TV Ads: Measuring Viewer Engagement

TV networks and advertisers are augmenting Nielsen ratings with new so-called engagement metrics to determine prices for ads—and their effectiveness

By David Kiley

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For decades, ad agencies and broadcasters have negotiated prices based on the time-honored Nielsen ratings that measure whether TVs are tuned to a certain show. But as talks gear up about ad rates for next fall and winter, the so-called up-front season, more negotiations than ever will center on a new metric: engagement.

In recent years, advertisers like Procter & Gamble (PG), Toyota (TM), and Home Depot (HD) have struck a growing number of deals with broadcast and cable networks based on new tools that aim to measure how closely viewers are paying attention to the programs, not just whether a set is switched on.

A Better Picture of Return

With the recession pounding retail sales and consumer confidence, the pressure to squeeze every dollar is driving advertisers to prove to their finance departments how efficient these deals can make their shrinking ad budgets. In turn, that's driving advertisers' push to make engagement measures the rule rather than the exception. By some estimates, more than half the top 100 U.S. advertisers are now pegging prices to viewer engagement. "Advertisers have been frustrated by the increasing research showing more people ad-skipping and multitasking on PCs and mobile phones while watching TV and are getting much better at understanding the true return on their advertising investment," says Andy Prakken, executive vice-president and managing director of media buying agency Mindshare/Team Detroit.

Advertisers hungry for the data have compelled networks and cable channels to buy such program research as a condition of doing business. The networks pay for their programs to be measured, and the advertisers pay for the ad measurement. One of the dominant companies in the field, IAG, which Nielsen bought in 2007, now has more than 30 network and cable station clients, plus Telemundo and Univision for Spanish-language programming.

Ford Motor (F) is among the latest companies to insist on pricing based on engagement. With an overall ad budget of about $1 billion, around half of which is for network and cable TV, Ford had been using the program engagement ratings of firm IAG Research for a few years to better plan its selection of TV shows. It found, for example, that while the Discovery Channel's (DISCA) Dirty Jobs series, starring Mike Rowe, delivered puny ratings points, the engagement level of the show's viewers is off the charts—and proved to be a ripe demographic for Ford trucks. That led Ford not only to advertise on the show, but to strike a deal with Rowe, who appears in Web videos for Ford showing how tough the F-Series pickup is. "It's a hugely efficient buy for us, but none of that happens without the kind of data we can get now on what people are tuned into, for how long and how closely they are watching our ads, because the Nielsen ratings alone wouldn't have led us there," says James Farley, Ford's chief marketing executive.

Engagement ratings, when laid atop traditional Nielsen ratings, have become invaluable for measuring product integration deals like Toyota's (TM) running deal with Bravo's Top Chef and Ford's with American Idol.

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