Backchannelmedia

Jack Myers Media Business Report, February 13, 2007

Research Industry Upheaval is On the Horizon

by Jack Myers

The research community is the next to undergo a period of upheaval and transformation as new players enter the information and intelligence marketplace, and as traditional players expand to capitalize on the growing appetite for improved knowledge about advertising performance and effectiveness. Programmers are becoming increasingly sophisticated in the search to better understand both the dynamics of choice and insights into viewers' emotional and perceptual connections to the programs they watch.

While The Nielsen Company is the 800 pound gorilla in the television market domestically, print media leaders MRI and Simmons are both expanding their imprint in the television and online businesses. European and Asian heavyweight TNS is expanding its U.S. footprint. The little engine that could, Erin Media, is reported to have received $25 million in financial backing from Publicis, Time Warner and Boston-based Spark Capital. Time Warner's involvement in Erin includes a test program at the company's Oceanic Cable in Honolulu. (Erin has won several bouts in the early stages of its anti-trust lawsuit against Nielsen.) Marketing and media mix analytics companies such as Carat's MMA are gaining in stature and relevance as marketers seek to connect their marketing spend to sales; WPP's Millward Brown and Added Value are becoming dominant research forces; and hundreds of entrepreneurial research companies are battling for recognition.

In the past several months, since the acquisition of VNU by a consortium of equity investors, new CEO David Calhoun, a GE veteran, has changed the corporate name to The Nielsen Company, moved quickly to re-integrate AC Nielsen with Nielsen Media Research, acquired the outstanding shares of Nielsen NetRatings, elevated highly respected executive Susan Whiting, hired several industry veterans including controversial but effective media agency legend Jon Mandel, solidified a relationship with Arbitron for the development of the Personal People Meter, and turned the debate over commercial and DVR ratings into significant revenue gains.

Whiting has successfully stifled the often strident and always vocal complaints about the company's service that have been a part of the media industry landscape for almost three decades.

So while many major industry players continue to advocate support for Nielsen competitors, others "prefer the devil they know to the one they don't know." The one sure thing most experienced executives agree on is that competing head-on with Nielsen is a sure-fire road to failure. Although there are no direct indications of Nielsen's intent, it is likely the company will expand its business into print, build on the Nielsen BuzzMetrics model to accelerate out-of-home and non-traditional research models, and acquire entrepreneurial research companies that have established beachheads in the burgeoning fields of emotional and non-behavioral insights. With AC Nielsen and Nielsen Media Research beginning to collaborate and Mandel in charge of identifying and developing corporate synergies, Nielsen is poised to become a major player in marketing mix and advertising effectiveness research as well.

As media exchanges drive the industry toward greater commoditization, Nielsen is clearly the primary and dominant research provider these exchanges will need to partner with, further expanding Nielsen's client base. But Google is on the horizon as either a major competitor or partner, and either way, Google's increasing involvement in the media and advertising business will be a disruptive force. The emergence of companies like Erin Media and Backchannelmedia, that have stayed below the radar screen as they developed new systems and models, will also be disruptive forces that media companies, agencies and marketers will need to follow and either support or reject. Erin's CEO Frank Maggio and Backchannelmedia's CEO Michael Kokernak accurately point out that enhanced access to massive amounts of highly personalized set-top data and sophisticated analytic programs will inevitably make Nielsen's panel models obsolete.

Realistically, though, others argue that those models are already obsolete and have been for years, but they remain the accepted industry standards and are likely to remain in place until Nielsen itself adopts and implements new ones. Media and advertising industry executives seem confident that research will be a last bastion where conservative and traditional models will thrive. As digital media have expanded, as established distribution windows have collapsed and new ones opened, as copyright protection has become a joke, as advertisers have moved billions from traditional to non-traditional media, media research has remained comparatively entrenched in proven methodologies and models and media companies have continued to rely on established research companies for their internal and external decision-making information.

In the next 24-months, some of these walls will come crumbling down as both media companies and marketers realize they require new insights for their non-traditional initiatives. Many programmers and marketers will begin to emphasize emotional, rather than quantitative, measures. Cross-media measures and comparisons will become a requirement. For many, traditional reach-based plans will be replaced by loyalty-based metrics. Companies that have invested millions in custom research will realize they can better and more efficiently achieve their goals with syndicated services that deliver the same insights and value, and more.

A couple of traditional players like Nielsen are effectively positioning themselves for continued growth, but others will find themselves unable to compete for either traditional business or in the emerging worlds that require research innovation. The greatest single challenge for the research community will be methodology, and whether to question and rethink established methodological rigor and requirements. A CMO of a top 100 national marketer, when confronted with attacks on agency insights that did not meet the standards of his top research exec, commented "I'd rather gain knowledge from research that meets 85 percent of research standards than learn nothing from research that meets 100 percent of your standards."

As online field work, digital set-top data, assumptive analytics, emotional and perceptual insights, and other forms of research gain marketplace acceptance, researchers will be forced to take a position on their validity and credibility. The research community is about to be subjected to forces similar to those that have radically altered the music, film and television businesses. Precedence proves that holding onto models that the marketplace itself no longer respects is a dangerous and potentially disastrous mistake.