PPM Builds Reach, Among Radio Listeners, Advertisers Too

Prospects for the launch of a portable people meter service got some more good news on Tuesday when an influential group of national advertisers gave it their endorsement. The vote of confidence from the Association of National Advertisers' Radio Advertising Committee follows a series of deal announcements PPM developer Arbitron has announced with major ad agency companies, including Carat, Interpublic and WPP Group. Arbitron has been pulling out all stops to convince radio broadcasters to follow suit, and got some additional support Tuesday when researcher Harmelin Media released findings of a study analyzing Arbitron's PPM data form its Philadelphia test indicating that radio delivers far greater audience reach than indicated by Arbitron's current paper diary rating system.

Bernie Shimkus, who directed the Harmelin study, described it as "a comparison of the paper diaries with PPM data on actual purchased radio schedules," and termed the results surprising because "typically, radio has been viewed as a frequency-building medium rather than a reach medium, but this study would seem to indicate it has an ability to generate much higher reach numbers."

According to Shimkus, the PPM revealed anywhere from 13 percent to 118 percent greater reach among demographics in particular time periods, with the latter figure occurring among programming aimed at 18- to-24-year-old men, a primary demographic for many radio advertisers. Shimkus said most results were usually 15 percent to 25 percent higher than paper diary data had led marketers to believe.

"The industry knew that a methodology requiring someone to remember and physically write down what they had listened to was probably not accurate," Shimkus ventured, "but even so, it's interesting how different the results really were."

The granularity of demographic data provided by Arbitron's PPM device--currently limited to age and gender breakdowns--could be easily extended to include valuable data such as income, Shimkus added. "You could get this kind of information, and you could get it more quickly. The current diary service is a three-month rolling average. You can get this tomorrow."

Phyllis Maguire, executive vice president and managing director at MPG, echoed Shimkus' sentiments: "The diary system is antiquated, and [the PPM data] is a true representation of what people are listening to, how often they're listening to it, and how often they're switching stations." Maguire also noted the data's implications for radio reach: "The notion that we've always been dealing with is that radio is just a frequency medium, but now we have evidence to support what everyone has always suspected--namely that it's a good reach medium as well."

And what do the results imply for the pricing of radio ad time? Maguire pointed to the example of Nielsen's introduction of television People Meters in 1987 as a precedent: "We faced the same when Nielsen rolled out the People Meter in local markets, and it turned out to be a one-time cost adjustment. Yes, the individual cost points could go up, but it's definitely going to vary by station. Really, the concern should not be that people are going to move away from radio if they adopt the PPM--it's that they're going to walk away if they don't."

The ANA's endorsement, meanwhile, adds pressure on radio broadcasters, which have been loath to commit to the PPM for a variety of reasons including fear over the economic impact to the radio advertising marketplace, and significantly higher ratings data costs associated with the new Arbitron product.

Radio giant Clear Channel Communications currently is evaluating responses to a request for proposals for a new electronic measurement service for radio audiences, including one submitted by Arbitron. A decision is expected in the next couple of months. Also expected within the next two months is a decision by Arbitron's erstwhile PPM partner, Nielsen Media Research, which has an option to create a joint venture with Arbitron based on the PPM, which would also provide TV ratings data.

The outlook for that venture, as well as a second PPM-based venture between Nielsen parent VNU and Arbitron to launch a single-source measurement system dubbed Project Apollo, also face some uncertainty, as VNU goes into play and may be broken up. A group of private equity firms is trying to take control of VNU and is expected to break it up and sell off the pieces, raising questions about whether a new Nielsen owner would want to move forward with the PPM venture, or whether a new ACNielsen owner would be keen to develop Project Apollo, which last week began rolling out a panel for a live field test this year.

During a regularly scheduled earnings call with investors, Arbitron CEO Steve Morris voiced confidence that new owners of the VNU assets would likely continue with the projects. Arbitron is deemed a potential bidder for one or more of the VNU assets, especially Nielsen Media Research, a move that would resolve some of those issues if it were to happen.

"To date, we've signed a number of national and regional advertising agencies to PPM contracts. These agencies account for nearly 70 percent of the national ad dollars spent on radio," Morris noted in Arbitron's fourth quarter 2005 earnings statement.

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