MBP Overview: PPMs and Radio’s Search for Better Measurement, Updated 3/05/07

Media buyers and planners have long been calling for a new measurement system to track radio listeners, pointing out that while the media world has changed, media measurement has not kept pace.

An August 2005 survey implemented by the Advertising Research Foundation, for example, showed that media buyers were unsatisfied with the methods of measurement on which they make buying decisions for radio, calling Arbitron’s paper diaries - which require participants to fill them out, based on their radio listening habits, and return by post to Arbitron - “relics from the past.”

An economic impact report from Forrester published around the same time predicted the radio industry could see a decrease in revenue of as much as $282 million annually if it doesn’t make the switch to a new measurement system.

Enter the PPM
Aware of the need for an updated measurement system, Arbitron began in 2001 to develop a portable electronic device that automatically registers radio and TV signals - when those signals are properly encoded - within a given range of the subject. The device, called a Portable People Meter or PPM, has been tested in several markets. Arbitron says the PPM will be deployed in the top 10 radio markets by July 2008. Arbitron is also working with the MRC to get appropriate accreditation.

While the PPM system poses some challenges - getting 18- to 24-year-olds to participate in the tests was as difficult as getting them to take part in the diary-based service, it turns out - it still seems an acceptable solution to advertisers, who are eager to find an accurate and more credible view of radio audiences.

A PC-based version of the electronic diary is being introduced in early 2007 for markets not being measured by the PPM. It will give radio survey participants in diary-based markets the option to use an internet-based, electronic diary in place of the standard paper-and-pencil survey tool. A mobile version of the electronic diary is also being tested.

Arbitron agreed, at the request of the Arbitron Radio Advisory Council, to wait until it received MRC accreditation for the PPM radio ratings service in Houston - the PPM’s first market - before it would discontinue the diaries and make the PPM the currency for radio ratings in Houston.

In the other markets in which the PPM is rolling out, such as Philadelphia and New York, Arbitron will not wait for MRC accreditation before it launches commercially. However, the MRC will have completed an audit and a report on those markets before Arbitron rolls them out (Philadelphia in March 2007 and New York in December 2007).

The Arbitron Radio Advisory Council felt that, with Houston being its first city to use PPM, Arbitron should “prove” to the industry that the PPM was capable of being accredited. Arbitron agreed that it would not use the PPM as currency in Houston until it had achieved accreditation.

Broadcasters’ View
However, most broadcasters didn’t feel ready to adopt the technology as the audience measurement upon which pricing will be determined. One reason the PPMs have come under fire from broadcasters is the fact that the measurement tool costs more. Worse, it can deliver ratings up to 20 percent lower than under the current diary ratings service, which broadcasters fear could mean they will not be able to charge as much for ads.

But advertising professionals say radio is ready to embrace the electronic measurement system. A panel at the Radio Advertising Bureau’s conference in February 2006 pointed to the television world’s experience with Nielsen’s local people meters, which are being used in nine markets: None of them have seen a change in cost per spot, according to Mindshare president/local broadcast Kathy Crawford. What changed, she said, was simply the measurement.

When viewing the new results, she said, “If you’re hysterical about this, the buyer gets hysterical.”

Clear Channel’s RFP and The Media Audit/Ipsos
Clear Channel Radio has remained unconvinced that Arbitron was the best and only answer to a new measurement service, and last fall, it issued a request for proposals for a new, electronic measurement system. Clear Channel received nearly two dozen proposals. It narrowed the field to seven, and then to three, but only one - The Media Audit/Ipsos - posed a real challenge to Arbitron.

The Media Audit/Ipsos’ system is based on smart cell phone technology, which passed a lab test by RAJAR, the U.K. radio ratings consortium. The Media Audit said that by not having had to develop any hardware, its smart cell phone has an advantage over other systems. Arbitron refuted the viability of a “dual use” electronic device, saying that using a cell phone to measure media behavior would create biased ratings because different age groups and ethnic groups use cell phones differently.

As the measurement scramble heated up, radio groups found themselves in an awkward position: While they wanted to wait and see what became of The Media Audit’s system, their biggest customers, representing 75 percent of national ad dollars, had signed for the PPM.

Still, many radio groups continued to hold back.

Broadcasters Give In to PPM
Eventually, radio groups such as Emmis Communications, Bonneville International, Beasley Broadcasting, and CBS Radio began to enter into multi-year agreements with Arbitron for the PPM radio ratings when the technology is deployed.

At that point, Clear Channel booted those radio groups from the RFP evaluation committee, which Clear Channel had put into place to evaluate the proposals. Clear Channel’s senior vp of research, Jess Hanson, sent an email to radio groups that had signed for Arbitron’s portable people meter service, writing, “Since you have decided to choose an electronic audience measurement vendor prior to the conclusion of the team’s work, we do not feel it is appropriate to ask you to continue to serve on the team.”

Clear Channel then suspended negotiations with Arbitron until such time as Arbitron can get MRC accreditation for the PPM service. Clear Channel CEO John Hogan wrote in an internal memo that “the companies who have signed on to PPM represent 252 stations… out of more than 13,000 in the U.S. The scope of the radio companies that continue to stand with the MRC and the Evaluation Team dwarfs those who have decided to exit the consideration of alternatives.”

Where It All Stands
In early August 2006, The Media Audit released its plan to roll out its radio measurement service, should it be chosen by Clear Channel as the new audience measurement system. On Sept. 7, it gave its first live demo of the technology to Clear Channel’s evaluation committee.

In late August 2006, Arbitron began to release its first weekly ratings from its PPM trial in Houston. It also is beginning to plan for a roll out of the PPM in Philadelphia, recruiting a panel of 2,040 consumers to carry the device, though the company is still awaiting MRC accreditation. The company will discontinue paper diaries in Philadelphia with the March 2007 ratings report and is beginning to recruit New Yorkers for the New York roll out.

In late January, 2007, the MRC accredited the PPM for use in Houston. The company anticipates that accreditation in subsequent markets will take place much more quickly than the two years it took for Houston.

Arbitron holds several patents on a technology that would allow the PPM to measure listenership of radio stations whether they agree to encode their signals or not. The audio matching capability is currently being tested among 50 PPM panelists and could be fully deployed within a year. This could be a vital step for the radio measurement company, as it still has a long way to go in convincing many radio broadcasters to have their signals encoded for the device. Cox Radio - the lone holdout in Houston against encoding - agreed in February, 2007, to have its signals encoded. The radio group pointed out, however, that encoding was a different matter than subscriber to the ratings service itself.
Also in February, Cox Radio, Clear Channel, Entercom, Radio One, and Cumulus provided funding to back a field test of The Media Audit/Ipsos’s smart cell phone technology in Houston.

In March, however, Clear Channel finally agreed to sign for the PPM, subscribing for three years to the service in Philadelphia and agreeing to encode its Philadelphia broadcasts. However, the company is continuing to keep its options open in other markets, pointing out that it is still funding The Media Audit/Ipsos test in Houston.