Anyone who’s worked in the ad business recognizes the adage, often attributed to 19th century department store pioneer John Wanamaker: “I know that half of my advertising budget is wasted, but I’m not sure which half.”
This dilemma has bedeviled marketers for more than a century. But now, with the emergence of better audience-measurement tools, it’s finally becoming possible to streamline ad budgets. For TV advertising, this means taking advantage of new metrics gleaned via such diverse tools as set-top boxes, social-network websites and point-of-purchase consumer loyalty cards, and adding them to traditional audience-measuring information to determine values such as return on investment, program engagement, audience attentiveness and program “stickiness.”
TV’s six-decades-old tool for valuing ads — Nielsen’s estimates of audience size and demographic composition — still remains the industry’s core currency. But the new metrics are bound to have major consequences for all ad-supported content in a TV ad biz valued at $59 billion per year in the U.S.
Audience measurement services are so popular that several players are now putting lots of coin in the field. Dow Jones VentureSource says that investors poured $1.05 billion in startup U.S. advertising/marketing ventures of all kinds in the first three quarters of 2011, after $1.25 billion in 2010. TRA’s first lead investor in 2007 was venture capital firm Kodiak Venture Partners.
Giant agency holding company Interpublic Group’s forecasting unit, MagnaGlobal, uses what it calls the Magna Value Index, a proprietary measure of audience attentiveness to TV.
“Everything we know helps us with our negotiations in purchasing TV time,” says MagnaGlobal managing director Brian Monahan.
In a sign of how the results of new metrics can diverge from traditional ones, no TV show landed on both Nielsen’s top-10 list of broadcast primetime shows and on Nielsen’s top-10 viewer engagement metric (see chart). Two runs of Fox’s “American Idol” top Nielsen’s traditional ratings, while NBC’s “Grimm” is the first of the top 10 shows by engagement, which can be defined as the degree of involvement that viewers have in TV programs.
In 2008, ad buyer Publicis Groupe’s Optimedia launched its first-generation Content Power Ratings, which measures delivery of TV programs to auds across multiple platforms, including online, mobile devices and TV. “The latest version of Content Power Ratings aggregates 17 data streams, including those from Nielsen, comScore and Google Trends,” says Greg Kahn, Optimedia exec VP and business development director. “It also tracks Facebook ‘likes,’ Twitalyzer and Klout.”
Such proprietary metrics are often referred to as “secret sauce,” and the media industry can buy off-the-shelf alternative measurement data from various syndicated research providers. For example, TRA (whose initials stand for The Right Audience) licenses viewing data culled from TV set-top boxes in 2.2 million households with 3 million TV sets, which it combines with supermarket shopping data from 60 million consumers swiping loyalty cards at checkout.
TRA says it can match purchase and viewing data to the same home, though information is not personally identifiable in order to maintain privacy. “TRA’s return-on-investment metric quantifies the impact of commercials on consumer purchasing behavior,” says TRA CEO Mark Lieberman.
Syndicated research services aren’t just limited to grocery store buys in calculating ROI; they can also tap other purchase databases, including those from autos and prescription drugs. Further, researchers can marry advertisers’ proprietary customer data with TV viewing.
The depth of data — in some cases down to a specific household — has in the past been associated only with online advertising, where users, their clicks and movements can be individually tracked. But now TV is getting aboard the bandwagon, and broadcast and cable execs are embracing the new metrics to make the case to advertisers to move more money to TV from other media, particularly the fast-growing online category, by duplicating its ability to measure click-through and point-of-purchase promotions.
Applying metrics like ROI — a measure of the sales payoff linked to a specific marketing initiative — to TV buys allows marketing departments and advertisers to assert bottom-line benefits to their corporate brass. That’s in sharp contrast to the vague benefits heretofore credited to TV commericals, such as raising “brand equity.”
“TV is moving to greater accountability, and advertisers over time will learn that some content works much better than other types of content” as an advertising vehicle, says Randall Beard, global head of advertiser solutions for Nielsen.
Another way new metrics attract advertisers: They can measure audience response to commercials and channels’ on-air promotions as well as TV programs, since set-top cable boxes can provide second-by-second viewing data. “You can see how the commercial did vs. the program and measure the difference,” says Jeff Boehme, chief research officer of Kantar Media Audiences.
The new metrics also help advertisers understand evolving consumer behavior as TV viewing goes high-tech with DVRs, videogame consoles hooked up to TV sets and new viewing devices such as the iPad. “The risk is not only that the consumers are hitting the fast-forward button, skipping ads on DVRs, but also turning away from the TV set to the smart phone or tablet in their laps,” says MagnaGlobal’s Monahan. “If you see the total hours people are watching TV, there’s no way that they can always be attentive.”
However, this trend toward new metrics faces obstacles. Most set-top box data simply reveals tuning, not specifically who in the household is viewing. Measuring social media buzz may be hip, but opinions differ as to whether online chatter about TV shows is a reliable measure of the impact of the commercials in those shows.
Perhaps the biggest hurdle is that new metrics run up costs for ad agencies. “They certainly don’t like to incur any added expense, especially if they can’t bill it back to the client,” says Brian Wieser, senior analyst at independent investment research firm Pivotal Research.
Still, some ad agencies have jumped on the bandwagon, touting the wonders of their “secret sauces” in pitching advertisers, suggesting they’ll deliver more bang for the buck than other agencies pursuing the same account.
And as an example of how the new metrics differ from traditional measurements, the Magna index’s No. 1-ranked new series in primetime among auds 18-49 was FX drama “American Horror Story.” That’s a far cry from the show’s Nielsen ranking of 54.
TOP 10 MOST ENGAGING SERIES
7.”Once Upon a Time”(ABC)
8.”2 Broke Girls”(CBS)
Source: Nielsen. Program Engagement measures viewer attentionto TV episode content. Includes regularly airing broadcast primetime entertainment series with at least three telecasts. Data based on time period Jan. 1 – Dec. 5, 2011, among viewers 13 and older.
TOP 10 HIGHEST-RATED SERIES
3.”NBC Sunday Night Football”(NBC)
4.”Dancing With the Stars”(ABC)
5.”Dancing With the Stars Results”(ABC)
7.”NFL Regular Season”(many nets)
9.”America’s Got Talent-Tues”(NBC)
IS: Los Angeles”(CBS)
Source: Nielsen. Data based on time period Jan. 1 – Nov. 27, 2011; Broadcast-Prime Only.