The Rainbow Connection

Imagine if media buyers were unable to identify and target people who represent one of the most important consumer segments, a group comprising as much as 10% of the U.S. population and one with exceptionally high discretionary spending. Imagine that this group also consists of some of the earliest adapters of new media technology.

It's hard to imagine, but that's essentially how big advertisers and agencies have been planning media buys aimed at the gay/lesbian/bisexual/transgender (GLBT) market. Either they've ignored such consumers, or they've had to rely on crude data—and even guesswork—to figure out exactly who gay Americans are and how they use media.

But the gay market is coming out of the media closet, as major marketers begin recognizing its spending power and new media and research become available to reach them. Until recently, this has largely been a print-media phenomenon that has seen a surge in the so-called gay press—slick urban magazines and gay- community newspapers that now account for more than $200 million in annual ad spending. Largely on the basis of print success, big marketers are now earmarking ad budgets to reach gay consumers via TV. And with Viacom's launch of Logo, a major TV player is in the game, too.

Yet while marketers typically are loath to invest significantly without firm data and hard facts about their target audience, most continue to rely on instinct regarding gay consumers. “The gay and lesbian market has been Johnny-come-lately as far as media research goes,” says Todd Evans, president and CEO of Rivendell Media Inc., a media-buying agency in Mountainside, N.J., which specializes in the GLBT marketplace. “It's almost nonexistent.”

It wasn't until Absolut vodka jumped in a few decades ago that ad spending in the gay press took off. Evans, who publishes an annual tracking study on spending on gay print media, estimates it rose 28.4% in 2004 to $207 million. More important, he says, the list of advertisers in the gay press now includes 150 Fortune 500 companies.

But the most important milestone, he says, is the fact that, for the first time ever, more than half the ads running in gay print-media outlets in 2004 were created specifically for the gay community, as opposed to mainstream ads in gay-media outlets. “That's a big development,” says Evans, “because creating gay-themed ads requires a bigger advertising budget and a bigger commitment to the market.”

While Absolut's success inspired competitors to jump in, the trend has occurred in other categories, too, including tobacco, travel, autos, entertainment, telecommunications and media—especially cable TV. In fact, a study released this month by Scarborough Research and the G/L Census Partners—a collaboration between the S.I. Newhouse School of Public Communications at Syracuse University and advertising and public-relations firm OpusComm Group—indicates that gay consumers are much greater users of digital media products and services, especially digital cable, premium channels and digital video recorders.

Given the fact that the GLBT market has some of the highest discretionary spending of any segment, it's no surprise that a major player like Viacom would launch a channel aimed at that market. Since its June debut, Logo has racked up 13 million digital-cable subscribers and is expected to be in 18 million homes when Comcast completes its rollout in the next few months. How many gay viewers it will actually reach is another story, and one that may not be told for some time.

“You've got to remember those subscriber numbers are households,” says Adam Herman, senior VP/director, integrated media, at MediaCom, the New York-based media agency that handles one of the most proactive gay-TV advertisers: online travel service Orbitz. “It doesn't say how many gays are in those households or how many of them will be watching Logo.”

To help Orbitz best target the gay community, MediaCom developed three tiers of programming. The first includes shows featuring gay themes or characters, such as Will & Grace and Queer Eye for the Straight Guy. The second tier includes shows that have “gay sympathy” but a predominantly straight audience, such as The Ellen DeGeneres Show, or have a unique appeal among gay viewers, such as a Liza Minelli special, according to MediaCom. The third tier includes shows that MediaCom's planners believe gays are likely to watch, including hip programs like The Daily Show.

Herman says Orbitz currently places spots only in the first tier: “Intuitively, we know we are reaching a gay audience this way.”

The lack of data on gay viewers has pushed some to develop creative applications to infer it. When Bravo generated a hit with Queer Eye, NBC Universal's researchers came up with an innovative way of looking at Nielsen data, creating a custom demographic break based on same-sex adults living in the same household. They then edited out households where people were related or were known to be roommates and asked Nielsen's field representatives to make a judgment on whether they were gay households.

The results confirmed what advertisers or programmers might expect gay people to be watching, says Horst Stipp, senior VP/director of primary and strategic research, at NBC Universal. But when a Nielsen committee looking into the measurement of gay viewers repeated the study, he says, it generated conflicting results—sending the committee back to the drawing board.

“The take-away from our research,” Stipp adds, “is that the gay population is as heterogeneous and diverse as the general population.”

That conclusion is similar to one uncovered by media agency MindShare, New York, when it conducted a study of gay/lesbian consumers and their media habits in 2003. “What we found was that their income was a little bit higher and their age a little bit lower than the average American, but otherwise, they looked like the mainstream audience,” recalls David Marans, who was head of research at MindShare and is now an executive VP with IAG Research, New York.

The finding was a hot potato within media and marketing circles, which have historically positioned the gay market as being very different—and substantially more affluent—than mainstream Americans. While their incomes are reportedly comparable, Marans says, the primary distinction is discretionary income, as gay households tend not to have children and often have two incomes.

But the most important part of the study had nothing to do with the socio-economic aspects of gay consumers. It had to do with how they feel about the way marketers advertise to them; the gay community has proved fiercely loyal to brands that have been targeted specifically to them.

Says Marans, “There is a tremendous boost if you're an advertiser and you advertise in gay media.”