Nielsen’s Slow Shift to the Web Hinders TV Networks

Broadcast and cable networks like CBS and Viacom Inc.’s Nickelodeon are failing to get paid for surging Web audiences because those viewers are almost invisible to Nielsen Holdings NV.

The dominant ratings measurement firm, used by all major advertisers to determine how much they should pay for a TV ad, has been slow to count growing Internet audiences, according to media and advertising executives. They’ve expressed frustration with Nielsen’s technology, saying it leaves out as much as 12 percent of the audience. At the same time, Internet metrics used by Google Inc. and Facebook Inc. don’t work for TV.

“We don’t think that online viewing is being counted properly,” CBS Corp. Chief Executive Officer Leslie Moonves told analysts on an earnings call last month. Nielsen’s new system isn’t “there yet,” he said.

Capturing online audiences is crucial for the networks, which are holding their so-called upfront meetings this week to sell marketers commercial time for the next season. The four major broadcasters have suffered a collective 7.2 percent drop in traditional TV viewers this season. They are introducing services to meet viewers’ demands for shows on tablets and smartphones, and they want that audience counted.

“Nielsen is acutely aware of the pressures of the media marketplace,” the New York-based ratings company said in an e-mailed statement, adding it has begun measuring online audiences, including those using tablets and other systems.

New System

Nielsen began tracking digital ad campaigns about 18 months ago and announced last month a pilot program to measure shows streamed from network websites, such as News Corp.’s Fox and Comcast Corp.’s NBC. The ratings company is just starting to follow audiences using mobile apps, such as the Watch ABC service unveiled this week. Nielsen also announced today it will start measuring ads on ABC shows playing on websites and mobile apps. Last month, CBS bought a stake in Syncbak, a company that helps local TV stations stream programs.

NBC and Fox showcased their 2013-14 schedules yesterday in New York. Walt Disney Co.’s ABC features its lineup today and CBS has its presentation tomorrow. Of the four, only CBS has drawn more viewers this season, a gain of 1.5 percent as of May 5, according to Nielsen data. ABC and NBC are down more than 6 percent, while Fox’s audience has declined 20 percent.

Ad spending on broadcast networks is projected to drop about 2 percent this year to $16.9 billion from $17.2 billion in 2012, when sales were padded by political spending and the London Olympics. Total TV advertising, including cable, will grow 2.8 percent to $63.9 billion, according to ZenithOptimedia, a research unit of Publicis Groupe SA.

Tablet Crowd

One reason for the 2013 forecast is the growing number of viewers, not captured by Nielsen, who watch their favorite shows on tablets and smartphones, said Lyle Schwartz, managing partner at WPP Plc’s media buying arm GroupM.

Internet video advertising, while still relatively small, will increase 41 percent to $4.14 billion this year, according to EMarketer Inc. That’s about 6 percent of the size of the the traditional TV market, the researcher estimates.

“TV consumption as a whole is flat to slightly down in the last couple of years,” Schwartz said in an interview. The viewers aren’t lost, “they’re just watching it on other formats, namely online,” he said.

Schwartz said he challenged Nielsen a few years ago to count the online audience and let clients “spend smarter.” He estimates that would add 3 percent to 12 percent to TV ratings.

‘Some System’

Armed with better online data, advertisers could more accurately gauge who has watched a commercial multiple times on TV and the Web, leading to higher online spending, Schwartz said. Consumers who see an ad often are more likely to purchase the product, a proven marketing tactic known as frequency targeting.

Walt Disney Co., owner of ABC, is trying to sell advertising across both television and the Internet, Chief Executive Officer Robert Iger told investors earlier this month.

“What we obviously need to happen at the same time is either Nielsen or some measurement system to kick in that adequately compensates us for that increased consumption on new devices,” Iger said.

That hasn’t happened yet. Companies like ComScore Inc. provide web-viewing statistics that aren’t comparable to the Nielsen ratings marketers are accustomed to. Networks have had to rely on other services, such as Unicorn Media Inc., which provides networks such as ABC and The Weather Channel with information on exactly how many people are watching website ads and when, CEO William Rinehart said in an interview.

Still Waiting

Nielsen’s online ratings system, meanwhile, isn’t accepted by all major Web publishers, including Google Inc.’s YouTube, which accounts for a large swath of online video viewing, according to GroupM’s Schwartz. The online search company has its own method, called Google Analytics, that Web publishers often cite to advertisers.

Advertisers are “waiting for Nielsen to work through a solution,” Jay Baum, director of national media buying at Deutsch Inc. in New York, said in an interview. “If there was another viable option available, people would look at it.”

Nielsen also is unable to capture online audiences ages 2 to 12, since the company relies on Facebook data for demographic samples. Facebook only allows people who are 13 and older to sign up. That could hurt networks like Nickelodeon which rely on younger audiences.

‘Incredibly Complicated’

David Bank, a media analyst with RBC Capital Markets in New York, said Nielsen isn’t entirely to blame.

“This is an incredibly complicated process,” Bank said in an interview.

Even so, because of the shortcomings, advertisers devote too little of their budgets to the Internet, according to WPP, the largest advertising company in the world.

“We still overspend on legacy media,” the company’s annual report read. The Internet accounts for 30 percent of a person’s daily media consumption, while advertisers devote a fifth of their budget to digital, according to the report.

“From an advertiser’s standpoint, it’s been quite frustrating,” GroupM’s Schwartz said.

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