Currency Exchange

Exactly one year ago our industry was abuzz with debate over the prospect of using commercial ratings rather than traditional program-viewing measurements as the primary currency in negotiating rates for national television inventory.

Some agencies and media companies wanted to delay the move to commercial ratings, arguing that more diagnostic work was needed. Despite those arguments, C3 ultimately became the standard currency for the 2007 upfront marketplace. The commercial viewing data proved to be consistent with assumptions gleaned from NPower and the respondent level database. As a result, for the first time, media companies were financially incentivized to maximize audience retention through more effective ad placement. At the same time, commercial exposure generated by recorded viewing received credit.

It’s now safe to say that the move to C3 has provided significant benefits to both advertisers and the television networks. The economic incentive of commercial ratings has encouraged the networks to reduce the length of commercial breaks and the number of promotional announcements in the first commercial position while improving the position of ads to maximize their ratings potential.

All these steps provided significant incremental value to advertisers. The networks also have benefited by capturing viewers who see programs on a delayed basis through their DVR but don’t skip through the commercial breaks. This is significant given the growing penetration of DVRs and the increasing impact this development has had on how consumers watch TV.

Without this change, the impact of the DVR would make the current economic model unsustainable ON live-program ratings. Unfortunately, C3 ratings have been unable to stem the continued erosion of broadcast network prime-time ratings as audience viewing habits have continued to fragment and shift, with cable being the primary beneficiary. The good news is that capturing delayed viewing with commercial exposure has maintained rating levels comparable to live program levels, and with the growth in DVR penetration will quickly exceed them as we move into next season.

I expect C3 will remain the trading currency for the foreseeable future despite the continued debate over the role of the set-top box and the call for more precise commercial-level ratings data. Significantly more granular data will be required to manage exact commercial-level ratings, which will require more robust sampling or direct census data from set-top boxes. Even if it were to become universally available today, much work would still be needed to produce data that could be used as negotiating currency. While it’s true that significant differences exist in rating performance within a commercial pod and across them, we can identify the potential differences and manage them through aggressive stewardship. We should continue to evaluate those nuances regardless of the currency.

But we need to go from counting potential commercial exposure to overlaying rich consumer data to drive better investment return. One major step toward achieving this goal would be the development of databases and infrastructure to cultivate customized messaging through addressability. Marrying set-top box census data with a plethora of consumer databases will drive more effective targeting and accountability beyond just a more precise count of eyeballs.

With the rapid moves toward digital delivery of traditional media, media service agencies must act as catalysts to ensure the deployment of technology and business practices that will enable addressability, response capability and improved measurement and data flow from all media. We must also help our clients reach and engage with consumers.

In the area of addressability and advanced advertising solutions we at GroupM took an equity stake in Invidi Technologies Corporation in 2007, a provider of addressable and targeted TV advertising solutions. Invidi’s proprietary technology can target commercials to individual set-top boxes, thus bringing the targeting of the Internet to television. Advertisers will be able to target their audience with less waste and greater precision. We will be working to roll out this capability across cable, satellite and telephone company platforms.

In this rapidly developing digital world, the value of scale goes beyond our ability to develop marketplace knowledge and leverage. The greatest benefit of scale comes from the ability to capture, aggregate and mine the data flow from our significant share of the global communications market and to turn these insights into competitive benefit for our clients.

Rino Scanzoni is chief investment officer at GroupM.