Rino Scanzoni, Part 2

TVWeek: GroupM and WPP seem bullish about Invidi and Visible World and other players involved in addressable advertising—you guys have an investment in some of these players.

Rino Scanzoni: Yes. The advantage that television has is that viewers have accepted the fact commercials are there and they are less likely to look at them as significant intrusion. In the online world, that's still a challenge as we try to insert messages. In that lean-forward world versus the TV lean-back world, there's probably more resistance to that message, unless that message has a high level of relevancy or is being sought out by that particular consumer or particular individual.

So look at television in a space where there's the ability to go a little bit further now and make the messages more relevant to the people who are in front of that television set. And then you marry that to the activity that these same people have online where they're seeking out information on products and services. I think the potential is huge.

In that lean-back, TV watching frame of mind, they probably are going to be a little bit more receptive to your message than they are when they're in a lean-forward situation where it's about, well I want this now, I'm seeking specific information. If you can now provide people with a message that is somewhat relevant to their lifestyle, to their interests, and it can even be increased by the fact that they might in fact be seeking a certain type of information about certain type of products at that time-- information you know because you can marry that with their online activity--you will present a very, very effective advertising message to that particular consumer at that point in time, significantly increasing response.

TVWeek: So that brings me to the initiative, the Coalition for Innovation Media Measurement, or CIMM, that you guys are a part of where you are seeking some better metrics for single measurement and such. That’s clearly very important to CIMM. Is Nielsen working fast enough? If GroupM and P&G and all the other companies thought so, would you have formed the Coalition?

Scanzoni: Nielsen is trying. But there are some challenges. I made a reference earlier in this interview [see Part 1] to the fact that up to this point in time what's been great is the fact that we've had stable viewing levels on TV. And that fragmentation has provided a huge opportunity for clients. My concern is that as we move into the future we could see those viewing levels becoming unstable. And the reason is the fact that we are now to the point where the television set is actually converging with the computer.Television sets are going to be manufactured so that they are going to provide online access.

TVWeek: Yes. We’ve been at the annual Consumer Electronic Show the last few years and I think that's a far more interesting application than 3D-TV which received so much hype at CES this year.

Scanzoni: I'm with you a hundred percent. 3D-TV and wearing glasses to view it is going nowhere. It's going to have some application here or there but it's going nowhere. It’s a reaction to some theatrical films that have had some success.

TVWeek: I agree. A much more key application is these TVs that all are going to have Internet access.

Scanzoni: Right. That's going to be the next generation. So now all of a sudden when you're sitting there and you've got the ability on your big screen to search the web and download video content, I think that will start disrupting viewing levels.

TVWeek: Agreed.

Scanzoni: Because now online video content can actually become that much more competitive with standard television content. And television content is going to continue to be an expensive proposition. So from a business standpoint how do you make television continue? Because at the end of the day the individual is still going to look for the kind of content that is generally expensive to produce and there is a fair amount of scarcity of that.

So what's going to need to happen is we're going to go to a model that is clearly going to require aggregation. It’s not that different than what's happened with syndication. What the syndicators realized, especially with fragmentation and so forth, they realized because this product is costing X, they've got to find a way to aggregate the audience to maximize what they get out of the advertising revenue.

The same thing is going to happen with television content on the web. It's going to have to be aggregated.

I'm not talking about display ads and I'm not talking about short-form video. I'm talking about long-form video. Think about what we're seeing with DVR usage. It’s small but it's growing significantly.

And look at, for example, the CW. There's a significant audience that's watching those shows on a computer screen.

TVWeek: Absolutely. “Gossip Girls” has been very popular on iTunes.

Scanzoni: Right. You're not going to be able to justify the cost purely based on the amount of advertising exposure you're going to generate by the traditional distribution of television on an expensive show like that. Because a lot of that viewing is also on a DVR where we're seeing 50 to 60 percent skip rates on ads.

So you've got to be able to aggregate that audience and that's really why it's so important for research to catch up with the way people consume television now. It’s got to be done quickly. This thing is moving relatively quickly. So we've got to drive Nielsen and we've got to also look at other research providers that can help drive this change to be able to measure across all of these platforms relatively simultaneously. We need to know what the duplication is, what the overall reach is, what the engagement is. This is going to be very, very important because this content is going to be out there. You can't keep it away from people.

Even if you try to delay for three or four days and have these windows it doesn't work because you've got things like piracy that gets out there. So knowing that it's going to get out there you've got to find a way to modify it.

TVWeek: Looking at the iTunes model, aren’t there lots of people who are willing to watch TV shows and pay for them and not watch them with commercials?

Scanzoni: I think consumers don't necessarily have an aversion to advertising. Every piece of research that we've done indicates that the consumer sees that advertising is a fair price to pay to get access to content. So I really believe that ultimately the advertising model, if it could work on an aggregation basis, will generally be something that clearly the consumer will prefer as opposed to a model that is going to require a payment. Maybe it's going to be a situation where it will have to be a hybrid of the two.

The thing that concerns me is that I think you have to make that change sooner as opposed to later, because people get accustomed to what they’re used to. If we continue to provide that TV content on a very, very limited commercial basis that will become the standard. And there will be a rejection if you try to make significant changes to that.

So I do think that in most cases, the advertising model is going to be preferential to a pay model. Or maybe it has to be a combination of the two which is a hybrid, which is really a heavily discounted model, because the content is accompanied with advertising. There's going to be a lot of ways to play this. But I don't see a situation where you're going to be able to purely monetize this content on a cash basis with consumers, especially if you look at the kind of economic challenges that people have. I just don't think that we are dealing in an economic environment where there is so much discretionary income that it's going to allow for that.

TVWeek: I couldn't agree with you more. This scenario, in broad strokes, was first brought to my attention, and maybe yours too, back years ago when Jamie Kellner, who was running the WB network, spoke about it. He thought that there was going to be a huge crisis as TV shows were shown on the Internet (and audiences followed), if shows didn’t carry enough of a commercial load on the Internet. His argument, as I recall, was that this was a scenario for disaster for marketers, and for the TV business, as marketers then wouldn’t be spending enough on advertising to allow the networks to produce high quality programming. And without high quality programming you wouldn’t get high enough audience viewing levels. So it would all spiral downward.

Scanzoni: I think there's some truth to it. That's why in my gut I think ultimately it's going to go to be a scenario where obviously we're going to have to migrate the advertising to be integrated in the program and it's got to follow distribution of that TV content wherever it goes.

That's going to be critical to be able to maintain the audience levels that will help support the advertising revenue. That's number one.

Number two, there's going to be some sort of a pay model such as TV Everywhere, where consumers are going to have foot some of the bill for to this, but it's going to be part of overall aggregated services.

It's going to be the combination of those two things that are going to maintain the vitality of the business.

TVWeek: Let me just run by you a frustration I’ve had watching TV shows on the Internet, and I don’t think it’s an isolated case. And that's the old problem of not enough commercial executions. The show I watched had limited commercials, but each time the commercial ran it was the exact same commercial. Drove me crazy. I would have been much happier with more commercials as long as it wasn’t the exact same execution every time.

Scanzoni: Yeah, it’s true. One of the drivers of commercial avoidance is frequency. And we're still in a world where clients are producing two or three commercial versions of a particular execution and then placing them on these targeted channels and running the sprockets off of them. So even if it's a great message and it's a relevant service or product, after a while like you sit there and you say, I get it already.

I understand that and frankly that was one of the issues that when we go back at C3 we would find these cable channels that were basically taking the first break and putting promos in it and they promo the hell out of shows right up to air date so that same audience is probably seeing that same promo 20 times, which almost invites them to change the channel.

TVWeek: Since you brought up C3, do you think there are there going to be any more debates to try and get the C3 to evolve into something else? Or what do you think along those lines?

Scanzoni: There are people out there that I think would love to see the business be based upon exact commercial exposure. The problem with that is the fact that the systems that are currently utilized really can't handle that. It's also likely a zero sum game anyway because you're buying multiple units and exact commercial exposure has more to do with your position in a pod than it has to do with your actual commercial. People are going to continue to want to look at that. We're probably going to get better data that is going to allow us to look at that but I don't see that converting to the trading currency.

Because I think it'll lead to a level of complexity that at the end of the day will yield no real incremental benefit.

That being said, that doesn't mean that we shouldn't have that data to look to see how certain commercials and certain executions from a creative standpoint have the ability to hold an audience. It’s important to be able to do that and see where a message, because of frequency, starts to show some real significant wear.

So I think the analytics are good to have and it'll make a difference about how we schedule and so forth, but I don't see any real change in the trading currency any time soon, outside of the fact that I think we will be moving to more of an aggregation of audience across the platforms.

TVWeek: On that whole issue of aggregation, do you think then it's possible if you—meaning CIMM—is successful with its RFP and with the coalition’s agenda, that maybe you’ll move to that as a currency to displace Nielsen?

Scanzoni: We didn't form CIMM to really look to displace Nielsen. I think we really were pushing to put the industry together on it because of the fact that if we all do things independently nothing is going to be funded at a sufficient level to really try change.

So I think what we can do is as a group that represents advertisers and agencies, media agencies, and media vendors, is we can look at what all of the opportunities are and who is providing all the different potential research services and methodologies and models to determine which ones shows the best promise and look to invest in them.

And Nielsen's part of that too.

I think there have been a lot of potential viable competitors to Nielsen. The problem has always been the fact that the industry, whether it's the advertiser agencies or the media, really didn't want the addition of supporting a competitor, which limited the ability of a competitor to make any kind of a foothold. Frankly if you look back, I think that's probably been one of the biggest mistakes we've made as an industry. Because I think if there was a viable competitor to Nielsen over the last 20 years we would have been in a much different position in terms of the kind of data, and the granularity of the data.

And the responsiveness of Nielsen would have been much different. We would have been in a better place because I believe better data, smarter data, leads to better decisions, better decisions increases ROI, and if you increase ROI you actually increase the value of the media.#

To read Part One of our interview with Rino Scanzoni, please click here.