How much are TV ads worth?

[Josh] As Nielsen begins to report ratings that include DVRs, the Wall St. Journal and the advertising industry ask "should we be paying for recorded viewing, or just live?"

This is one of the sillier question ever to be debated in a serious publication. (I'm not counting the "Merry Christmas" vs. "Happy Holidays" debate.) It's silly because the market will answer the question, regardless of what we say.

What's an ad worth? Whatever an advertiser is willing to pay.

Advertisers are questioning the value of TV ads -- GM, Unilever, Procter & Gamble, and Carat, a big media buying agency, have all said they will buy fewer TV ads in the future.

Despite the insistence from CBS' David Poltrack that they should "get credit" for recorded viewing, advertisers will do the math, and devalue the recorded viewing, since the ads in it receive less attention from consumers. Our surveys show that DVR users skip about 92% of commercials in recorded viewing -- if you have a TiVo or Comcast DVR, I bet you would say the same.

It would be a pretty lazy media buyer who placed ads assuming that those who watch ads in recorded programs will deliver the same impact as those who watch live. A conventional wisdom is going to develop around this, until we have more data. Ads in recorded programming are worth something, but not the same as ads in live programming. How much less will be determined by the ad buyers.

With DVR penetration now past 10%, there are enough viewers here to matter. But this is a short term issue. Within a year or so, advertisers will study whether ads in recorded viewing actually create recall, or other sorts of action that helps their marketing. In the meantime, the debate about recorded viewing is so much posturing.