Can Commercial Ratings Save TV Advertising?
It's been well documented that the TV advertising industry has had a challenging year. Advertisers are no longer investing blindly into TV programs, based strictly on TV ratings, as they used to. Advertisers are demanding that TV become more accountable and provide more accurate reporting and return on their investment.
As a result, the past upfront season was lackluster. More and more advertising budgets are being diverted to new media resources such as Internet, streaming media or mobile advertising (which tend to offer better ROI numbers). More telling is Nielson's announcement to offer commercial ratings as a way to provide accountability. But will the new commercial rating system solve the problem?
Nielsen Media Research, and the television advertising industry it serves, is removed by several technological epochs from the modern solutions required to meet these challenges. As the average channels receivable by an American household has increased from 5.7 in 1960 to over 105 today, Nielsen's statistical sampling techniques have grown increasingly insignificant.
More importantly, the media planning/buying process, which is based on this flawed data, executes transactions via a cumbersome paper and fax process that does not enable advertising affiliates to take proper advantage of scale economies and reduce overhead expenses.
Rather than embrace technological solutions to a problem born of technological innovations, the old guard has hunkered down in an attempt to maintain their positions and justify their legacy systems.
While Nielsen has announced its intent to track exactly who is watching television ads and rank them accordingly, it has proven difficult. This is due largely to the variety of ads being placed, such as regional ads during sporting events and crawler ads imbedded within programs, which are difficult to track. The line between sponsored programming and actual commercials is also often difficult to determine.
Another concern with Neilsen commercial ratings is how to accurately calculate a "commercial minute" as some minutes contain both programming and commercials. To further complicate things, DVR technology makes it difficult to determine who is watching pre-recorded commercials in a timely manner.
The bottom line is that while Nielsen's intentions to track television ads were good, there are too many questions still unanswered; and no reasonable answers in sight. However, changes in regulation, technology, and the competitive marketplace are currently taking place that will open new doors for television advertising.
With the mandatory switch to exclusively digital broadcast in 2009, and new "smart" set-top boxes, new opportunities will be open to advertisers to track exactly who is watching their ads.
However, until then, the market will continue to be fragmented, and it will continue to be difficult to determine ROI from television advertising and Nielson commercial ratings will not be the "quick fix" that many advertisers were hoping for.