As TV audiences skip ads, TiVo watches closely

NEW YORK (Reuters) - TiVo Inc reshaped television by allowing viewers to skip right past commercials when they save their favorite shows on digital video recorders -- and made life far tougher for advertisers in the process.

Now TiVo is attempting to make it up to the advertisers and broadcasters, selling them data that show exactly what viewers are watching during every second of every show.

The idea behind its Stop Watch service, begun just over a year ago, is to create a fuller picture of TV viewing habits. That helps an advertiser understand how its commercial is playing: Do audiences skip it entirely? Stay around for a few seconds? Watch the whole spot?

At the moment, the standard audience measurement from Nielsen Media tracks what viewers are watching on a minute-by-minute basis. But with most commercials lasting no more than 30 seconds, TiVo's more specific information has begun to make inroads with major media clients.

"At this point in time, the big question on the industry's mind is this: When people have DVRs in their homes, how are they time shifting and how are they fast forwarding?" said Todd Juenger, TiVo's General Manager, Audience Research & Measurement. "Those things are important."

Advertisers spend roughly $70 billion each year buying TV commercial time in the United States. Even in the face of audience fragmentation and competition from new media, advertisers still count on TV more than any other outlet.

But DVRs are raising thorny issues for broadcasters and advertisers. Consider advertisements for movies, which often run Thursdays to build excitement for weekend openings. Those spots lose much of their punch when the Thursday show in which they're placed is recorded and watched later.

"When people start time-shifting and fast-forwarding, the idea of the detailed commercial rating becomes hugely important," said Juenger. "If there weren't DVRs, I'm not sure much would have changed in the TV ratings business."

EVERY SECOND COUNTS

Advertisers say TiVo's service, while not perfect, begins to address the challenges posed by audiences who can skip commercials at the press of a button. For a 60-minute TV show, TiVo will supply 3,600 points of data.

"If you look at what we're trying to do in advancing the business, the number one thing is getting better data and more data," said Andy Donchin, director of national broadcast at Carat North America, a unit of Aegis Group Plc. "We need it to help us navigate through all advertising platforms."

That should provide a much-needed boost to Alviso, California-based TiVo, creating a new revenue stream even as competition heats up in its core business of supplying DVRs.

With cable operators and phone companies marketing their own DVR services, analysts have raised concerns about TiVo's growth prospects. Revenue rose just 5 percent last year, and it posted a $31.5 million loss.

TiVo declined to comment on revenue figures from its audience research, but it has deals with clients like CBS Corp , General Electric Co's NBC, Interpublic Group of Cos Inc, Carat and Omnicom Group Inc.

It's also in talks with Walt Disney Co's ABC and News Corp , according to executives.

"We're able to look at individual commercials and see if the actual commercial itself has a significant impact on retention," said CBS Chief Research Officer David Poltrack.

"Does it makes a difference what commercial is in the first position? And if you can get people through the first position, are they more likely to stay?" he said. "If that's the case, do some commercials do that more effectively than others?"

One of the drawbacks to the TiVo data include the fact that the information is only representative of households with DVRs. Another is that TiVo subscribers are considered by some to be tech-savvy, early adopters -- meaning their viewing habits may differ from those of people using DVR services from cable providers.

TiVo plans to take its research a step forward later this year when it rolls out Power Watch, featuring a panel of TiVo subscribers who volunteered information like age, income, race, marital status, and even favorite products.

"If your client is Budweiser, they could ask our panel, do you drink beer? If you drink beer, do you drink Budweiser or Miller?" Juenger said. "And then, for the first time that I'm aware of, you could get reports that say Budweiser drinkers watch TV this way, and Miller drinkers watch TV this way."

Given the thirst for audience measurement data, others like TNS Group are joining TiVo in selling second-by-second figures. Nielsen itself, with Charter Communications Inc, is starting to provide some of that data.

"There ought to be multiple sources of data," said Juenger. "But I'm glad we have an early start."

(Reporting by Paul Thomasch, editing by Gerald E. McCormick)