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Changing the way radio transacts business, from the long-used cost per point ratings model to an impressions-based system, is quickly gaining momentum among broadcasters. The topic was the top agenda item during the NAB’s Committee on Local Radio Audience Measurement (COLRAM) meeting at the Radio Show last month in Dallas, fueling an hour-long discussion where participants said there was an urge to fast-track the transition.

Nothing is imminent, these sources say, and many radio companies are still developing a stance and analyzing the pros and cons of adopting the same currency used in digital media.

The radio discussion quickly heated up after the Television Bureau of Advertising (TVB) announced Sept. 18 it is spearheading an industry charge to convert to an impressions-based system by 2020. “It seems like there is a fast track because so much business we do is with agencies that are buying TV, radio and digital,” said one COLRAM meeting participant. “Why do we want to be left behind?”

At the COLRAM meeting, there was “a fair degree of positivity” on the potential change, said one participant. “With radio’s focus on digital, to be on the same playing field with how digital media is bought and sold could be a good thing.”

In addition, talk about impressions-based measurement was prevalent in meetings that Nielsen took with clients at the Radio Show. “It is a hot topic of discussion so folks are now educating themselves on the pros and cons,” Nielsen Audio Managing Director Brad Kelly tells Inside Radio. “Advertisers and agencies believe this would remove friction from the system. Anything that makes their life easier is something we have to be talking about.”

If there is inevitability to radio making the switch, the sentiment is: Why wait and be the only media transacted on cost per point? At the same time, broadcasters want to conduct due diligence before jumping in.

Nielsen has not taken a position on the issue, Kelly says: “Collectively, buyers and sellers need to decide what the right move is here.”

Flipping The Currency

Impressions would move the industry from the current cost per rating point model to a cost per thousand impressions (CPM) approach based on AQH persons. That would flip the currency from the percentage of the population reached by an ad campaign to the projected number of viewers or listeners.

“This is not a seismic change,” Kelly stresses. Cost per thousand impressions (also known as CPM) simply refers to the sum total of average quarter hour persons delivered by a given schedule. Agencies would avail stations on a CPM basis and stations would develop ad schedules in that vernacular. CPM is already one of the metrics used in Nielsen Audio’s TAPSCAN software.

Among the upsides to impression-based currency:

Reduced ratings compression: CPM measurement would result in fewer multiple station ties at the top of a ranker.

More audience granularity: Stations with less than a 0.1 rating, which currently do not show up in media buying systems, would benefit. “In a CPM model, you could monetize that 400 AQH persons station,” Kelly says.

Improved pricing power: Hypothetically, when a station drops from 3,500 AQH persons to 3,400 under the current system, its 0.4 rating could drop to a 0.3 rating, resulting in a 25% reduction in pricing power. With CPM, the station would lose less than 3% of its pricing power. “Transacting off rating points is a rather course metric that can affect pricing power significantly when you gain or lose a tenth of a point,” Kelly explains.

Easier for advertisers to buy: Radio would be bought and sold using the same metric as digital media and soon, television.

No major changes in systems: “All the heavy lifting that’s involved is re-ordering the columns in your TAPSCAN schedule,” Kelly says.

But as with any change, there are also downsides to consider:

Impressions don’t tell the entire story: An AQH persons number lacks the added dimension of reach and frequency. “An advertiser still needs to consider reach and frequency to know what percent of the market they’re reaching and how many times they’re reaching it and how a schedule performed against those objectives,” Kelly notes.

Not all impressions are valued equally: “Different impressions for different media should have different prices associated with them,” Kelly contends. “It’s not moving to uniformity of pricing but it gives you a better relative sense of worth and value.”

Agencies may see it as a cheaper way to buy radio: Buyers are famous for using new systems to pay less, as the transition to PPM showed.

The shift would cause both buyers and sellers to adopt a new mindset and change some conventional thinking. For instance, under the current system, larger markets have a higher cost per point than small markets. But in a CPM world, the opposite would be true. “Smaller markets are less efficient because they have fewer thousands of people to work with than the big markets where the cost per thousand looks more attractive,” Kelly explains.

While COLRAM meeting participants were hard pressed to find any major negatives, they also stressed that more vetting needs to be done to see if there may be any unintended consequences from such a fundamental change. Should the industry agree to proceed, the next step would be to speak with one voice on the topic, whether through the Radio Advertising Bureau or the NAB COLRAM group. – Paul Heine