At a posh Florida resort where Nielsen Media Research hosted its 2006 client meetings in March, President Susan Whiting told a crowd that, while ad agencies shift money from TV to new-media platforms, “no one has quite figured out how to really make money.”
No one, that is, except Nielsen.
For years, the TV-ratings giant has withstood criticism that it is a monopoly with a substandard system that governs how $70 billion in TV advertising is spent annually. Lately, many executives, from national advertisers to network bosses, claim that Nielsen has been slow to respond to the quicksilver migration of video to cellphones, iPods and computers, as well as to the shifting of viewing times for hot shows.
But as difficult as the splintering of the video marketplace has been for TV, the changes have become a bonanza for Nielsen. What started as an enterprise to measure TV viewing has morphed into an array of products and services that track consumption of media everywhere from living rooms to rodeos to elevators. The company has also rolled out new, non-traditional advertising formats, such as branded entertainment and product placement.
Nielsen's clients are most interested in a new portfolio of offerings the company plans over the next several years, which Whiting promised to detail in May. Nielsen will “follow the video,” she vowed. “Any form of content that encompasses sight, sound and motion should fall within our purview.”
The offerings will include:
- New ways to measure out-of-home TV consumption via cellphones and iPods, which could include loading Nielsen software into the devices
- The integration of TV and Internet audience measurement to understand how people use each in conjunction with the other
- The increase of electronic audience measurement in smaller TV markets
- New methods of measurement, such as audience “engagement” and other factors Madison Avenue considers to increase accountability
- A means of tracking the impact of new-media technologies.
The goal, said Whiting, is to offer clients a seamless package of services tailored to understand how people watch TV or video, whereas Nielsen's current systems seem a hodgepodge collection of often conflicting methodologies, say critics.
She also said the research firm plans to offer a new way to track viewer engagement. A panel, which would be created from Nielsen households retiring from its regular panel, would be kept on Nielsen's meters and would participate in periodic telephone surveys to demonstrate how their metered viewing behavior correlates to such factors as advertising recall and attentiveness to TV programming.
“Anywhere they use video”
That push is a recognition by Nielsen that the demands of U.S. advertisers are shifting from simple audience exposure. Already, several big ad agencies, including Starcom MediaVest Group and ZenithOptimedia Group, have licensed Nielsen's new minute-by-minute ratings tapes, which produce a close proxy for commercial ratings.
The challenge to transform comes at a time when Nielsen seems to be under attack from all sides. Its parent company, Dutch-based research conglomerate VNU, is for sale, discussing a $9 billion buyout offer from a group of private-equity firms. One proposal, if the sale doesn't succeed: break up and sell the parts of VNU.
Nielsen is also facing an antitrust suit by TV-ratings upstart erinMedia. And though things have quieted down, Nielsen is still under the threat of government scrutiny and potential legislation stemming from concerns that it is a monopoly in the TV-ratings business and has yet to sign a “voluntary code of conduct” created by the industry's own watchdog, the Media Rating Council.
Nielsen executives discount those threats as nuisances and maintain that the company's longstanding sample-based measurements—which are nationally projectable—are the best that money can buy.
Meanwhile, ad buyers are impatient to learn the relative worth of all the new-media choices. Nielsen is “the definitive provider of currency for all video-based negotiations, but they need to measure all video, which they can't do yet,” says Shari Anne Brill, VP/director of programming at Carat USA, New York. She counts herself among the Nielsen clients pushing the company to move in new directions. “Their portfolio has to be expanded. They have to develop a system that can track a viewer wherever they go, whether that is in the home, out of the home, or anywhere they use video.”
While ad executives are pushing Nielsen, most are loathe to publicly criticize the media researcher's methods or its monopolistic ways for fear of undermining the perceived veracity of the Nielsen ratings they use as the basis for their media buys.
Some more-vocal critics believe something far more ingrained is afoot: a need to preserve a status quo in the way buyers and sellers evaluate TV, especially at a time of such fundamental change. Frank Maggio, founder and chairman of erinMedia, describes this as the ad world's equivalent of the “Stockholm Syndrome,” a term originally coined to describe the effect on hostages who are held captive so long they begin to sympathize with their captors.
“There is another subtlety of all this: the relationships that build in a monopolistic environment,” asserts Maggio. “When you're used to dealing with the same person or company for decades, and you become reliant on their product as a currency, this coziness, too, throws perhaps insurmountable obstacles for a disruptive innovator to improve the state of the industry.”
Maggio, of course, is one of the latest in a litany of disruptive competitors that have tried, but failed, to unseat Nielsen's market dominance. The company has been fiercely protective about the primacy of its core sample-based methods, which have served as the currency of television commerce for more than half a century.
Nielsen uses a hybrid system of meters and paper diaries for measuring America's local TV markets. Ten of the biggest markets, reaching 30% of U.S. TV households, use people meters. Forty-six markets, reaching another 40% of U.S. households, use a combination of old-fashioned “set-meters,” combined with paper diaries. And the rest of the TV markets, reaching 30% of households, use only paper diaries. So Nielsen's sample actually measures only a fraction of the actual TV population, basing the viewing patterns of hundreds of millions of viewers on the responses of tens of thousands of respondents.
Yet the history of potential Nielsen rivals is littered with failed attempts, including Europe's AGB, R.D. Percy & Co., the SMART TV ratings initiative and Arbitron, which is now partnered with Nielsen parent VNU in a system that would measure media audiences and their product purchases.
ErinMedia filed a federal antitrust suit against Nielsen in U.S. District Court last year, alleging that Nielsen's business practices prevent new competitors from entering the TV-ratings market. In January, erinMedia filed another suit in the same court, this one claiming that Nielsen's advertising and promotional claims that it “counts everyone” are false when it uses a 10,000-household sample to measure the viewing behavior of hundreds of millions of Americans.
ErinMedia's claim is that it can measure all actual viewers of television programming based on a census of set-top boxes instead of using the sampling methods that Nielsen does. U.K.-based Taylor Nelson Sofres is testing a new system on Time Warner Oceanic's system in Hawaii that is similar to erinMedia's approach: modeling the viewer data that comes directly from TV set-top devices.
To compete, Nielsen has struck deals with TiVo and with cable giant Comcast to gain access to some of their data and could launch a service based on the information they analyze.
Nielsen has dominated in part by playing its monopoly card or by adapting the innovations of rivals or acquiring them. When Nielsen wanted to move into online- audience measurement, it acquired a stake and an option to take control of that market's leader, NetRatings, in 1999. When it wanted to get business in the world of word of mouth—or buzz marketing—it acquired that market's leader, BuzzMetrics, in January.
There's no shortage of competitors with new ideas to measure audiences. Nielsen is considering software-based solutions to track viewer consumption on iPods and cellphones. That's a similar solution to the one proposed by The Media Audit, which is licensing a “smart-phone” technology developed by European market researcher IPSOS as part of its bid for a radio-audience–measurement initiative spearheaded by Clear Channel Communications. By using software, the smart phones, or other portable handheld devices such as iPods, PDAs (personal digital assistants) and cellphones, can be turned into ratings meters.
Another company participating in that radio-industry initiative is Arbitron, which said it is moving forward with a “radio first” rollout of a personal people meter. Arbitron and Nielsen parent VNU remain partners on Project Apollo, a new system that combines Arbitron's portable people meter with VNU's product-scanning technology to produce research on the media that people are exposed to and the products they purchase as a result.
To date, six advertisers have committed to a field trial of the Apollo system: Procter & Gamble, Unilever, SC Johnson, Kraft, Pfizer and one undisclosed company.
“Think about it. A year ago at this time, all we measured was linear television,” says Sarah Erichson, general manager of national services for Nielsen. “Now we measure time-shifting via digital video recorders, and in just a couple of months, we'll be measuring time-shifting with [video-on-demand]. In less than a year, in January, we'll be measuring viewing in college dorms as part of our extended home sample. So we've added time-shifting and now place-shifting.”
Beginning this year, Nielsen offered three streams of ratings data to deal with time-shifting caused by digital video recorders: live-only, live-plus-same-day of playback, and live-plus-seven-days of playback. The new data streams have already generated anomalies that Nielsen executives have found hard to explain.
For example, ratings including time-shifted viewing are sometimes lower than live-only ratings. Moreover, they have created marketplace disruptions, as media buyers and TV salespeople haggle over which DVR ratings streams are the appropriate basis for advertising deals.
Bugs in the system?
Nielsen executives say those anomalies have been caused by the way it weighs its samples and don't represent genuine viewing behavior. Still, the revelation has some wondering whether there aren't other bugs in the system, especially as Nielsen begins adding other components of TV-audience measurement.
Indeed, if the company begins marketing these new forms of audience estimates, the debate over veracity could likely grow. “This much is evident,” Whiting said during the meeting. “We must continue to improve audience-measurement technologies and methods to accurately capture consumer activity across this expanding array of media.”