Rating Score Definition |
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