Ratings, in principle, are to serve the interests of advertisers and networks. However, their interest gets parted based on price; broadcasters want higher ratings and advertisers want lower prices, therefore, lower ratings.
What counts are the right consumers, not audience make up. Producers craft their business tools to balance the conflict of shared demand for the right consumers over estimates of the number of right consumers. At one time, advertisers and networks may have had a vested interest in a monopoly over ratings such as Nielsen or Arbitron, since it would serve their transaction-of-cost efficiencies. But gone are the days. So whose interests are served?
The ratings from an economic point of view have nothing to do with a consumer-based demand model. Rather, it has exchange value between the advertiser, the networks and now the broker, the advertising agency, where the source of profitability is selling TV and completes the troika of a closed economy. The raters serve their own interests cloaked under the mantle of objectivity, which are proffered by their surrogate: the agency.
The loser in all of this is the consumer, who never gets the programming of choice and yet pays the price for the goods and services depending on how the agency interprets the ratings. Agencies work best with ratings services and use the ratings to negotiate spot costs with networks. The agency model may be based on buying and producing TV spots, which is why, in a world of decreasing ratings, TV upfronts continue to fetch multibillion-dollar commitments.
The consumer has been exiled from the equation but is paying the price.
Our (BIGresearch) simultaneous media research and strategic media allocation model demonstrates quite effectively that advertisers are not getting what they pay for. The "exposure" model of media as a metric guarantees the winner: It will be TV.
Commercial ratings are only an extension of the logic discussed above. In fact, as we have pointed out, advertisers need to look toward a consumer-centric tool rather than ratings in order to allocate based on consumer demand. This is clearly not a part of the ratings economy.
To the degree that advertisers follow the ratings model or exposure model, (i.e. time spent, exposure, clicks) then there is nothing they can point to regarding consumer disposition to spend that would be accurate or predictive of consumer expectation. Advertisers find themselves navigating without a compass.
So, if you are an advertiser, you must reverse the scenario and rescue the consumer from exile, and instead exile the agencies. All our costs will be lower and the value will be much higher.
Joe Pilotta is vice president of BIGresearch and a former professor at Ohio State University, School of Communications. Read full bio.