Ratings 101: Pandora opens the fiction box

As advertising evolved in the 20th century, every medium created its own measurement system to try to make itself look better. Advertisers, you see, don’t buy ads, they buy audiences, and if a media channel can make its audience look bigger, it attracts more marketing money. CPM, or cost per thousand impressions, was a benchmark for years in things you read (newspapers and magazines), battled by GRPs, for Gross Rating Points in TV or radio, the percentage of people in a local market population exposed to the ad message. CPM was a count. GRP was a %. You can already see the comic magic.

When the Internet arrived in the 1990s with more hard-wired metrics such as cost per click, traditional media panicked. Never mind that “clicks” or today’s Like “engagements” would become just as devalued; every nondigital medium went into defensive mode worried that it would lose ad dollars. Out of home moved from DEC to Eyes On measurement. Newspapers went from CPM tied to circulation to a fuzzy “readership” estimate that assumed papers were read by more than one person. And in our favorite move, Arbitron, the group that measures radio ratings, rolled out Portable People Meters that picked up actual radio signals to get a more accurate read on radio ratings than previously had been recorded by diaries. PPMs found that radio listeners skipped around the dial more than previously thought, likely triggered by commercials, so Arbitron in 2007 launched a campaign to media planners claiming 70 GRPs is the new 100. (To understand that ridiculous math, which tried to explain away weaker radio ratings, imagine you give me a check for $100,000. I’ll give you $70,000 back. But don’t worry, $70k is the new $100k, so you’re cool, right?)

So it’s even more comical that Arbitron is now upset that Pandora, a popular Web- and mobile-based music streaming service, is trying to explain its audience in traditional radio terms. Pandora used to play the web CPM game, but in the past few months it has started touting radio ratings. At first blush, Pandora’s numbers look good. In the New York DMA, Pandora adults 18-34 would have a 0.9 Average Quarter Hour rating — about equal to a mid-sized NYC radio station, with nearly 1% of the entire population listening for at least 5 out of every 15 minutes — and a 19.9 cume rating, meaning that 19.9% of that population listens to Pandora each week.

If Pandora can grab almost 1% of NYC’s young adults every quarter hour and reach 1 out of 5 in a given week, it’s a good advertising choice vs. radio, right?

Well, only if you believe those numbers. Arbitron whines Pandora’s “radio ratings” are inaccurate, suggesting Pandora listeners may step away from computers while radio listeners are really there. Either way, Pandora has an advantage that radio does not — to get on the radio in NYC, you have to buy a spot that reaches all of that station’s market, because only one spot runs at a time. On Pandora, you can spend less money out of pocket since different consumers are served different spots. Smaller entry costs could appeal to smaller businesses, or those just willing to test; Pandora also offers fewer commercial interruptions per hour, meaning listeners might actually listen.

Confused? Of course. The only way to find out is to test, measure response, and calculate if your cost per lead or sale from Pandora vs. radio is better. Ratings have always been a fiction, a form of currency used to plan choices among alternative media providers. With all advertising metrics on the decline, the only way to invest is to count your return.

Ben Kunz is vice president of strategic planning at Mediassociates, an advertising media planning and buying agency, and co-founder of its digital trading desk eEffective.

Image: Kayintveen

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