InteracTiVoty: Judging Success by Advertising Effectiveness - Todd Juenger - MediaBizBlogger

There was a time not so long ago when judging the success of a television network was pretty simple. The network with the highest rated programs wins. Distribution and advertising follow suit.

About ten years ago, things got much more complicated. Enter the DVR. All of a sudden, advertisers start thinking, "Wait a minute, what I care about is how many people saw my commercial, not the program surrounding it." Of course ad avoidance was going on since the invention of television. As soon as that console TV was installed in the living room, people's biological clocks starting timing themselves to synchronize bathroom trips with commercial breaks. The widespread adoption of the remote control (and the introduction of dozens, soon to be hundreds, of new channels to explore with it) led to a whole new type of behavior – channel surfing -- usually at the expense of the commercials you were supposed to have been watching.

But DVRs really broke the camel's back in terms of advertisers accepting program audiences as proxy for commercial audiences, stimulating a discussion and re-invention of methodology that should have taken place years (or decades) earlier.

So the research industry has responded. There are now several companies, including TiVo, offering specific commercial ratings. Want to know how many impressions your :15s delivered? We can give you a specific answer. The industry currency also adapted of course, culminating a few years ago in the "C3 Compromise." Now networks and advertisers generally agree to base their measurement for audience delivery on the "average commercial minute" in a program, including timeshifted viewership, up to three days after airing.

I'm not going to enter into a rant about the issues with C3 ratings versus specific commercial ratings, and comparative methodologies. Save that for another day. What strikes me as more profound are the broader consequences of this seismic change.

Remember when we could judge a network's success by the popularity of its programs? No more. The ratings number that matters is the popularity of its commercials. And just like programs, some commercials are more popular than others. For example, a quick glance at some February numbers in the TiVo Stop||Watch service, looking at ad viewership by product category, reveal some popular categories (motion pictures, foreign cars) and some unpopular categories (domestic cars, toilet paper, laxatives – you can't make this stuff up).

So here's the rub: everything else being equal, a network that carried a lot of ads for foreign cars would have had higher February ratings than a network that carried lots of domestic car ads. There was a penalty for carrying domestic car ads instead of foreign car ads (note: this is not an absolute truth; it was true for February, but certainly we all hope this imbalance will correct itself when the general climate improves). Network ratings, "C3," are being driven not only by the program, but by the advertisements themselves.

This begs a lot of fundamental questions. Should networks seek out advertising clients in popular categories, or with popular brand campaigns, and weed out less popular categories? Should networks start programming commercial pods, based on intelligence of which ads will retain most audience, giving privileged positioning to popular product categories? Should networks start charging premium pricing for toilet paper ads (and discounted pricing for theatricals)?

From the advertiser side of the equation, what we have is a perfect example of a freeloader problem. Under the C3 Compromise, every ad in a program is assigned the same rating. There is no distinction between the "good" ads and the "bad" ones. So the "good" advertisers are being charged a discount (relative to the impressions they actually delivered), and the "bad" advertisers are being overcharged. This works out fine for the "good" advertisers, as long as everybody keeps their mouths shut. But that won't happen. Before long the "bad" advertisers are going to wake up (with the help of specific commercial ratings data) and say "I'm not paying for 20% more impressions than I actually received."

There may come a day, in the not so distant future, when the question to ask when judging the success of a network is not "how popular is their programming?" but rather "what advertisements do they carry?"

Todd Juenger is VP and General Manager, Audience Research and Measurement for TiVo, Inc.