[extropy-chat] Future of TV Advertising

[Hal Finney]

The Sunday New York Times magazine had a good article on TV ratings and
media advertising,
http://www.nytimes.com/2005/04/10/magazine/10NIELSENS.html

Unlike other stories on the topic, it didn't focus on the problem with
the advertising model in a world where people can skip commercials at
will.  Instead, it looked at short-term efforts to improve measurement
of ratings on TV and radio shows.  The problem is that the old ratings
systems are inadequate today due to audience fragmentation and inaccuracy.
With hundreds of TV channels, internet and satellite radio, advertisers
need to switch to a narrowcasting model and target their ads to specific
demographic groups.  This requires far more data, and more accurate data,
than the present systems gather.

Arbitron (for radio) and Nielsen (for TV) are working together on a
device called the PPM, Portable People Meter.  This is a pager-sized
device which will be worn by people recruited to have their viewing and
listening habits monitored.  All TV and radio shows will have inaudible
audio signals encoded into them which these devices will listen to
and record.  The PPMs will then dump their data onto the net at night,
allowing the ratings services to know exactly what TV and radio programs
the person was exposed to during the day.

It sounds futuristic, but Arbitron already is running a large scale test
in Houston: "Arbitron has begun to ask radio and television stations
around the country to run their broadcasts through a patented Arbitron
encoding device; at the moment, almost all of the radio and television
stations that a listener can tune into in the Houston metro area --
including over-the-air, cable and satellite TV (though not satellite
radio) -- are coded for the P.P.M. trial. The stations are not being
paid for this; instead, Arbitron has convinced them, through literal
door-to-door salesmanship, that encoded broadcasts will enable Arbitron
to measure their audiences better and thereby ultimately boost their
advertising sales."  Advertisements shown before movies are also being
encoded.

Further out, executives envision tying PPMs to the much-loved RFID
technology.  Chips could be embedded in books and magazines so that PPMs
could record what print advertising you are exposed to as well.

Another technology soon to be rolled out is direct monitoring of which TV
stations are tuned in on cable boxes.  Cable companies already have this
information for digital cable systems, but it is not yet being used for
ratings or sold to advertisers.  This data is a gold mine and the only
thing holding it back is that the greed of the various companies involved
is preventing them from putting a business plan together to exploit it.
But it sounds like this should be in play as well in a year or two.

All of these new monitoring technologies lead to the holy grail of
advertising, a joint Arbitron-Nielsen effort called Project Apollo (after
the space program).  This will combine PPM based advertising-exposure
monitoring technology with purchasing information from retail loyalty
cards.  At last, advertisers will know exactly which commercials
people were exposed to and how those people changed their purchasing
decisions as a result.  This knowledge has been the dream of advertisers
"since people were drawing woolly mammoths on the side of cave" says
an executive.  No longer will the public be a black box to advertisers.
Everything will be open and exposed.

Overall this article was informative and plausible.  It sounds like this
stuff is really going to happen in the next couple of years.  But there
were a few strange omissions which seemed to ignore important issues.

One was the question of privacy.  The PPMs are carried voluntarily,
like Nielsen families today with their diaries and People Meters.
The motivation is that participating gives you great influence over
what TV shows succeed.  However the PPM will be much more invasive in
terms of the quantity of information it gathers.  And if the dream of
narrowcast advertising is to work, PPMs must become relatively common in
order to identify all the target demographic groups.  Being a PPM holder
would no longer make you "special" and instead you would be giving away
a lot of information about yourself for nothing.

A bigger privacy issue is the proposal to sell data about what people are
watching on their cable boxes.  I bought a TiVo about five years ago and
it was a big deal back then, that TiVo would record your viewing habits
and sell them.  The company promised they would be aggregated and not
individually traceable, but still....  TiVo had to allow people to opt
out entirely from the tracing data (which I did).  If cable companies
start doing the same thing I think we will see a privacy backlash which
will slow it down even if they get an opt-out system in place.

Another problem not addressed in the article is the one I touched on
above, that people generally hate advertising and try to avoid it.
New technologies are making that easier, and it's entirely possible
that the net effect of all these new measurements will simply be to
chronicle a dying business model in technicolor detail.  Broadcasters are
participating freely in the PPM trials now, but it should be obvious
that the news is not necessarily going to be good.  If these test markets
reveal that people are not watching as much TV as the old rating systems
showed, stations in other cities are not going to want to participate.

Nevertheless, I think this article, along with the RFID technology
we were discussing, both point towards a common element of the near
future: a fantastic increase in information flows about activities in
the physical world.  Ultimately, it will happen because it is possible,
technology is making it cheaper until it becomes almost free, and there is
genuine business and social benefit from increasing the information flow.
There are also social costs, but as in many technologies the costs tend to
be diffuse while the benefits are narrow (think of the costs of industrial
pollution vs the benefits of a profitable factory).  In the short term,
benefits drive the equation.  Only if and when things go too far will
the pendulum start to turn back.  But in the mean time we are in for
rapid change in the information flowing around us and about us.

Hal