Backchannelmedia

Boston Herald, February 12, 2007

Nielsen tuned in to static: Start-up eyes TV setup for Web age

By Jesse Noyes

Long live television! Down with Nielsen!

Revolution is in the air at BackChannelMedia, aka "The Nerdery," a small company with big ambitions nestled in Boston's Leather District.

Michael Kokernak and Daniel Hassan, co-chief executives of the company, want to topple ratings king Nielsen Media Research by changing the way you watch TV.

Even as headlines regularly predict the bleeding of TV advertising, and companies try to find ways to make ad revenues online, BackChannelMedia is putting the tube at the front-and-center of its business.

The YouTubes and Googles of the world are getting all the attention, Kokernak said, "but we're on the verge of television becoming like the Internet."

"We still see television as the marquee media outlet," Hassan said.

And in BackChannelMedia's brave new world, viewers could download info from TV ads to a personalized Web portal with the click of a remote control. In turn, advertisers would know immediately who's buying their products, Kokernak said.

For example, imagine watching "The Tonight Show with Jay Leno" and the musical guest is the Killers. A small ad could pop up asking a viewer to hit a button on the remote control to download the band's latest album. A link to the album on Apple's iTunes would be immediately stored in a personalized Web portal hosted by a cable company.

"Now all of sudden 'The Tonight Show' has turned into a one-hour commercial," Kokernak said.

Traditional 30-second spots would be fashioned in the same way. Clicking the right button during a car commercial would set up the option of scheduling a test drive in the viewer's Web portal, Hassan said.

Meanwhile, viewers would always be shopping and advertisers would get direct sales results tied to their commercials, rather than just how many people are seeing the spots, Kokernak said.

Really, what BackChannelMedia is setting out to do is replace Nielsen ratings, which provide data to TV networks, cable outlets and media buyers. Those ratings typically keep track of how many viewers a program attracts by using a sample of households around the country.

Advertisers use the ratings to see where their ads will get the maximum amount of eyes and TV networks use them to decide how much to charge for commercial time.

But Kokernak and Hassan claim Nielsen's system is outdated and advertisers want to see the direct results of their ad spending. Nielsen is essentially theory, Kokernak said. It's not a science.

BackChannelMedia's system would create "a continuous loop," Kokernak said, where advertisers could adjust their media buys almost immediately to target the viewers who are actually purchasing their products.

Theory or not, Nielsen ratings have been the main way of tracking and buying TV time for decades. And changing that will require convincing top TV advertisers, something Hassan - whose father, Fred Hassan, is the chairman and CEO of big pharmaceutical company Schering-Plough Corp. - said he's been doing for the past few months.

Hassan said he talked to some top executives at big-name companies testing the idea out before joining BackChannelMedia. Those execs, he said, were bullish on the concept. "That's when I said 'Hell, I'm throwing my money in with these guys,'" Hassan said. So far he's put in about $4 million of his own money.

BackChannelMedia has already attracted some prominent figures to the company. Erwin Ephron, a media-planning guru, Clayton M. Christenson, a Harvard University business professor, and e-commerce pioneer Keith Krach all sit on BackChannelMedia's board of advisers.

The company also needs agreements with all the cable providers. Hassan said BackChannelMedia is in many ongoing discussions with the cable companies.

It will take more than the support of CEOs to launch BackChannelMedia. After all, there's been much hoopla about interactive TV over the past few years, but little in tangible results. Kokernak said that's because the technology wasn't in place, but with all TV signals under a mandate from Congress to switch from an analog to digital signal by February 2009, the pieces will be in place.

BackChannelMedia plans to make money by licensing its software and taking a percentage of media buys made through its system.

But implanting that system will be an enormous undertaking for the small start-up, which currently has about 30-employees. "This is not a small solution in any way," Kokernak said. It will rival the build out of a satellite radio company, he said.

BackChannelMedia said it wants to have 80 employees by April and hopefully have a staff of about 1,000 in the next 18 to 24 months, Kokernak said. The first phase of implementing the system - which primarily would be sending out the interactive ads to a significant amount of homes and creating the Web portal - will likely cost $50 million to $100 million. The company hopes to raise most of the money by collecting revenue as it adds onto its system.

The project is so big you'd be excused for seeming skeptical.

But the need for a new system exists, its just a matter of delivering it, Kokernak said. "The industry already wants this to happen," he said. "They just don't know what form it's going to take."

"People have seen the writing on the walls for years," Hassan added.

Note: this article has been modified from its originally published form.