Time Warner, Viacom Back Off Nielsen

Analysis: With a difficult 'upfront' market looming, media companies prepare to buck tradition to keep ad revenue flowing

Madison Avenue has long paid for TV commercials in a way that made sense when everyone watched TV the same way. With digital technology giving rise to multiple kinds of couch-potato behavior, however, advertisers are pushing for something new.

In moves that could have seismic effects on the media industry, Time Warner and Viacom are in talks with select advertisers that would have the sponsors pay for video ads based on measures very different from the industry’s current standard, Nielsen ratings. The deals would center not on an average of how many people actually saw the commercials — as is the current practice — but rather on how the ads affect consumer behavior or how often consumers interact with the pitches.

The new efforts show how TV, still considered big-audience media, is trying to get smaller — by mirroring digital media’s ability to isolate narrower consumer niches. Seeing such offers from companies known for TV content “is kind of the Holy Grail,” said Mary Ellen Barto, vice president of brand media at Arby’s, which spends approximately $50 million to $60 million on TV advertising each year, and has held talks with Time Warner’s large Turner TV unit. “Consumers now have so many options for how to spend their time and where and when they access content,” Barto said in an interview. “It has really become increasingly challenging for marketers to know where to invest their dollars for maximum effect.”

Turner has offered certain advertisers the chance to establish guarantees such as lifts in brand recognition, purchase intent or awareness of a specific marketing effort, like a loyalty program. These guarantees would be established for four of the unit’s cable networks — Cartoon Network, Boomerang, Adult Swim and TruTV — said Joe Hogan, executive vice president ad sales for Turner’s “emerging” networks, in an interview, and would be made alongside traditional metrics like Nielsen ratings. Viacom, meanwhile, has begun talks with potential sponsors about “not only just delivering an impression to an audience, but seeing how the audience will engage with their content or their ad,” said an executive familiar with the situation. The effort would involve new kinds of data and could potentially involve agreements regarding consumer activity related to social media, this executive said.

Many TV networks have begun pitching new ideas about helping marketers use TV more precisely, but Turner and Viacom are believed to be the first to actually offer guarantees of success. If the companies fail to deliver the consumer behavior promised, they would be obligated to give advertisers some sort of “make good,” which could come in the form of extra ad inventory.

The talks emerge as the media industry is poised to enter the annual upfront market, when U.S. TV networks try to sell the bulk of their advertising for the coming programming cycle. In recent years, marketers have cut back the amount of money they put down in advance, and have earmarked more money for new forms of promotion on digital and social media. Advertisers committed between $8.17 billion and $8.94 billion for the 2014-2015 primetime slate on broadcast, according to Variety estimates, compared with between $8.6 billion and $9.2 billion in 2013. They placed $9.6 billion in advance advertising commitments for cable in 2014, down about 6% or about $577 million from the $10.2 billion committed the year before, according to the Cabletelevision Advertising Bureau.

To halt the migration of ad cash, media companies have begun to break old rules and to allow advertisers to do tailored deals that look less at the number of impressions an ad makes and more at very specific marketing goals.

“Overall TV ratings are in structural decline. Marketers are increasing their spend on digital marketing priorities, especially around social, digital video and mobile. The TV networks need to evolve their data, analytics and insight capabilities,” noted Christopher Vollmer, leader of the global media and entertainment practice at consultant Strategy&. Advertisers “will shift their money to the partners where they have the greatest confidence in the return on their video investment,” he added. “They want and need more than Nielsen age and demo.”

Executives who decide how big marketers should allocate their funds applaud the efforts. “This is an advancement over years past, when we were looking only at demographic and age,” said Melissa Shapiro, president of investment at MediaVest, the Publicis Groupe ad-buying firm that represents Procter & Gamble and Coca-Cola, among others. “Now we are looking at specific audiences.” Advertisers are more interested in “how do you find the car buyer, rather than men between 18 and 49,” said Marianne Gambelli, executive vice president and chief investment officer at independent media buyer Horizon Media. “I think that’s where the business is going.”

Other companies are making efforts as well. “We are deep in conversations looking at all data sets,” said Dave Morris, chief revenue officer of CBS Interactive. “We have started to talk to some pretty interesting partners and we are trying to make some very smart and strategic decisions.” CBS is at present offering guarantees based on Nielsen, according to a person familiar with the situation, but will entertain other types of guarantees on a case by case basis.

The media companies hope the ideas grow over time. The four Turner networks were selected because their audiences are more narrowly defined, and perhaps easier to harness for the new measures, said Donna Speciale, president of Turner’s ad sales, in an interview, but the company would over time like to extend it “out on all of our networks,” including its biggest properties, TNT and TBS. Viacom sees a chance to get more involved with advertisers looking for video distributed across TV as well as mobile and digital means, the executive said.

Success is not guaranteed. The deals require a closer working relationship with the TV networks than some advertisers might prefer, said one media-buying executive with knowledge of the discussions. Indeed, the Turner offer requires the advertiser to get involved with higher levels of placement on the networks or potentially helping the network get attention for its programs, according to ad buyers. Some advertisers may not wish to share marketing goals, the media-buying executive said, because doing so might tie the marketer more closely to a particular media company, leaving less room for flexibility. What’s more, the media buyer suggested, sharing granular marketing goals could give TV outlets leverage to charge advertisers more for helping them reach the audiences they most covet.

If these deals gain traction, however, they could place pressure on Nielsen, which has for decades been the de facto arbiter of TV success. Advertisers pay for TV commercials based on a measure known as “C3,” which includes views of ad breaks that take place as many as three days after the commercials air. Some have begun to use “C7,” which incorporates a week’s worth of commercial views. Marketers typically pay most for views by audiences between the ages of 18 and 49.

To be sure, the company does more than measure viewership. It also provides data about consumer habits, and its Nielsen Catalina unit, which analyzes consumer buying behavior, is part of offers being made by both Scripps Networks Interactive and CBS in the weeks leading to the upfront. “There are a myriad of measurement options emerging for key players in the media industry, but Nielsen remains dedicated to delivering superior quality measurement that the industry continues to rely upon,” said Charles Dreas, managing director of media analytics, insights and policy at Nielsen, in a statement provided by the company.

The Turner and Viacom efforts aren’t the first to use alternate measures to woo advertisers. In 2006, NBC put together an agreement with Toyota Motor that called for the network to prove viewers could remember specific pieces of information about TV shows, including the plot. Toyota wanted to identify the NBC programs that sparked the most viewer attention, or engagement, and place commercials alongside them. To get such information, NBC and Toyota relied on IAG Research, a New York company that measures viewer response to TV shows and ads. Nielsen purchased the company in 2008 for $225 million.

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