Earlier this summer, TiVo - makers of a personal video recording device - unveiled an analytical tool that can tell advertisers, ad agencies and television networks not only how many people tune into a show, but whether they’re watching the ads. The technology is far more accurate than a Nielsen rating because it uses computer technology to track viewing habits, not handwritten surveys filled out by viewers after the fact.
Broadcasters are frightened over this development, according to a new report by BusinessWeek Online. “This is the beginning of the end of that drunken orgy of dollars spent on broadcast TV as the ultimate ‘reach’ vehicle,” said Tim Hanlon, vice-president for emerging contacts at Starcom MediaVest, an ad agency that helped TiVo design its new service.
The new TiVo service can also pinpoint where and when ads are watched the most. This is data that broadcasters and ad sellers would just as soon not have known, said the online magazine. “This kind of information is the holy grail for marketers. But it’s not the holy grail for advertising agencies and media companies, which have built an industry around the idea of getting a shallow message to a broad audience rather than a tailored message to a narrower one,” said Mike Galgon, chief strategy officer at Seattle-based interactive ad agency Avenue A, in the report.
Businessweek Online also reports that TiVo’s initial data reveals some uncomfortable trends for the broadcast networks. For one, a program’s rating, the number of people saying they watched a TV show at a given time, appears to have an inverse relationship with the proportion of ads viewed.
On April 11, 2002, the report said, ABC’s popular TV drama The Practice drew a TiVo rating of 8.9, meaning 8.9 percent of TiVo owners watched the show live or recorded it and watched it later. But those viewers watched just 30 percent of the ads shown. Meanwhile, the NBC quiz show The Weakest Link, drew a rating of 0.9, but viewers watched 78 percent of the commercials. CBS TV news magazine 60 Minutes only received a 2.2 rating, but its viewers sat through 73 percent of the ads.
This indicates that certain genres of programming are “stickier” than others. The report said big-budget situation comedies and dramas tend to have the lowest retention and commercial-viewing rate because couch potatoes tend to record them and skip through the commercials rather than watch them live. Reality TV, news, and event programming such as the Oscars telecast, on the other hand, do significantly better at getting viewers to see the commercials.
The news magazine said these trends don’t threaten to kill TV advertising, but “they’re sure to change how ads are produced and sold.” And, Newsweek predicted, advertisers trying to reach younger people will shift their spending to more appropriate channels.
According to Forrester Research, when personal video recorder (PVR) technology reaches 30 million households in 2006, 76 percent of advertisers say they’ll cut their TV ad spending—one quarter of them by more than 41 percent. Instead of buying TV ads, 65 percent plan to spend more on program sponsorship, 46 percent will increase budgets for product placement, and 36 percent say they'll redirect their dollars to online advertising.