Don’t use discredited PR metrics to value AR

Lighthouse’s measurement work often provokes interesting questions. Recently, one client asked if we conducted any research that could give a ballpark figure on how much analyst coverage is “worth” in cash. Of course, many PR agencies have a simple policy: equivalent advertising value. AEV is the price an article would have cost were it an advertisment.AEV is both widely used and widely discredited. There are also deep ethical and work-quality issues with it.

Luckily, attempts to use this discredited approach are hampered in the AR realm. You cannot buy advertising space in an analyst report. Obviously the AEV rule of thumb does not work for AR easily, unless one values each report at the price of a sponsored white paper.

However, the search continues for a simple rule of thumb that could help establish the cash equivilents of, for example, a two-page Ovum report versus being placed high in Gartner’s Magic Quadrant or getting an analyst quote into a press release.

Sadly, there’s no effective rule of thumb for cash value. There are several major variables that explain differences in the degrees to which different market segments are influenced by analysts; just one rule removes most of that information. Furthermore, different analyst firms have different influence. Lastly, the balance of influence between written and spoken research also varies from deal to deal.

As a result, most vendors need to use large-scale market research, or complex statistical models to predict the financial impact of research.

Any rule of thumb system would be rather weak. For example, imagine if you were to follow these steps:

  • estimate what percentage of your sales were influenced by analysts;
  • estimate what percentage of that is determined by analysts; and
  • allocate that between vendors in line with their share of voice in published research.

Any calculation based on such numbers would not be very accurate (apologies if you are using just that approach. We don’t intend to embarass anyone). Even the trend, upwards or downwards, would be only modestly reliable.

Of course, there are ways to improve such models, just as one can make an elephant look more like a banana by painting it yellow. However, we remain unconvinced by rules of thumb for valuing analyst research for rather similar reasons to those used to criticise AEV.

Duncan Chapple

Duncan Chapple is the preeminent consultant on optimising international analyst relations and the value created by analyst firms. As SageCircle research director, Chapple directs programs that assess and increase the business value of relationships with industry analysts and sourcing advisors.