Cover Story: Thinking Inside the Box


To some, the way TV advertising continues to be bought and sold — based on the ratings from Nielsen Media Research — is a little bit bizarre.

It is, in the estimation of many who even depend on it for their livelihood, an antiquated polling process that tries to guess the opinions of a nation of millions of TV viewers based on the imperfect diaries of less than 20,000 homes. For example, Nielsen ratings assume by definition that every commercial in a show gets the same audience exposure.

“We know, logically, that's patently absurd that every commercial would get the same rating,” said TiVo vice president of audience research and measurement Todd Juenger. “Can you imagine buying Internet advertising on that basis?” (See sidebar, next page.)

Yet, in the TV ad business, Nielsen's panel-based data remains the coin of the realm. Television advertising in the U.S., based on those very ratings, was estimated to total $68.9 billion in revenue for 2008, according to eMarketer.

Now, a growing cast of ad-measurement players is looking to supplement — or someday supplant — the Nielsen “currency” using data siphoned out of cable, satellite and telco TV set-top boxes and digital video recorders.

The actors in this show include Nielsen itself, which already sells set-top-based research, along with Rentrak, TNS Media, TiVo and Google. Big cable operators also are exploring the best ways to crack this code, through Canoe Ventures, the advanced-advertising company established by the country's six biggest MSOs.

The promise: to provide the actual, second-by-second viewing habits of millions of television viewers, across the full cable lineup, mapped to demographic data to reveal with unprecedented precision who's tuning into a specific show or commercial.

Advertisers ultimately want fully addressable advertising, in which a TV spot is essentially matched up with the person viewing it — say, a Disney vacation promo for households with kids under 12.

Before that happens, though, they'd like more info about the media they're already buying. “Set-top box data will give us a better idea of who's watching TV,” said Bob Ivins, vice president of data products and research for Comcast Spotlight, the cable operator's ad-sales arm. “Rather than planning on the potential reach of a show, advertisers will buy impressions based on actual impressions.”

Eventually, set-top data could mature to the point where it challenges Nielsen as a credible alternative, according to some industry executives.

“I think set-top box data will become, in this century, the raw material for analysis, the way to provide granular viewing information,” said Comcast Spotlight's Ivins.

But there's no simple or quick solution. Data formats are inconsistent among different operators, some box models are incapable of capturing and passing back data — and there's the issue of ensuring who's actually watching.

To get there, cable operators and their research partners need to navigate multiple technical, business and privacy issues. As Turner Broadcasting System chief research officer Jack Wakshlag put it, “If the industry ever gets it right, set-top box data can become immensely useful.”

For starters, cable operators must ensure the privacy of their subscribers' data is protected, not only to comply with federal laws but to avoid negative publicity. Cable operators are highly sensitive to consumers who value privacy and many realize they need to offer basic safeguards to prevent a consumer backlash.

Technically, pooling set-top data from several markets even within one operator is a huge and complicated task, said Time Warner Cable media sales group president Joan Gillman.

“Often, what's lost in these conversations is the operational complexity involved in gathering this data,” she said. “The work that is needed on our side, the MSO side, is significant.”

Operators must also find a way to offer standardized data and to maintain consistency across the MSOs. For example, today there's not a standard way for programmers to provide the actual program start and end times so that it's accurately reflected in set-top data — a critical issue for live events, like sports, which frequently extend beyond the prescheduled times, said ESPN vice president of integrated media research Glenn Enoch.

To be sure, even if all these issues are resolved, digital cable and satellite set-tops combined represent no more than 70% of all TV households. Moreover, it's not always clear who — if anyone — is watching cable TV at any given time. About 10% of set-top boxes — 6.9% of television homes — were never turned off for the entire month of May 2009, according to Nielsen. The ratio is even higher on an average day, when 35.9% of homes left a set-top box on all day long.

Still, some of the biggest names in TV are working on a set-top-box solution. Nielsen itself claims it is embracing set-top data as a way to provide additional context to its flagship ratings service. In February 2008, it acquired Audience Analytics, which sold software called Audience Watch for analyzing and reporting large sets of audience-measurement data.

Nielsen's Audience Watch service currently processes set-top data from about 250,000 households, gathered mainly from Charter Communications' Los Angeles system. Several other research companies have access to the same data from Charter, including Rentrak and TNS Media.

“The measurement will start to evolve,” said Manish Bhatia, president of Nielsen's Advanced Digital Plus group, adding: “We think the [People Meter] panel data has a huge, critical role to play in cleaning up and making sense of the set-top data. Combining set-top box data injects fidelity into the panel data; and the panel data makes the set-top data more complete.”

Perhaps the biggest effort to build a business of interactive advertising from the aggregation of the set-top-box data is cable's collaborative effort, Canoe Ventures. CEO David Verklin has said Canoe eventually expects to provide viewing metrics, in some shape or form, from some 57 million set-tops representing 32 million U.S. cable households.

According to Mark Mitchell, Canoe's senior vice president of network relations, the first step is to collect the data from its member companies. “We are working first and foremost on gathering data from our six MSOs,” he said, speaking in early June at a forum hosted by ad agency MPG. Next year, according to Mitchell, Canoe may provide supplemental audience-measurement data to the industry. In 2011 and beyond, the venture has its eyes on “data integration as foundational for segmentation, targeting and performance metrics.”

Initially, Canoe will provide set-top box data with its own addressable and interactive advertising products, Mitchell said. Beyond that, he said, “there's also the opportunity to supplement the data that's already in the market.”

Until cable can provide a consolidated national view of its universe, research firms are already retailing other sources of set-top data. TNS Media, for example, launched the DirectView Service earlier this year, based on tuning data from 100,000 DirecTV subscribers including time-shifted viewing across more than 350 channels. “Whether you're doing addressable advertising or not, you still need that granular information… if anything, to figure out, which 50% of the advertising is it that I'm wasting?” said TNS CEO Dean DeBiase.

Another player is Rentrak, which sees itself — for now —as a complement to Nielsen's existing ratings services. “Over time, I do believe there will be more than one currency in the marketplace upon which advertising is bought and sold,” said Rentrak Advanced Media Information Division president Cathy Hetzel.

Rentrak, which chairman and CEO Paul Rosenbaum assumed control over in 2000 mainly to accumulate data on box-office receipts from movie theaters, provides viewing measurement for video-on-demand. In VOD, it's captured 100% of that market, analyzing data from more than 70 million set-top boxes for the top 25 MSOs.

Rentrak broke into the linear TV market this year, rolling out its TV Essentials product about two months ago. So far, the company has deals with three major distributors — AT&T, Charter in Los Angeles and Dish Network — and has access to data from about 10 million set-top boxes.

In the Charter Los Angeles system, which represents about 300,000 homes, Rentrak is cross referencing data from linear TV and on-demand platforms, providing information that will help the operator learn how to better promote VOD on linear channels. That information could be available for sale within the next month, Hetzel said.

Dish Network uses Rentrak's data internally and to sell their own advertising, Hetzel said, taking information from several million set-tops, many with dual tuners. Hetzel said Rentrak also sees big opportunities in niche markets and is targeting unrated networks and local TV stations with the data, and has already landed Mark Cuban's HDNet and The Inspiration Network as customers.

Google also provides set-top data from Dish Network, aggregating second-by-second viewing information from more than 4 million boxes. But it's not reselling the data itself. Rather, the data supports Google's Internet ad-buying system.

“Set-top data is the way we help our customers put better ads on TV,” said Mike Steib, director of Google TV Ads.

Google sells Dish Network local ad avails from among 96 national channels reaching the satellite TV operator's subscribers. It also has deals with 12 cable networks to let them sell national ad inventory, including NBC Universal's CNBC, Sci Fi Channel, Oxygen and MSBNC; Bloomberg TV; Hallmark Channel; CBS College Sports; Outdoor Channel; and GSN.

In a similar approach, Time Warner Cable, along with sales group National Cable Communications, has been testing an automated system that allows media buyers to transact orders for local cable ads. Marketers specify their budget, their desired ratings points and demographic data — and the system feeds back the best matches from the ad inventory on hand.

Time Warner Cable is testing the system in Kansas City, Dallas and Austin, Texas. Gillman said the MSO plans to use the tool, which the operator is calling Campaign Connect, in its own local and regional ad business.

TiVo sells data collected from 300,000 of its subscribers' DVRs. The company is the only player in this space that's also a set-top manufacturer. Juenger, TiVo's head of audience measurement, claimed the DVR company is able to collect far more consistent and reliable data that cable or satellite operators because its own engineers designed the devices from the beginning to be able to report back to central servers.

Like Nielsen, TiVo emphasizes that its data comes from every market, and consumers using every service: analog cable, digital cable, satellite, telcos and over-the-air broadcasts.

But critics say the data is skewed because every household in its sample has a DVR, which is not reflective of the broader television viewership.

Advertisers are intrigued but tentative. Sharon Gallacher, managing director of global brands for Ogilvy's San Francisco-based digital unit, Neo@Ogilvy, said Nielsen's small sample, projected to the entire United States audience, “has never been the truth, and it would be nice to get closer to the truth.”

Still, she's wary of relying on data culled from millions of set-top boxes, because she understands it's a very complex process to do that.

“You get to a black-box scenario, which makes me a little uncomfortable,” she said.

She added: “I know what I want — one set of data that everybody agrees are the right data. What I don't want to do is spend more time arguing about the accuracy of the numbers.”

Data from digital cable and satellite viewers represent at most only about 70% of TV viewership:

Digital cable




Analog-only cable




Who's doing what in this sector:

Nielsen Media Research: Entrenched TV ratings kingpin offers analysis of data from 250,000 set-tops, mostly from Charter Los Angeles.

Canoe: The joint venture of six U.S. cable operators still in the process of figuring out how to aggregate set-top data from its members, but plans to offer “supplemental” metrics as early as 2010.

Rentrak: Provider of VOD measurement entered linear TV ratings this year with data from AT&T, Dish Network and Charter L.A.

TNS Media: Began offering DirectView service in January 2009 based on data from 100,000 DirecTV subscribers' receivers across more than 350 channels.

TiVo: DVR set-top maker collects data from 300,000 of its subscribers' boxes.

Google: Provides analysis of TV viewing data based on more than 4 million Dish Network boxes, as part of its ad-purchasing service.