In the course of a serious online discussion there comes a time when it attracts pundits who want to demonstrate their higher intellect and superior knowledge by offering a new perspective on the subject.
Too often they do just the opposite. Their comments reveal ill and uninformed opinions that demonstrate their lack of understanding of the subject. Rather than make useful contributions that advance the discussion, they simply add to the noise level side-tracking the discussion.
So it is with the discussion about Voltair. Failing to understand the broad implications of Voltair’s apparent success, too many people new to the issue bring up silly issues. It’s like a child around a group of adults shouting "look at me, look at me!" to get attention.
The first foray into silliness was the assertion that using Voltair was unfair. Anyone who feels this way simply doesn’t understand the economic value of a device that may significantly increase TSL and in turn a station's AQH rating.
The latest diversion is the notion that there is just too much fuss over Voltair. It is no big deal, just another way to game PPM.
"What about engagement, what about passion?" is asked, as if these things somehow make up for a flawed technology potentially undercounting radio listenership.
Suggesting that radio is too obsessed with accurate listening estimates proves that one has no concept of the role that ratings play in today’s multi-media environment and tomorrow’s programmatic marketplace.
Only a person who has never sold radio time, never tried to explain PPM’s 30% lower AQH ratings, or had to make a sales budget makes that argument.
Voltair is a canary in the coal mine, a warning that something is amiss with PPM. It is a warning with broad implications regarding radio sales and radio revenue.
A rough "back of the envelope" calculation illustrates the magnitude of the problem.
Last year US spot radio revenue totaled $13.6 billion with nearly three-quarters of the total coming from PPM markets.
How much of the revenue was ratings driven is anyone’s guess, but large market managers tell me it can be 70%+ of total spot revenue. Even in smaller PPM markets the percentage can be 50% and higher.
We’ll use the lower 50% number, knowing that it probably understates the actual average across all PPM markets.
Let’s call it $6 billion in spot sales driven by ratings.
Let’s also assume that rating sensitive sales are tied to cost-per-point. In other words, the higher a station’s AQH rating, the higher the rates it can charge.
Now for our last assumption let’s say that PPM is under-reporting AQH ratings by 30%. Remember Arbitron’s "70 is the new 100" campaign? That was an admission that AQH ratings are about 30% lower when measured by PPM.
Given those assumptions, spot radio revenues should be north of $16 billion instead of less than $14 billion.
If these assumptions are in the ballpark, PPM is costing radio a little more than $2 billion in lost revenue every year.
Let that sink in. Two billion dollars of lost revenue. Every year.
What if a higher percentage of spot sales is driven by ratings?
What if lost listening is higher than Nielsen’s estimate? We’ve seen ratings jumps over 50% at some stations after installing Voltair. (Your mileage may vary!)
It is not inconceivable that ratings driven sales revenue could double. That would put total spot radio close to $20 billion.
And if programmatic sales really do take off, you can kiss good by all those warm fuzzy reasons to buy radio. Spot sales deals will all be driven by ratings.
That’s really what the fuss is all about with Voltair.
If Voltair is helping PPM meters more consistently log radio listening, it confirms that PPM based estimates are low, that listening levels are higher than we thought, and we ought to be charging more for our spots.
If a flawed ratings system is conceivably costing radio $2 billion a year in lost revenue, that’s worth fussing over.
Next up, we’ll take a closer look at the "70 is the new 100" campaign that Arbitron hatched in 2009 as a way to explain the drop in listenership with PPM.