Published: August 23, 2004
Barry Williams for The New York Times
A THREE-YEAR-OLD company plans to describe a new service today that will measure radio audiences in cars, combining global positioning technology and continuous tracking of the radio dial to challenge Arbitron, the dominant radio ratings provider.
The service, from Navigauge, is not likely to weaken Arbitron's grip, but it may remind radio executives and advertising agencies that established ratings systems have room to improve, executives said. Arbitron generates its data by asking consumers to record their listening habits in paper diaries.
Howard Nass, a principal at Nass-Hitzig Media, a media services and consulting company, found fault with Arbitron's methods, saying the company depends on consumers' recollections, uses small samples and has low cooperation rates. "That has to be fixed," he said, "because there are billions of dollars going into radio."
Advertisers may spend more than $20 billion on radio this year. The medium collected $19.6 billion in ad revenue last year, up from 2002 and 2001 but still shy of the record set in 2000, when revenue was $19.8 billion, according to the Radio Advertising Bureau, an industry association.
The challenge of accurately measuring audiences is not limited to radio. Nielsen Media Research, the VNU unit that dominates television ratings in the United States, has battled public relations and legal challenges in its effort to replace its diary system with personal electronic "people meters."
Events have also called into question the reliability of print circulation figures. Newsday, The Chicago Sun-Times and the Spanish-language daily Hoy have recently acknowledged that they falsely increased their circulation figures. That has heightened scrutiny of the Audit Bureau of Circulations, which verifies circulation figures.
Meanwhile, the radio business has been caught in its own tangles. Most recently, the radio giant Infinity Broadcasting threatened to stop using Arbitron. After a monthlong standoff, Infinity and Arbitron said last Tuesday that they had reached a multiyear deal.
All the dust-ups have only heightened longstanding industry agitation over ratings.
"Even before advertisers and their agencies became increasingly obsessed over return on investment in the last year or so, there was always a concern over 'am I getting what I'm buying?' " said James Boyle, a broadcast analyst and managing director at Wachovia Capital Markets.
Navigauge executives are betting that shortcomings in the system will provide an opportunity for them. "For a long time, the radio industry itself has lamented the fact that it gets a large percentage of consumers' media consumption but a disproportionately small share of advertising revenue," said Tim Cobb, chief executive at Navigauge in Atlanta. "That's based on the fact that they cannot articulate to advertisers the value that they are delivering."
Navigauge has developed its technology with $6.5 million in funding from institutional investors like Skyterra Communications and the Armada Venture Group. It has sought input - and income - from marketers including Coca-Cola and McDonald's, who have helped the company pay for an Atlanta test run that fitted more than 500 cars and trucks with the videotape-size Navigauge device. It hopes to be operational in the 10 largest markets by early 2006, and in the top 20 markets by later that year, finances permitting.
Mr. Cobb said the second-by-second analysis of listening and location made the Navigauge approach worth exploring. "We're not going to bash Arbitron, because I think they do a good job with the information they have, given the way they collect it," he said. "But when we've done a comparison of a diary to actual behavior, the results are radically different."
Arbitron executives said that it was insufficient to measure listeners only in cars, despite the importance of drive-time radio. "Radio needs a service that captures the entire day, the entire audience," said Thom Mocarsky, vice president for communications at Arbitron in New York. "That's what we do now. It's not perfect, but we do it."
Like Nielsen, Arbitron has been trying to abandon paper diaries. It is winding down a test of people meters in Philadelphia and preparing for a bigger test next year in Houston, to run through early 2006. The meters, which resemble pagers and must be worn throughout the day, detect inaudible codes that can be embedded in radio and television programming.
But Arbitron has so far failed to convince broadcasters like Cox Radio, Infinity and Radio One to embed the necessary codes. "We would do anything to help our advertisers get better information," said Joel Hollander, president and chief operating officer at Infinity, a Viacom unit that owns about 180 radio stations in 22 states. But he said that the cost of embedding the codes might be a problem, especially when broadcasters were uncertain how expensive or effective they would be. "The broadcasters help fund it," he said.
Mr. Mocarsky, the Arbitron vice president, said that about 35 cable networks and 5o Houston radio and television stations have installed encoders that can be used in the Houston test.
Navigauge, meanwhile, will seek slices of the ratings business. The company hopes that its capacity to track participants' cars through the global positioning system will add new layers of useful information for marketers. For example, the company can tell where drivers stop for lunch and whether radio commercials can change people's destinations. The global positioning capacity could also provide information on the amount of traffic moving past billboards, aiding the outdoor ad industry in the notoriously difficult task of measuring signage exposure.
Frannie Wellings, a policy analyst at the Electronic Privacy Information Center, a Washington advocacy group devoted to privacy issues, said people who agreed to drive around with Navigauge boxes under their hoods might not realize the implications until later. "When you ask people to start in something like that, they are initially active in the decision, but they don't know what's going to be inferred from their habits," she said. "Later on they actually might find themselves stuck in sort of a profile about a certain area and how they participate by listening to advertisements."
Then again, in the imperfect world of media ratings, some might call that progress.