After the Switch

NEW YORK In June of last year, less than a month after Nielsen Media Research unveiled its new commercial ratings system known as C3, NBC’s Tonight Show With Jay Leno aired a live 45-second commercial for Garmin’s Nuvi car navigational system. It featured Leno sidekick John Melendez expounding on a serious male malady he termed “direction disorder,” which often causes men to become “lost, confused and not knowing where to turn.”

The timing was no accident: It was the first live spot the late-night program had aired in 14 years. And it was directly tied to the client’s desire to try a different technique to keep viewers tuned to its marketing message in the rapidly expanding DVR world, just as the industry was switching to a measurement system that not only measures audiences for commercials but also tabulates playback viewing of the spots.

“Probably most people had no idea they were being pitched a commercial,” said Steve Lovell, media sponsorship marketing manager at Garmin and the architect of the spot. “It looked like a skit.” He said that post-telecast research showed that effectiveness and awareness levels for the live spot were significantly higher than for many of the company’s traditional 30-second spots. The company is planning another live spot on the Tonight Show in the second quarter of this year.

The live Garmin spot illustrates the sharp focus that has been placed this season on viewing patterns of ads, driven largely by the switch to commercial ratings. The adoption of C3 marks the first time in the 60-plus year history of the television medium that the official yardstick for buying and selling airtime has focused on viewing of the spots and not the shows.

Although C3 is seen as a major improvement over program-focused ratings, there is wide debate about how long the new system, which measures the average rating to commercial minutes within programs, will remain in place. Some agency executives, including Magna Global’s Steve Sternberg, are pushing Nielsen to adopt a new methodology that would measure only commercial pods, as opposed to averaging (and weighting) every minute of airtime with one second or more of commercial content. Other buy-side executives, including GroupM chief investment officer Rino Scanzoni argue that C3 will remain in place for the foreseeable future for a range of reasons, not the least of which is that the industry is not technologically prepared to switch to a system with more detailed data such as brand-specific ratings.

Many clients, however, said they aren’t satisfied with C3 ratings because they do not measure viewing to specific commercials, and instead provide only average audience levels to spots within programs. “Advertisers want to know who is tuning into their brand-specific commercials,” said Robert Liodice, president of the Association of National Advertisers. In an ANA survey of marketers earlier this year, 87 percent of those polled indicated they wanted to see the implementation of a ratings system that measures viewing to specific ads.

“The question people want answered is how many people saw my spot,” said Steve Sullivan, svp, communications services, Liberty Mutual, Boston, and current board chairman of the ANA. “The answer is available in Europe,” he said, referring to rating services that measure viewing to individual spots outside the U.S.

But even the ANA admits that getting there won’t be easy. A year ago, Liodice challenged Nielsen to develop and implement a system for measuring specific ads by 2009. That timetable, Liodice now acknowledges, was too optimistic. “It won’t be a year from now,” he said.

While admitting C3 represents progress, he called that system a “temporary step,” but wouldn’t predict exactly when the industry would be prepared to shift to a system that measures specific spots. “It’s within line of sight,” he said. “I do have confidence that it will take place. We won’t give up the fight for greater accountability with brand-specific commercial ratings.”

Pat McDonough, svp, analysis, insights and policy at Nielsen Media Research (which, like Adweek, is a unit of the Nielsen Co.), said brand-specific ad measurement could be achieved with special audio codes embedded in the commercials. In fact, she said the ratings company is working with several advertisers now to develop such codes, which would have to be attached to all spots in order to create a currency around individual ads.

But network executives aren’t anxious to make another shift so soon. “We’re talking years from now,” said Mike Shaw, president, ABC sales. “We took a major step forward this year with C3. Until somebody can come in and tell us Nielsen has a vetted system [via the Media Rating Council] and it’s up and running and we are confident in its ability to deliver, I’d be loathe to go to my company and say we have to make another change in the currency. That will be hard fought indeed.”

David Poltrack, evp, chief research officer at CBS, agreed, and argued that introducing brand-specific ratings as a currency would open up a complex can of worms that nobody in the industry really wants to deal with. For example, he said that brand-specific ratings would force the industry to develop an entirely new price and value system for ads because DVRs essentially indicate which ads trigger fast-forwarding, thereby reducing the value of entire pods. Thus, an ad that triggers fast-forwarding might be priced significantly higher than a spot with a higher level of viewer retention. Viewing data on individual spots might benefit clients and agencies for planning purposes, he said, “but I don’t see the benefit of moving from C3 in terms of transactions, guarantees and the currency.”

Buyers and sellers agree that C3 has forced the industry to sharpen its focus on keeping viewers tuned to commercials. “Everyone is motivated to address it because it now affects revenue directly,” said Poltrack.

CBS and other networks this season systematically analyzed every program and every commercial pod within each program. In late night, for example, prior to this season, most programs back-loaded ad inventory so that late-night hosts could extend their opening monologues to draw in viewers without commercial interruption.

“Sometimes you’d have monologues go 15 minutes with no ads,” recalls Shari Anne Brill, vp, director of programming, Carat. “The pods had to move up with the shift to commercial ratings.” In late night, audiences tend to dwindle toward the latter part of programs as viewers go to bed. With program ratings it was in the networks’ interests to draw as many viewers in at the top of the show as possible. But advertisers suffered because their ads would run later and reach smaller audiences. Now, ads air earlier and are exposed to the maximum level of viewers.

In prime time, data from Nielsen Monitor-Plus indicates that the four major broadcast networks aired shorter commercial breaks in the fourth quarter of 2007, averaging 2 minutes and 29 seconds or about 2 percent shorter compared to the same period in 2006. To compensate, about 2 percent more breaks, or about six breaks per hour on average, were added to the mix so that the amount of commercial content remained roughly even year to year at about 15 minutes and 30 seconds per hour.

Ad-supported cable networks seemed to take the opposite approach, according to the Monitor-Plus data, utilizing fewer but longer breaks. In the fourth quarter of 2007 the average length of a prime-time commercial break on cable was 3 minutes and 26 seconds, 8 percent higher than the previous year, but with 4 percent fewer breaks, which averaged around five per hour. Total commercial time per hour remained flat year to year at 15 minutes and 25 seconds.

Beyond adjusting commercial breaks, networks experimented with new or non-traditional ad formats like the live Garmin ad. Another example: In January TBS launched a series of nontraditional ads called “Bitcoms,” featuring comedians doing short routines about branded products, like I Can’t Believe It’s Not Butter, that lead directly into a traditional ad about the product.

Also in January, CNN began regularly squeezing ads to make room for editorial crawls displaying election results in various primaries, a practice designed to keep viewers tuned in during commercial breaks.

Although C3 has sparked innovation, it actually has a hard time measuring it, network executives said. “It captures the routine but not the unique,” said Jack Wakschlag, chief research officer at Turner Broadcasting Co. Alan Wurtzel, president, research and media development, NBC Universal, agreed, estimating that 40 percent of nontraditional ads aired by the networks are inaccurately reported by Nielsen. Codes may solve the problem, Nielsen said.

The goods news, Wurtzel said, is Nielsen accurately identifies the vast majority of traditional ads. “I think there’s a sense of relief in the industry,” he said. “I think a lot of us were very nervous going into the fourth quarter, and wondering whether IT systems would hold and whether there would be sufficient accuracy in terms of Nielsen’s ability to identify the commercial and do the math. But when I talk to my peers, I get agreement it did work.”

Meanwhile, some buyers, including Horizon Media, still wish the industry had waited a year to implement C3 so there’d be a year’s worth of comparative data. “People paid increases based on the anticipated [low] number that C3 was expected to generate,” said Aaron Cohen, Horizon’s chief media negotiating officer. “And I don’t think anyone is getting a rebate.” As for the future of C3, Cohen asked, “How’s your crystal ball?”