TV Networks' Ad Downfall: Metrics Mumbo-Jumbo

Devising meaningful qualitative and quantitative measurements that can be monetized across the media spectrum will value the new digital connections between content producers, advertisers and consumers.

That struggle arguably cannot be resolved until all media--most notably television in the home--becomes interactive. Until then, billions of advertising commitments will continue to hinge on guestimates (yes, even the complex C3 post-broadcast including DVR) that look pretty lame in a new world of developing click accountability.

Amid this confused sea change, ABC is offering its own interim solution next season with an Advertising Value Index of more than 15 criteria to assess content value. The effort smacks of the commercial networks clawing for every ad last dollar as their audience base and importance erode. At least ABC is trying. But based on details trickling in from its upfront presentation, it's not clear that this new approach does much more than reinforce the serious shortcomings of the ratings and demographics data the broadcast networks primarily use to sell their overall $19 billion annual ad revenues.



The fundamental problem with ABC's new index--as with all TV metrics--s that they are rooted in a system of mere estimates of who is watching any portion of a program or commercial. In truth, television networks have never really known the exact numbers and demographic makeup of their viewers at any given time. From the old written diaries to today's more sophisticated monitoring equipment, Nielsen Media and its peers provide readings from a relatively small, not necessarily representative sampling of viewers, which they use to formulate educated guesses. Those estimates are used to generate millions in advertising commitments.

Many of those same advertisers are gaining experience with interactive media platforms and devices that generate imperfect, but more exacting metrics to determine the pitch placement. Many can virtually assure advertisers a connection with a target consumer, based on the click-through identification, that can be leveraged into an e-commerce transaction--a marketers' ultimate goal.

That new paradigm makes accurate data critical to monetizing content, products and services in the digital media age. In fairness, there is almost no data that is flawless. Google's stock price and earnings estimates have been in an ebb and flow this year in response to questions about declining paid clicks and comScore's measured results. Until that time, click-through data was virtually unquestioned. Media stock prices, revenue and earnings projections, advertising commitments, research and development, and every other aspect of business is driven by data that may not be adequate or accurate at this nascent stage.

ABC's new approach goes as far as static television viewing and its crystal ball forecast system can go, which is not far enough. As described by Mike Shaw, ABC Television Network president-sales and marketing, the new index helps marketers judge how well their ads would perform on the network, based on between 16 and 25 different data points--including information about audience education, household data, national and local market commercial ratings and consumer-recall and engagement information from IAG Research, a New York firm becoming part of Nielsen. It's essentially the same guessing and posturing for ad dollars.

Bernstein Research analyst Michael Nathanson recently lamented that there is "a 30% correlation between [cable] network ratings and network revenues ... there is a 30% chance that the ratings data points we now obsess about will be directionally meaningful for our revenue projections." The ratings data only helps to solve one of the necessary variables in any network's revenue equation: Price-per-viewer times number of commercials sold. The networks remain tight-lipped about pricing and sell-out ratios.

Even as media straddles the traditional static and the new interactive worlds, it is essential to explore where data comes from, how it is gathered, what it includes and excludes (and why), the potential and applied uses of technology, and consumer accountability. The ability to lay a handful of prime metrics against the macro trends is perhaps the best way to determine value--and track it 24/7. Toward that end, Disney Tuesday said it will work with Microsoft, P&G, Kraft and an Australian university professor specializing in interactive TV to track multiplatform advertising. ABC and ESPN announced plans to track advertising in a new advanced lab.

Until that is possible, the TV networks are stuck with Nielsen and product placement (about as inane an advertising value as can ever be justified). What are the chances that all the viewers supposedly riveted to their tube really recall the make or model of a car or the label on a beverage in a TV series while texting friends and transacting online?

As they become more comfortable with the direct data gleaned through interactive platforms and devices, advertisers will determine the price they are willing to pay. Television networks can now point to more definitive iTunes downloads and streaming video views of their increasingly popular ad-supported content online, along with their on-air program guestimates. (These residuals could be at the heart of a disruptive screen actors' strike this summer.) It will be interesting to track the response and adoption of advertisers and their network peers. (NBC, Fox and CBS have their own multi-platform metric grids.)

Eventually, TV networks will have a much broader array of broadband showcases on which to measure and monetize the individual connections and penetration of their wares. Measuring consumer access and use of content will redefine their value and bolster their bottom line.

For now, the networks face a bigger challenge--convincing Madison Avenue and Wall Street that their ratings and CPMs are credible, when they are not. They will continue to command ad dollars until there is a universal system for validating digital connections and their verifiable value.

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