Advertisers, television networks and ratings firm Nielsen Media Research for years have known approximately how many TV viewers bail during commercial breaks. Beginning this fall, they're going to let the rest of us in on the industry's little secret.
In a move that is sure to transform not only the way ad time is bought and sold but potentially the content of the ads themselves, Nielsen said Tuesday that it would begin distributing data on average viewership for the commercials in any given program.
The shift, which will roll out in November, is the industry's response to mounting pressures on two fronts: the rise of digital video recorders, or DVRs, that allow viewers to zip through the ads; and Madison Avenue's growing affection for the Internet, where ad penetration is easily measured by the number of users who click through.
"Nielsen's move is probably one of the most significant acknowledgments of how the Web has changed the marketing world," said Jeff Lanctot, vice president and general manager of Avenue A/Razorfish, an online advertising agency.
Until now, the TV industry has been content to rely on a measurement and reporting system created three decades ago. Nielsen reports TV viewership per half-hour, and ads are priced based on the average viewership of a whole program, including ads and promo spots.
But advertisers' traditional "spray and pray" strategy — buying lots of ads and hoping they connect with consumers — is increasingly being seen as wasteful when compared with the more targeted ad venues that the Internet offers.
Soon, for the first time, TV ad rates will be based on how many people watch the ads.
"We've all talked about the way the world is changing, and now it really is," said Alan Wurtzel, president of research for NBC Universal. "We will radically be changing the way we measure television from a business standpoint."
Although the new reporting system will mostly affect ad buyers and sellers, TV viewers at home may notice the difference as networks shuffle their ad inventory to give prominence to commercials that retain more viewers. That could require the advertising industry to come up with more clever commercials that are immediately engaging.
Advertisers and networks have long grappled with what's known in industry parlance as "commercial avoidance."
"Even before the remote control, there was the call of the refrigerator and the bathroom," said Irwin Gotlieb, chief executive of Group M Inc., which oversees four prominent agencies that buy time for such advertisers as American Express Co., Citibank, Cingular Wireless and Campbell's Soup Co. "We've been factoring these assumptions into our equations for decades."
But now, for the first time, there will be data that "the industry has agreed to use as a yardstick," Gotlieb said.
The new data reporting policy, which was first reported by MediaWeek, is largely an attempt to address the rising use of digital video recorders such as TiVo, which enable viewers to fast-forward through commercials when they play a recorded program.
About 10% of the nation's 110 million homes with TVs have DVRs, said Jack Wakshlag, chief research officer at Turner Broadcasting System. Within a year, nearly 20% of U.S. homes probably will have one.
Although Nielsen has included about 1,000 homes with DVRs in its national sample audience of 10,000 since late last year, the broadcast networks and advertisers recently have been at loggerheads over whether advertisers should have to pay to reach people who record a show and watch it later.
Last month, during the so-called upfront advance ad sales for the fall 2006 TV season, broadcasters caved in to pressure from advertisers who didn't want to pay for such "time-shifted" viewing. The broadcasters, whose profits depend on the number of eyeballs they can claim to be glued to their shows, were forced to leave a significant number of those people out of their tallies.
The big networks weren't happy with the results of this year's advanced advertising sales, with overall sales down about 2% from last year. So the networks have been eager to figure out a way to begin counting digital recorder users in their totals, particularly as more people get the devices through their cable and satellite providers.
"We wanted to get some credit for these viewers because we knew that some got exposure to the ads," said David Poltrack, president of CBS Vision, the company's newly created research arm. "And we know that when a person has a DVR they watch more television, and they watch the big-ticket shows."
Meanwhile, ad agency Mediaedge:cia was interested in just how many people skipped its clients' ads. Executives there knew that Nielsen had been collecting minute-by-minute ratings for TV shows for some time, but the data were so voluminous and cumbersome (not to mention expensive to retrieve) that they were rarely used by advertisers or the networks.
"The idea was to get the information in a manner that we could use for buying and selling," said Lyle Schwartz, director of broadcast research and marketplace analysis for Mediaedge, who first proposed the new reporting procedures to Nielsen.
"In this new age, DVRs are having a large impact, and we are seeing a tremendous amount of commercial avoidance," Schwartz said, adding that studies have shown that as few as 8% to as many as 90% of DVR owners skip ads.
"As a researcher, I'll be happy to be able to get my hands on this information," Schwartz said. "First we will be able to see how many people are watching the commercials, and the next phase will be to find out how viewers react to the commercials."
But with every change comes a new set of problems. Everyone agrees that advertisers will have to craft their television commercials differently, with an arresting image in the first few frames so that people don't skip the ad, said John Cate, San Francisco-based vice president and national media director for Carat Fusion, a digital ad agency.
There might also be jockeying for the first commercial in an ad break — something networks typically don't guarantee except for premier events such as the Super Bowl or the Academy Awards, said Tim Spengler, director of national broadcast for ad-buying firm Initiative.
Changes could be profound, particularly if network executives begin to shuffle the ad spots so they can prominently display the most compelling commercials.
"Will the networks say, 'Give me all the movie spots, and I'm not going to put this toilet paper spot on'?" Spengler asked. "Once that happens, you really open up Pandora's box."
Some say the new Nielsen service might force the networks to reduce their ad rates, particularly for shows whose viewers tend to skip the ads.
CBS' Poltrack said past studies have shown that viewership for commercials during broadcast shows was about 5% less than for the programs themselves, whereas cable shows saw a 10% drop. That's because cable programming tends to get more short-term viewers — channel surfers who stop by for a few minutes before flipping to a new show, Poltrack said.
Gotlieb of Group M said he didn't expect the networks to start slashing their rates.
"This isn't going to decrease the value of television time," he said. "But over time, the ratings will be more accurate than what we have now." Already, the growing popularity of so-called viral videos has provided an incentive for advertisers to make their commercials more interesting. The idea: Release commercials that are so funny, charming, sexy or controversial that viewers not only don't skip them, they share the ads with friends.
Anheuser-Busch Cos., Gap Inc. and other mainstream marketers have used these videos, also called pass-along ads.
Subservient Chicken, a bizarre Burger King website featuring a chicken that seemingly takes commands from Web surfers, has attracted hundreds of millions of viewers.
Meg James and Chris Gaither, Los Angeles Times. July 12, 2006
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