BETA
This is a BETA experience. You may opt-out by clicking here

More From Forbes

Edit Story

Nielsen Is About To Help Programmers Profit From Your Online TV Viewing

This article is more than 9 years old.

This story appears in the May 25, 2014 issue of Forbes. Subscribe

For all the talk of a "golden age" of television, traditional TV networks have a big problem, and Mitch Barns, the new CEO of audience-measurement company Nielsen, thinks he can fix it.

Here's the issue: It's very easy for, say, ABC to charge advertisers for a 30-second spot during the network's hit show Scandal on Thursday nights. The average $250,000 ad covers viewers of the live show and those who watch on DVRs or on-demand within three days.

But after that, things fall apart. If you watch Scandal four days after it airs, advertisers are basically getting your eyeballs for free. Until recently, if you watched the show through an app, like most who watch online, ABC could measure clicks only, not the juicy demographics (like men ages 18 to 39) that command so much money on TV.

That means a lot of money has been left on the table. "As a company we push to get our content to consumers in as many different ways as we can," says Peter Seymour, chief financial officer at Disney/ABC Television Group. "Service is important, but how do you measure and monetize that?"

Enter Nielsen. After three years of work the company says it is finally on the verge of being able to measure viewers everywhere they watch, be it on live TV, a PC or a mobile phone. The unified measurement will give programmers the ability to sell ad time for one show across many platforms.

"This could get very big," says Barns, 51, who was promoted to CEO in January and tasked with bringing the company into the modern age. "This is very important for our business to stay healthy and grow."

And it couldn't come at a better time for New York-based Nielsen. Until recently the company's methods of measuring who watches what hadn't changed much since the days when Leave It to Beaver was on the air, handing out paper diaries to families and asking them to write down which shows they watched and when.

The only game in town, Nielsen didn't have much incentive to update its methods for the next 60 years. But as TV viewership migrates to the Internet (we spend on average 7.5 hours per month watching video online, up from 6 hours just a year ago), Nielsen is up against more competitors than ever, most notably a Virginia technology company called ComScore.

Best known for measuring online audiences, ComScore recently ran a pilot program with ESPN in which the company measured viewership across five platforms. ESPN (which, like ABC, is owned by Disney) declared the findings "impressive and insightful."

It is competition Nielsen would prefer to do without. Viewer measurement accounted for 40% of Nielsen's $5.7 billion in revenue last year, up from 34% of $4.8 billion in 2009. The rest came from the company's "buy" business, which tracks retail purchases. Analyst Hamzah Mazari of Credit Suisse estimates Nielsen's new initiative could add roughly $600 million in revenue by 2017.

In order to create a system that measures all TV viewing, Nielsen had to persuade dozens of stakeholders to get on board. The system works through metadata or an audio watermark in every piece of video that goes out into the world.

Every company that makes a video player, from News Corp .'s Fox Now product to Disney's Watch apps, had to agree to put a line of code into its software to send pings back to Nielsen's server with information about the device used to watch the show, whether a TV, tablet or phone. The hardest company to convince to join up: Google .

Google's YouTube is, of course, the biggest carrier of video on the Web, but Google likes to use its own data to sell ad space. And while Nielsen numbers give advertisers the ability to buy ads guaranteed to reach certain demographics, Google's main ad-sales metrics have been more focused on counting clicks.

Under pressure from big advertisers Google finally agreed to come on board last November. But a Google spokesperson was quick to point out that the company is not married to Nielsen's product. She noted that Google is working with ComScore as well. Nielsen will measure only ads viewed on the site, not videos.

"For the first time YouTube will offer advertisers audience guarantees based on Nielsen ratings," says Steve Hasker, head of global products for Nielsen. "This will give advertisers confidence that they are getting what they paid for."

Each ping that comes back to Nielsen contains, essentially, a device address. Nielsen's computers first send all of that address information to Facebook.

The social networking site is acting like a 180-million-person audience-measurement panel. The site has the digital address of all your devices, from your computer to your mobile phone. Facebook sends information back to Nielsen about the age and sex of the person watching. People who are also on Nielsen's census-representative panel are singled out, and that information is used to calibrate the numbers coming back from Facebook. The company has also partnered with credit card company Experian to get deeper information on viewers.

Nielsen, as you'd expect, insists the system was developed with privacy experts to make sure no personal information is exchanged. If you're a Facebook user this is part of what you signed on for, whether you know it or not.

The initiative, which rolls out over the next few months, will eventually be able to provide customers with a torrent of information about viewers, such as education level, income and whether there are children in the house. Nielsen wants to step out of the way and let the main players--ad-time buyers and sellers--decide how to come up with the next, best metric for the business.

Eventually Nielsen will syndicate a combination of the "watch" data with the "buy" data to offer a picture of how people purchase after seeing ads. But that's for down the road. Right now the company just needs to hold on to its lead.

Follow me on Twitter at DorothyatForbes.

Also on Forbes: