But Few in the Industry Actually Know What The Devices Are

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NEW YORK (AdAge.com) -- The full deployment of a portable people meter system by the radio industry could add $696 million more in revenue than is now generated with the current audience measurement method, according to a new study just released by the Radio Advertising Bureau.
The Arbitron Portable People Meter is the size and shape of a beeper (above, left) and designed to be similarly worn on the belt. Its desktop base station is shown at right.

But perhaps more curious is the same study's finding that despite recent national controversies about such new measurement technologies, a quarter of the survey's respondents -- primarily media planners and directors -- and two-thirds of the current radio industry advertisers had no idea what a portable people meter was.

'A lot of education'
David Pearlman, whose firm Pearlman Advisors spearheaded the study for the RAB, noted that the new "PPM Economic Impact Study" clearly underscores the need for "a lot of education" throughout the radio business. Forrester Research conducted the study, which was funded by Arbitron, for the RAB.

RAB's president, Gary Fries, however, preferred a brighter spin. He said he believes radio industry players in the last 12 months have become "more aware" of the accountability issue. "They may not understand the mechanics of [portable people meters] but they know if they’re comfortable with it or not," he said.

Forrester Research analyst Josh Bernoff pointed out that much of the industry is focused on its current problems rather that the potential to new electronic solutions. "There’s a fair amount of frustration about the current ratings system,” he said. “Clearly a better ratings system would have a positive impact.”

Decreasing ad spending
The economic impact study surveyed 484 advertising decision makers -- both marketers and agency executives -- who buy radio advertising. It found that on average they planned to decrease radio ad spending by 2% annually as long as the medium remains on its current written diary-based ratings system but would increase by 3% if it moved to a more precise ratings system.

The current paper-based Arbitron diary system requires participants to painstakingly record their week's worth of radio listening by hand. There has long been significant amounts of debate about the accuracy of a method that depends on an individual's memory or interpretation of what he or she heard on the radio when.

The PPM, on the other hand, is a passive, high-tech system for measuring consumers' radio listening habits. Participating consumers simply clip onto their belts a small electronic device that automatically "listens" and instantaneously records data about which radio broadcasts the individual is exposed to throughout day.

Special encoding required
To enable the PPM system to work, broadcasters must include inaudible codes in their signals that can be detected by the pager-like PPM device.

The PPM "hears" and records the codes of any encoded audio signal within the wearer's hearing range. For instance, the device hears the radio playing in a car and makes note of when that coded broadcast sound began and ended.

At night, each PPM is placed in a desktop online base station that extracts its data, uploading it to Arbitron's central processing facility. The base station also charges the unit's batteries for the next day's monitoring.

Throughout the day, a PPM can also detect and record data about other suitable encoded audible media, including cinema advertising and TV networks. Arbitron has signed up retailers such as Best Buy and The Gap to use encoded in-store audio so it can begin to measure how radio advertising may influence in-store traffic.

Philadelphia PPM test
After completing a PPM test run in Philadelphia in 2003, Arbitron has established a full panel PPM program in Houston, the results of which it hopes to release in September.

However, Arbitron has encountered opposition from some media companies. Both Cox Radio and Radio One have yet to commit to encoding their broadcast signals so that PPM units can monitor them. Neither radio company returned phone calls for comment by press time.

After the Philadelphia trial, some radio stations were disconcerted by the discovery of a ratings decline during the lucrative morning-drive daypart -- the apparent result of Arbitron diary-keepers’ tendencies to overstate their morning listening time. The study indicated that while morning drive-time ad revenues would likely fall when the PPM system is used, the decline would be made up by increases in other dayparts.

Forrester's extrapolations
Forrester extrapolated from the study's advertiser responses that if PPMs were deployed to the top 25 radio markets by 2010 the industry would see a $305 million cumulative ad revenue increase. Deploying PPM measurement to the top 50 markets by 2010 would create a $478 million cumulative increase. And, it said, if and when PPMs were fully deployed, it will reap an additional $696 million cumulative.

While the survey didn’t account for such factors as where the potential increase in radio ad dollars would come from, whether the entire ad market would rise or fall in the next several years, or how a push for better TV ratings through Nielsen’s Local People Meter (LPM) system would affect the outcome, it did highlight the dissatisfaction with the current system and the desire for something more modern and accurate.

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