Bad news for Nielsen: TV ads to be bought more like online ads

Two executives from media agency Initiative said TV ads will increasingly become performance-based, moving the industry beyond just trying to amass huge audiences. That could throw a huge monkey wrench into the way brands and agencies think about media buying, and could be disruptive to Nielsen’s ratings system.

In a phone conversation with Kris Magel, EVP of Initiative’s National Broadcast practice, and Michael Hayes, president of Initiative Digital, we discussed the current state of video advertising and how the agency thinks the mix of TV and online video advertising will change in the future. One key takeaway from the discussion was that the way TV ads are bought today needs to be rethought.

Hayes said that on the digital side, the agency thinks of audiences a little differently. For instance, “auto demographics are dead,” he said. Media buyers shouldn’t really care about whether someone is in the 18-49 demographic, or male or single. What really matters is behavior and intent, and whether the viewer — regardless of age, sex or marital status — is interested in buying a car. Furthermore, digital ads provide advanced tracking and measurement.

The future of the TV market might be similar, as agencies look to better target ads to consumers and measure the effectiveness of those campaigns. IP-enabled set-top boxes and advanced ad insertion is being introduced that could let advertisers and agencies be able to track actual impressions of ads and how they performed.

“Down the line, we believe TV will head toward more of a performance-driven model,” Magel said.

One stumbling block for all of this is the Nielsen Rating. Today, those ratings are the “currency” that brands and agencies use to determine how much they’re willing to pay for ad placement against TV shows. By providing a standard measurement for how many viewers are tuned in to different programming, those ratings allow the industry to see how shows stack up against one another and how much audience each draws.

Nielsen’s panel-based approach to TV ratings, while an accepted standard, has some limitations. The model takes data from 25,000 households and uses it to estimate what more than 115 million U.S. TV households are watching. New technology is becoming available to provide potentially more accurate accounting for how many viewers actually tuned in, such as set-top box data. But that data, too, has its problems: there are some technical issues with how it’s acquired, and it tends to be expensive. Most importantly, though, adopting a new standard of measurement would totally upend the way media is bought.

“It’s very hard to change currencies when you have so much money exchanged,” Magel said.

In the meantime, agencies are developing their own ways to measure the effectiveness of campaigns. Initiative, for instance, has a proprietary system called Matrix for media planning, which takes into account 70 different touchpoints for determining the most effective media mix.