AVE is the rand value of what it would cost to place your editorial as an advert, it is that simple. It is not a measure of sentiment nor is it a measure of projected reach or Return on Investment (ROI). In fact AVE measurement is being replaced and outlawed in some countries for use as an effective measure when entering PR awards as the limitations are large. However we recognise that in South Africa this is the preferred measurement tool at the moment. As we update and find more effective tools we will add them to the mix.
To calculate, measure the space (column inches) occupied by a clip (for radio and television coverage, you measure time). Then multiply the column inches (time) by the ad rate for that page (time slot).
Thus is the cost of the advertisement that theoretically could have occupied the space (time) occupied by your editorial. Advertising Value Equivalency is a navigational metric: it can provide rough measurements that can help you navigate your PR program toward higher profitability.
Many PR people incorrectly assume that AVE is an evaluative metric. That is to say, they assume that it can help them measure the profitability of their programs, because it appears to show a “dollar value” of publicity.
But the “dollar value” is not a measurement of value; it is a measurement of cost.
AVE numbers can drastically overestimate or underestimate the “equivalency” in “advertising value equivalency.”
Consider that a highly positive article can be worth much more than a single advertisement in the same space, because readers consciously or unconsciously think of an advertisement as an instance of a company boasting about itself, and an article as an implied endorsement by a presumably objective and knowledgeable third party. So, from this perspective, AVE underestimates the value of editorial.
AVE clouds this issue by falsely equating advertising and publicity, which in turn reinforces the ancient but ever-popular fallacy that publicity is “free advertising.” In fact, it is not free and it is not advertising.
On the other hand, many PR people overestimate the advertising value equivalency of editorial coverage, because they calculate the cost of the space occupied by the whole article – even if only one sentence mentioned the company.
In summary, the use of this technique can perpetuate two major fallacies: (1) that editorial is “free advertising,” and (2) that dollar cost equals dollar value. Many senior managers believe these absurdities, and we marketers should always be looking for ways to debunk them, not reinforce them. If you’re trying to educate your management about how PR works, this technique is counterproductive.
The Institute for Public Relations in 2003 published a thoughtful and insightful report that raises two additional objections:
(1) What is the value of a negative story? (2) What is the value of the absence of coverage in cases where the PR people involved were working specifically to keep the story out of the papers? Those are very good questions.