As the automobile became the primary transportation method for the nation, the buggy whip inventors created their best offerings. Too little, too late- and other than for collectors of buggy whips- totally valueless.

That’s our analogy for commercial ratings.

Nielsen has been ruling the roost with abstract data for decades- taking a percentage of the total viewers and making an educated, statistically based guess on how many viewers are watching a program. While this worked well with only 3 networks, in the days of cable tv, satellite tv, vcr’s and dvr’s it became less relevant- but the system was so well dug in, and the alternatives so few- that the advertising industry stuck with it.

With broadband sneaking into more homes, with DVR’s doing the same thing- and with Internet use skyrocketing- and the advent of Internet Protocol TV (IPTV) with products like AppleTV, we are seeing the last days for Nielsen- and no real use for rating TV spots.

Here is why: Advertising is expensive- and therefore, advertisers aren’t interested in reaching people via “broadcasting” anymore. Broadcast reaches “broad audiences” including those who aren’t eligible to buy your product. The web, IPTV, and hard-drive enabled TV systems (cable and satellite) are able to deliver content that is targeted and able to generate hard data back. The ultimate one-to-one marketing, where if an ad dollar is wasted- it will only be wasted one time. This is the future, and with the ad industry being a multi-billion dollar business, it won’t be long before marketers demand accountability more exact than if someone saw the commercial- as offered by Nielsen- or even if they liked the commercial- they want to know if you are a real business prospect- and what it would take to make you one.

Nielsen to Offer Commercial Ratings
NEW YORK Nielsen will begin supplying national commercial ratings starting in the fall, the company confirmed today.

If the networks and advertisers can agree on a standard, the commercial ratings could be used as currency to buy and sell ads by as early as the start of the 2007-08 TV season.

But for now, program ratings will continue to be the currency for ad transactions.

A Nielsen representative said it received requests from all five major broadcast networks (ABC, CBS, CW, NBC and Fox) for commercial ratings based on live viewership plus seven days of recorded DVR playback viewing. Nielsen will begin delivering that data “sometime this fall,” the rep said. That will give the industry about a year to analyze the data before deciding whether or not to use it as currency in the following season.

The commercial ratings will provide the average audience for all paid national ads airing during each program transmitted by national broadcast and cable networks, the Nielsen rep said.

While the trade press, the buyers, and the networks talk about this “next big thing” they are just fiddling while Rome burns. The entire system of delivering advertising messages will be more like YouTube and GoogleVideo- with meta-tags driving ad choices with a rebate per-click to the viewer (that’s right- you will get paid for watching and interacting with advertising in the future) or similar to Amazon‘s suggestions with a profile built from information you have volunteered.

Soon content producers will take their programming direct, via online hubs like the iTunes store or Amazon- getting paid directly from the consumer for their content. Discounting your media bill will be accomplished by your willingness to watch targeted TV spots- that help build your profile.

If you accept more commercials than your media bill- the proceeds go to the media producers- not to the intermediaries. This levels the playing field- and allows capitalism to do its thing- the way it was meant to.

There are two articles in Ad Age- talking about “engagement” and how “YouTube isn’t getting it done” which are still based on the idea that TV is driven through the old school “Network as middle-man” model. Once you realize that the new middle man will be the one who delivers 2-way feedback and links to your product- you realize how stupid this whole commercial rating discussion is.

If Proctor and Gamble took their “Soap Operas” offline- and onto their site- and charged $1 per show for an enhanced program- with 2 way connections with the characters- and then offered the content for free- if you answered some questions about Pringles, Tide or Gillette- don’t you think they would find that infinitely more useful than a rating of the viewership during their commercial?

Commercial ratings- the best buggy whip for last centuries marketers. Get used to it.

If you have questions about how to navigate this new media landscape feel free to contact us. Surf at the next wave dot biz.

Note: in today’s Ad Age, an article called “Revenge of the nerds” talks about this very subject- it seems Backchannel media has the right idea- except the part about the delivery system still including the networks.

Mr. Kokernak’s vision is to implement long-sought dreams of fully interactive, individually addressable and accountable TV. Backchannel wants to become the software and technology backbone of a new era dawning in TV as it transitions from analog to digital broadcasting — one Mr. Kokernak likens to the broadband tipping point that ushered in the age of YouTube.

In this era, ads are served to people according to the blocks or households where they live. They respond to TV ads with a simple remote click on an icon to, say, get more information about a car they just saw advertised, buy a song they just heard on the Grammys or the book Oprah just touted, or reserve a table at a nearby restaurant. In this era, based on real-time analysis of who’s clicking on what offers and programs, media plans change continuously.

TV, like the internet, but better?
In Backchannel’s vision, TV is a direct medium a la the internet, only, as Mr. Kokernak sees it, much better — without click fraud, phishing scams and other security threats. It’s enough, he believes, to shift much of the money that’s been going into search and other direct media back into TV, replace eyeball counts with the harder currency of response, and ultimately eliminate most upfront deals as dollars gravitate daily in a continuous-improvement cycle toward programming proven to generate response.

Sounds like a pay for performance plan doesn’t it?