Q: An article in the latest BusinessWeek explains how program engagement and advertising effectiveness measurements are changing the way companies place their ads. How is Nielsen helping to change the game of TV advertising?
Lois Miller: Nielsen’s TV ratings have always been – and still are – an important tool in measuring how many people are watching any particular show. But those numbers alone can’t measure how engaged an audience is with that show, or more importantly, with the commercials. Understanding a need for these measurements, Nielsen’s IAG product has emerged as an industry leader for measuring program engagement and advertising effectiveness. This has helped advertisers target buys where the spots are most likely to be recalled by the audience. We’re essentially changing the currency for how ads are bought and sold.

Q: How exactly does your data help advertisers target their buys?
LM: Let’s say there are competing shows on Network A and Network B. Both have similar ratings and both cost the same. But our data indicates that the audience engagement with the program is 30% higher on Network A than Network B. Because there is a strong link between how closely viewers watch the program and their recall of the ad, airing an ad in the show with higher audience engagement will help ensure higher ad recall. In this scenario, that’s going to tip the advertiser’s purse strings toward Network A.

Q: Can’t networks use the data to their advantage to boost ad sales, too?
LM: Of course they can. While the IAG product was initially designed with the advertisers’ interests in mind, this new currency of ad data has helped to level the playing field for the networks. If a show or network might be struggling with lower ratings, it can point to our effectiveness data and argue that its audience has a strong base of attentive viewers. The network can also offer guarantees that its audience will be engaged with the show at a particular level. Not only does this help the network but is also ensures the advertiser will have attentive viewers that are more likely to recall their ads.

Q: You’re the President of IAG Automotive. How important are these effectiveness metrics for car and truck advertisers?
LM: In a time when the auto industry is under tremendous pressure, it’s more important than ever. Car companies need to make every dollar count and that’s exactly what makes our metrics so useful. If a company can spend less money on a spot that they know will be seen by a more engaged audience, then it’s an efficient use of its ad budget.

Our data can also help these car companies develop compelling and memorable ad campaigns. In 2008, for example, we saw 50% more airings for car and truck sales event ads than the previous year. That leads to a lot of ad clutter on a viewer’s TV screen and it can make it hard for that viewer to remember which automaker is offering what. That’s when effectiveness becomes the name of the game. Advertisers can use our data to see which creatives were most effective in connecting with the audience.

Just last month, Lois Miller presented the 3rd annual Nielsen IAG Automotive Ad Awards at the New York International Auto Show. A video recap of the awards can be seen here.

Through July 2008, the Big Three American car manufacturers (GM, Ford, and Chrysler) all showed negative advertising growth over 2007, according to Nielsen Monitor-Plus. Ford and Chrysler each spent 22% less on advertising, while GM dropped its spending by 6%.

Compare that with the relative success of foreign automakers. Honda added the most spending in dollars over 2007 (an extra $71.5 million, or 13%), while Daimler (48%) and Volkswagen (23%) showed the most growth percentage-wise.

But not all foreign automakers saw the same success. Hyundai’s spending dropped by 17%, Nissan’s fell 15%, and Toyota’s numbers remained unchanged. The numbers reflect a 10% dip in ad spending across the entire auto industry through July.

So, for the money that has been spent, where has it gone? Of the total $6 billion spent on car and truck ads, more than $5 billion (83%) were placed in television, while $640 million (11%) were placed in magazines

There were some notable declines in media spending this year. Television is down $323.7 million (-6% compared to last year); budgets for magazines (national, local, and B-to-B) were cut $187.3 million (-23%); and newspapers (national, local, and supplements) dropped $58.8 million (-25%). These significant losses contributed to the overall loss of $640 million, bringing advertising for the automotive category down 11% for the first seven months of this year.

Cable television reported a 5% increase in total spend for the Jan-July time period with $881.9 million in total spend. Another bright star in automotive ad spend is Spanish-language cable television, gaining $1.8 million. Finally, spending in local magazines also climbed, showing the largest increase of 23%.