July 12, 2006
Advertising

How Many See the Spots? Soon, Ad Buyers Will Know

By JULIE BOSMAN

New York Times
 
Ad buyers are already looking forward to the start of negotiations for network television ad time next year.

For the first time, ad buyers will be able to rely on new ratings from Nielsen Media Research that will let them know how many people are actually watching commercials, not just programs.

It is not clear if the new ratings data, being offered beginning this fall at the request of ad-buying firms, will mean a price break for their clients, who spend billions on network TV spots. But the ad buyers are enthusiastic about the prospect.

“From our side of the fence, it’s something that we’ve been pressing for for a very long time,” said Marc Goldstein, the president and chief executive of MindShare North America, part of the WPP Group. “The beauty of this is that we’ll have a solid eight months to really look at the data, see what the fluctuations are and build it into the thinking of our upfront negotiations.”

Ad buyers may use the numbers to prove some long-held conventional wisdom: television viewers watch commercials less than programming. More important, they will be able to analyze commercial viewership by program — valuable information for their clients.

All of which means that starting next spring, when advance negotiations for ad buying begin for the 2007-8 television season in the so-called upfront market, advertisers may be able to negotiate lower prices.

Advertisers have increasingly been diverting their purchases to the Internet, where ad buyers know how many people view a Web site, how long they stayed and how many clicked on the ad. Last year, sales in the upfront were down from the year before; this year, advance sales will probably be down again.

•But one industry expert cautioned that while commercial ratings were a more precise count of people who could be exposed to marketing messages, it was too soon to predict how the new data would affect the upfronts.

“I think this is only one measurement and one tool that is a factor in pricing,” said Charlie Rutman, the chief executive for North America at MPG in New York, the media agency owned by Havas. “There are other things, like supply and demand. It’s not only about ratings.”

Industry estimates place commercial ratings at approximately 5 percent to 10 percent less than program ratings in prime time. For cable, the numbers range from 3 percent to 15 percent. Now that advertisers are mere months away from receiving hard numbers on commercial ratings, the estimates will be put to the test.

Still, it remains unclear if network executives will be swayed by an argument for lower prices when next year’s upfront market arrives. “If I know that commercial ratings are 5 percent below the average, should I say, ‘I’ll pay you 5 percent less’?” said Gary Carr, the senior vice president and director of national broadcast for TargetCast TCM, an agency that buys commercial time for marketers. “Or will they say, ‘You’ve always known it’s 5 percent less, so nothing’s different’? So that’ll be the next fight.”

•Representatives of three media agencies — Mediaedge:cia, MindShare and MediaCom, which control a significant percentage of the money in the media-buying industry — approached Nielsen in January and requested the new ratings system.They were initially told that delivering commercial data would probably take a year, said Lyle Schwartz, the director of broadcast, marketplace and research analysis for Mediaedge:cia, part of GroupM and the WPP Group.

“Their first reaction was that they would look into it, and they would have to see what the industry reaction was,” Mr. Schwartz said. “They were a little tentative.”

Representatives from the networks turned out to be O.K. with the initial proposal, he said.

Alan Wurtzel, the president of research for NBC Universal, said: “We all owe ourselves this next season to really evaluate this new approach. If it’s as promising as we think it is, and we do think it’s promising, then we would use it the following year and it would become a big part of the business. But it’s a big step.”

Michael Shaw, president for sales at the ABC Television Network in New York, part of the Walt Disney Company, told the trade publication Mediaweek that his department was already prepared to begin selling based on commercial ratings.

One explanation for the networks’ openness is their need to respond to emerging competition like online advertising and video-on-demand, which promote more measurable return on investment. In December, Steve King, worldwide chief executive at ZenithOptimedia, part of the Publicis Groupe, predicted a 22 percent increase in online ad spending growth in 2006 over 2005.

The new commercial ratings will not show viewership of individual commercials — just an average of all the commercials for the program, said Jack Loftus, the senior vice president of communications for Nielsen. “It won’t be a rating for the Budweiser commercial at 11:08,” he said.

Minute-by-minute data has already been available to Nielsen’s clients for several years, Mr. Loftus said, but “you have to really drill into the data and get into it.”

The commercial ratings will be available at no additional cost to subscribers of minute-by-minute data, but subscribers of standard program ratings will be required to pay extra for commercial ratings. Mr. Loftus said the prices have yet to be determined.

 
Nielsen Plans to Track Viewership Of TV Commercials for First Time
By Brian Steinberg and Brooks Barnes

Nielsen Media Research, the firm that calculates national television ratings, plans to answer one of advertising's most pressing questions: How many people actually watch TV commercials?

In November, Nielsen will begin for the first time to provide formal ratings for commercial breaks, a move with far-reaching implications for the fast-changing media world.

Currently, Nielsen, a unit of Dutch media company VNU NV, provides ratings only for individual TV programs in their entirety. Commercial prices are based on that overall rating. The higher the rating of a particular show the more money a TV network can charge advertisers for a spot shown during that program.

Both TV networks and advertisers expect the new Nielsen ratings will show that viewership declines noticeably when a program breaks for commercials. A particularly big drop could fuel advertisers' push for changes in how ads are incorporated into shows, reinforcing demands for fewer or shorter ad breaks and lower ad rates. It could also accelerate the flow of advertising dollars out of television to the Internet and new digital media.

"Prices should go down," says Bruce Goerlich, executive vice president and director of strategic resources at Publicis Groupe SA's ZenithOptimedia, a firm that buys advertising time on behalf of corporate clients and other marketers. "If I was a buyer, I would be taking the stance of, 'Quite frankly, what you said you were delivering, you weren't.'"

Television executives aren't likely to roll over, though. Jeff Zucker, chief executive of General Electric Co.'s NBC Universal Television Group, says there's "no reason to believe" the new ratings will put pressure on prices. "The bottom line is that there is still no better way to reach a mass audience," he says.

Any softening of ad prices would be a big blow for the nation's TV networks and their parent companies. Media stocks overall have been depressed in recent years as technology has whipsawed the industry. Many big advertisers have already cut back on traditional TV spots. General Motors Corp., for example, says its spending on 30-second prime-time commercials declined by 50% in the five years between 2000 and 2005.

In the recently concluded "upfront" ad-sales negotiations, where major networks sold the bulk of their ad time for the coming fall season, overall ad commitments fell slightly compared with the previous year, which itself was down from the year before. Ad buyers and sellers believe the new commercial ratings could help determine pricing for ad time starting with next year's upfront session.

Since the industry's early days, networks and advertisers have debated how many people watch the 30-second spots sprinkled throughout TV programs. Viewers have long used commercial breaks to grab something to eat or change channels. Questions about the effectiveness of commercials have increased in the past couple of years as digital video recorders, or DVRs, such as TiVo, have become more popular, making it easier for people to zip through the ad breaks in shows recorded earlier.

The new ad ratings, to be offered retroactively to the September start of the coming fall TV season, will measure the average viewership for all the national commercial minutes that run during a program. They won't track individual commercials or specific commercial time slots.

The new ratings will be gathered the same way Nielsen compiles its existing TV ratings. The firm will use set-top monitors in 10,000 Nielsen homes, checking viewers' TVs several times per minute to determine what show is on. The monitors record whether viewers are changing the channel during a commercial break or zapping through the break with a DVR.

As for visits to the fridge or bathroom, Nielsen viewers are supposed to use another device to record when they leave a room in which a set is playing. The system isn't foolproof, but a Nielsen spokesman says the company believes more than 90% of its viewers comply with this rule.

Finding new ways to measure consumer involvement with media is crucial for Nielsen. Its CEO, Susan Whiting, has announced a flurry of initiatives to measure everything from video playback on cellphones to TV viewing in sports bars. Although the company is the sole provider of national TV ratings, it faces competition from a host of firms that survey measures such as viewer response to ads.

The introduction of commercial ratings comes as advertisers and their agencies are increasingly focused on measuring the results of the commercials they create. Advertising has long been viewed as a game of chance, with marketers putting money into costly TV commercials without any clear idea of whether the ads drive sales of their products or yield greater recognition among consumers.

But the Internet gives marketers the ability to determine the number of people who click on an ad, sign up for a test drive at a local car dealership or choose to receive an email newsletter. Ads on other emerging media outlets, such as cellphones and video on demand, are also providing a measure of consumer response. TV, however, still commands the largest share of ad dollars. In 2005, advertisers spent about $54 billion on local, cable and network TV, according to TNS Media Intelligence.

"Proof of performance measures become one of the things that people can use to separate the wheat from the chaff," says Jon Swallen, TNS Media Intelligence's senior vice president of research.

Network executives argue that advertisers have long known some viewers stop watching during commercial breaks and they say current ad prices reflect this. While Nielsen hasn't previously provided ratings for commercials, it has provided networks with detailed viewership data tracking programs minute-by-minute. Networks and advertisers have been able to crunch this data to figure out how many people watched their commercials, but these calculations were of limited use in ad negotiations because they weren't done in a uniform fashion.

Networks say the new ratings could be good for them because they provide the hard numbers advertisers have long sought. Mike Shaw, president of sales and marketing for Walt Disney Co.'s ABC, says the new metric means networks can go to advertisers and say, "Here is exactly who watched your commercial. They didn't graze. They didn't go to other channels."

Alan Wurtzel, president of research for NBC Universal, agrees, saying commercial ratings "at last address all of the basic issues that advertisers have: Are people seeing my commercial and how effective is it?"

The new rating could also provide something networks have been pushing for lately -- a way to capture the number of viewers watching a program recorded on a DVR. About 14% of the nation's television homes have DVRs, according to ad-buying and research firm Magna Global, a unit of Interpublic Group of Cos. In their latest ad-sales talks, networks asked advertisers for ad rates that reflected the increasing number of viewers thought to be watching TV on DVRs. Advertisers, believing these viewers generally speed through the ads, refused.

"Top shows get [DVR] playback much more often," says David Poltrack, executive vice president and chief research officer for CBS Corp. As part of that playback, he suggests, "we should see a net gain in total commercial exposure over time for the most popular programs."

But the new system may also give advertisers evidence to push for changes in the structure of commercial breaks. Advertisers have long been concerned that the increasing ad "clutter" in TV programs is reducing the value of their ads. Some advertisers have tried asking for specific positions in commercial breaks -- such as the first or last spot -- in hopes of attracting more attention. But networks typically have been reluctant to make such commitments.

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                            A Better Box 
 
  Nielsen Media Research's ratings-gathering system for TV shows and 
commercials: 
 
  -- Participating households receive a Nielsen box that connects to 
their TV. Each member of the household uses a unique log-on by pushing 
a button on the remote control or the box, identifying who is watching 
TV and when. 
 
  -- The box gathers data from DVR users when they watch a pre- 
recorded TV show and notes when they fast-forward through commercials. 
 
  -- The box records data every 2.5 seconds and sends it back to 
Nielsen at 2 A.M. each night via telephone line.
 

 
Report: Nielsen ad rating plan flawed

A top researcher doubts accuracy of data

By Samantha Melamed
Jul 13, 2006

 

Nielsen Media Research is promising that its new commercial ratings system will go active by November, to the delight of many media buyers, and it stands to revolutionize television if buyers use it instead of program ratings to negotiate ad prices.

But one noted researcher is already finding flaws with the Nielsen plan, saying the numbers will not measure commercial ratings but rather an average minute of viewing that may include only a few seconds of advertising.

In a report yesterday, Magna Global USA's top researcher, Steve Sternberg, says he's somewhat disturbed by the Nielsen plan, as he put it. Sternberg notes that the new system will not necessarily offer actual ad ratings but rather ratings for the minutes in which some advertising airs. Writes Sternberg: "These are not commercial ratings, nor are they an acceptable surrogate."

Sternberg finds several flaws with the new system, and one is that the measured minute might include a portion of programming, which would skew the rating.

"It would be averaging together minutes that contain both program and commercial time,” Sternberg tells Media Life. "We don't know how inflated these 'averages' will be, but it will vary significantly by commercial pod."

Sternberg notes that Nielsen currently defines a commercial minute as including any advertising, even only a few seconds within a program minute. He suggests determining a more realistic definition, perhaps including a 30-second threshold, meaning at least half the average minute rating includes advertising.

A Magna Global study of commercial pods earlier this year found that viewing drops off an average of 7 percent during commercials on broadcast and 11 percent on cable. Media buyers have long known that ratings dip during commercials but haven’t had the tools to do anything about it. The question has always been how much the falloff might be for a particular show, or even within a show.

The Magna study found that the dropoff varies depending on where a commercial pod is in a program, what genre is and how the program is doing in the ratings.

Sternberg contends that the best way to get a true measure of commerical viewership is with a system of second-by-second ratings. Buyers would then be able to track how many people are watching a given commercial spot. But to implement that, Nielsen would likely have to update its people meters, which currently measure viewing every 2.5 seconds.

Still, media buyers overall are looking forward to the new rating systems, flaws or no, and it will likely be the standard by which ads are priced at next spring's upfront market.

Whether it will lead to lower ad prices is another matter.

"You could make a claim that ratings are going to decline. But ratings have been declining for years and yet prices continue to go up," says Brad Adgate, Horizon Media's senior vice president and director of research. Supply and demand will still steer pricing, as in the past.

Adgate's not convinced that second-by-second ratings would give media buyers much useful information. "Plus, people tune out of commercials in other ways," he notes, whether it's reading the mail or making a phone call. "The people meter is not designed to measure that. There are other factors that go into whether my communications are effective, or whether the viewer is engaged."

Nielsen's initial plan is to offer live-plus-seven-day data, though they may offer live and live-plus-same-day commercial ratings. Sternberg complains that seven-day ratings are useless to time-sensitive advertisers, promoting a retail sale or a movie premiere for example. And he calls the planned inclusion of VCR recordings an embarrassment:

"Previous studies have indicated that at least a third of VCR recordings are not played back, and that at least two-thirds of playback involves fast-forwarding through commercials. Nobody debates this anymore."

 
 


Samantha Melamed is a staff writer for Media Life.