An Introduction To TV Advertising: Measurement

"On TV And Video" is a column exploring opportunities and challenges in advanced TV and video.

Today’s column by Steven Golus, founder at Steven Golus Consulting, is the fourth and last in a series that presents the fundamentals of how TV advertising works and how it is changing.

In our previous article, we unpacked the complex relationships between broadcasters and MVPDs. Before that, we discussed the upfront and pre-upfront planning.

For our final column, we will be covering the world of TV measurement. Over the past few years, TV measurement – attempting to understand what is being watched, by whom and whether that person took an action that led to a business outcome – has become complex. 

To simplify, we'll break this into two sections: linear TV measurement and the newish area of measuring the impact of TV advertising on business outcomes using set-top box and commercial content-coding data

Linear TV measurement

The Nielsen panel: As a quick review, since the 1950s, Nielsen has leveraged a panel of TV viewers designed to represent the demographic makeup of the United States. When the Nielsen panel first launched, household members used a paper diary to record their viewing habits. As technology evolved, Nielsen installed set-top boxes in their homes to gather viewership data. Each individual in the household was given a special button to press when they started and stopped watching a program. As a result, Nielsen is able to measure viewing habits at both the household and individual levels. The Nielsen panel is made up of around 44,000 homes.

Other measurement firms: It's worth noting that Nielsen isn't the only game in town. TiVO and Comscore also play in the space. Comscore, via its Rentrak acquisition, uses data from several MVPDs for targeting and measurement. TiVO, like Rentrak, uses MVPD data in addition to its DVR data to measure audiences. 

Household ratings: There are currently 121 million TV households in the United States, according to Nielsen. They are sometimes referred to as the TV Household Universe. A household is defined as a home with at least one television that can receive audio and video via an over-the-air signal, satellite box, cable box or a connected TV device. The number of households and household composition numbers is announced in the fall, at the start of every TV season. 

The best way to understand household ratings is to think about percentages. One rating point represents 1% of the TV viewing households. So a rating of 1 would equal 1.21 million households tuned in to a program. The household rating for the last Super Bowl was 41.6, meaning that approximately 50 million households tuned into the Super Bowl (41.6% * 121,000,000)

Share: We often also hear the term “share.” Share is simply the percentage of households with the TV turned on (sometimes referred to as HUT or Households Using Television) that tune into a program. When I hear share, it helps me to think about the share of voice. For example, Super Bowl LIV had a 69 share, meaning 69% of the households watching televisions were tuned into the Super Bowl. Where do you think share was the highest? In Kansas City and San Francisco, homes of the two teams competing. During the fourth quarter, the share in Kansas City was 97, meaning basically everyone who was watching TV was watching the game.

Demo ratings: Arguably, the most important measurement used by broadcasters and advertisers is the demo rating, with one of the most coveted being adults 18-49 years old, as they are assumed to spend the most money. Another prized demo is adults 25-54 years old, skewed toward women, who generally spend the most on household goods and services

Demo rating simply measures the percentage of individuals (not households) in a particular demographic that watches a program. For the last Super Bowl, adults 18-49 drew a 30 rating, again meaning that 30% of adults 18-49 years old watched the game. There were a total of 38.7 million adults 18-49 years old who watched the game. From those two numbers, you can calculate the universe of adults 18-49 by dividing 38.7 by 0.3. The result: around 130 million. 

Live and Same Day, C3 and C7: Back in 2007, a solution was developed to capture the cumulative ratings of those households and individuals who could be included in the average commercial minute for a program by not fast-forwarding through commercials via a DVR. It was decided to measure viewership on the same day, up to three days and up to seven days out. These are referred to as Live and Same Day, C3 and C7. For most programming, the bump between three and seven days is not significant. As a result, C3 is typically the metric used for negotiations. 

How ratings and the GRP work to create a currency: In our first column we discussed GRPs or gross ratings points. The best way to simplify GRPs is to think about ratings. If I bought one Super Bowl spot, the number of GRPs purchased would have been around 41. If I bought two ads in the Super Bowl, I would have accumulated 82 GRPs. GRPs can also be purchased on a demo basis, which is known as targeted rating points. The same math applies. The currency therefore for linear TV is the  cost per point, which represents what the advertiser is willing to pay for each delivered GRP.

Measuring the business outcomes of TV advertising

Given the recent ubiquity of IP-connected video devices, there is a new focus on determining if viewers of a TV ad spot engaged in a business outcome. 

One of the first measurement tools used to measure business outcomes of TV ads was the 1-800 number. You would watch a commercial, for example, this one for Phone Relief, and after the commercial, a phone number would appear on the screen. Each phone number was coded for a particular area and program so marketers could understand which programming drove sales. 

The more modern-day version of this leverages automatic content recognition (ACR). ACR is the technology in Shazam and other apps that can identify content played on a device. ACR built into smart TVs can do the same – they can identify the content watched on television. After the content is recognized, technology companies such as Data Plus Math and TVSquared can match viewership data from ACR to an IP address and/or a cross-device map and use that information to determine if a viewer visited an advertiser’s website or eventually made a purchase. The future of household and individual device mapping will enrich this data with more information about repeated exposures across multiple platforms and delivery systems.

Knowing the basics

Why is it essential to understand the business of TV advertising, the upfronts, MVPDs and measurement? 

I can't tell you how many times I've heard from CEOs, ad tech sellers and really everyone in the digital advertising space that "our company/product is going to steal TV ad dollars. All we need to do is call on the TV investment team, and the money will flow." 

The reality is that if you don't speak their language and understand their business cadence, budgeting, workflow and measurement, you are at a disadvantage. Hopefully, our last four columns will give you a step up when having these conversations.

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