Audience Measurement & Advertising

by Darren Bleckner

Audience measurement and television advertising are closely tied together. Most television networks have a duel revenue stream. They make their money from selling their network to a cable provider in exchange for a small piece of each subscriber’s monthly bill, but a bulk of their money comes from selling advertising space. In order to determine what a fair price for a commercial during a certain program should be, a trustworthy system needs to be in place that can measure who is tuning in.

Brief History of Audience Measurement and Ratings

Nielsen Logo

The Nielsen ratings, which were developed by the Nielsen Company, are television’s main audience rating system. The way in which the data is acquired has changed over time and with technology. In the 1920’s, Hooperatings simply called random households and asked what radio station they had recently heard. As television came about, houses were given diaries and were instructed to write what channels and shows they watched, but this was deemed unreliable. In the 1990’s, the People Meter was introduced. It was an electronic device that was attached to the television set and transmitted what was watched into a central database. [1]

Four times a year, during what is known as the “sweeps” period, Nielsen’s national sample  of over 2 million diaries across the country are processed in an attempt to capture the TV viewing information that provides a basis for program scheduling and advertising decisions for local television stations, cable systems, and advertisers. Nielsen’s sweeps are currently under way from April 26-May 23.[2] Despite the imperfections that come with Nielsen, it is the only data available and makes over $60 billion annually from its clients.

Advertisers look to spend their money on shows that will reach the most possible viewers that their product is targeting. Nielsen’s data determines a program’s share and rating over night. A share refers to the percentage of total viewing households whose sets were tuned to that program, it is not based on the total number of U.S. households, but upon the number of households actually watching television while the program is on the air.

Share = households turned into a particular program

               Total number of viewing households (HUT)
A rating is the percentage of television sets tuned into a particular program out of the total number of televisions in the United States. Nielsen estimates over 114.7 million television sets in the US for 2012, a surprising decline from 2011’s 115. million [3]

Rating = Households watching a particular show

                Total US television sets

Who Uses Audience Measurement and Ratings and Why It’s so Important

According to, television reaches more people a day than any other medium. [4] It’s important to invest advertising money the right way, billions of dollars are spent each year on television to promote products. Total advertising across all mediums topped $144 billion dollars. Television was once again topped all mediums with a 2.4% increase from 2010. [5]

2011 Ad Spending

A media buyer compares a program’s ratings and share as well as its rating points for a specific demographic before determining buys in television. They look to buy multiple rating points associated with their target audience. Advertisers need to know who is watching what, and use demographics of the designated market areas, as well as psychographics from sources like SRDSSimmons OneView, and MRI+ to determine which programs and networks will hit their target group. The key to successful media buying is reach and frequency. They want the most possible eyes on their commercial as possible. Currently some of the largest media buying companies are MediaComMEC, and Mindshare, which are all holding companies of GroupM.

The Future of Advertising

With ever evolving technology, the future of advertising is changing. Video streaming sites like Hulu, Netflix, and Youtube have changed how people view content. The creation of the DVR and time-shifting has allowed people to now simply skip commercials. According to Nielsen’s Spring 2012 research, 15.1% of the general population time-shifts prime time viewing. While the general population watches an hour and 15 minutes more of live television as it did this season than in 2011, it also DVR’s 7 minutes more. [7] Those loss of eyes on commercials costs advertisers and companies millions of dollars.

Television Genre Breakdown

As a result, advertisers have begun investing their money in a relatively unfamiliar territory. While television still tops all mediums with advertising spending, digital sales increased almost 6% from 2010 to 2011.

How Social Media Changed the Ad Game

Since the internet has given consumers a voice, advertisers must find a new approach to reaching the masses. While a lot of advertising agencies take the same 50 year old approach to sell a product, more and more are adapting to use the Internet and social media sites like Twitter and Facebook to spread their word. [6] Digital ads are becoming more like content instead of just print ads. They are engaging their viewers and asking them to participate. Internet/digital sales rivaled that of spot TV in the 3rd quarter of 2011.

Social Network use has gone up almost 20% since 2008 within an advertisers key demographic (18-33). Estimates say that by 2014, nearly two thirds of all Internet users will be on a social media site at least once a month. Nearly $8 billion dollars will be spent on ads on social media, and that number is excepted to double in 2013. [8]

Nielsen Media Research’s Future

Nielsen is be closer to giving advertisers what they wanted for years and it’s just in time. They have partnered with GroupM to develop a new measurement service which will merge media planning and measurement across television and internet. The “Nielsen Cross-Platform Campaign Ratings,” which is already being used to help GroupM clients, will combine Nielsen’s existing television ratings, with Nielsen’s new online campaign ratings. The measurements will show the overlap between both internet and television and will finally solve a problem posed to media buyers by calculating the reach and frequency of cross-platform campaign. [9] With the busy 2012 upfront season already underway, this technology will certainly be a key tool for both media planners and buyers as they negotiate long term deals with the networks.