Rating NBC’s New TV Measurement Valuation Approach
BY ADAM GROSSMAN
NBCUniversal recently announced it was making a fundamental change to how it is measuring the success of its television programming with its advertising partners. According to The Wall Street Journal, “In an effort to convince advertisers that TV can demonstrate the same kind of return-on-investment (ROI) as digital media, the company is working…to show brands business outcomes that result from their ads.”
NBCUniversal should be applauded for shifting its focus from looking solely at the quantity of impressions to now also factoring in the quality of impressions. The most common way to judge the success of television advertising has been by the number of people that watch a program or network. From an advertising perspective, the larger the audience the more exposure a brand would receive.
While reaching a large audience can be important, it should not be the only success metric used to judge advertising effectiveness. For example, CDW is a company that focuses on selling technology products and solutions to enterprise clients. Therefore, its focus is on reaching a relatively small number of people whose job is to make large technology purchasing decisions. Its advertising is usually more valuable when it is focused on reaching a narrow target demographic rather than reaching the largest possible audience.
Another reason that television ratings have been used is that they represent an easily defined success metric. A typical arrangement between television networks and advertisers is to determine a guaranteed number of people that will see an advertisement during a program. If that program fails to deliver that number of viewers then the network will provide a “make good” by providing advertising time on another program.
Shifting to measuring “business outcomes” changes the nature of this conversation. How do television networks and advertisers define what business outcomes should be? In addition, different companies have different business models so it would appear that creating success metrics would be difficult. As The Wall Street Journal Article states, “Tying TV viewing to business outcomes provides advertisers with greater validation that their ads worked, but the measurement process is complicated.”
The Block Six Analytics (B6A) Corporate Asset Valuation (CAV) Model makes a complicated process simpler by creating clear definitions of what constitutes a quality impression. We define success based on how a company makes money and on its brand goals. We measure these goals by looking at three considerations:
- What is a company trying to accomplish?
- Whom is a company trying to target?
- What is the most effective way to reach the target demographics?
This approach standardizes how value is defined while also creating specific models for specific opportunities for specific companies. It also enables television networks to look at both monetary and non-monetary goals. More specifically, revenue and brand goals are not always in complete alignment. For example, automobile companies often partner with sports organization to reach 18-34 year-old demographics, yet, the average age of a new car buyer is 51.7 years old. If car companies’ goals are to maximize immediate annual revenue then targeting younger demographics would not drive a high ROI (pun not intended).
However, car companies are focused on building brand awareness and enhancing brand perception for younger demographics now because it is believed that doing so will influence purchasing decisions in the future. B6A’s CAV model takes these types of considerations into account when determining the overall value that is being delivered in multiple different advertising channels, including television.
NBCUniversal is another example of how content providers are changing their approach to advertising valuation. By understanding its customers’ businesses and developing success metrics based on achieving companies’ brand and revenue goals, NBC is putting itself in a better position to communicate value and generate incremental revenue growth.