An Alexandria company wants to help make sure that the 130 million commercials scheduled to be televised every year actually are broadcast when and how they are supposed to be.
According to Paul Wilson, president of the new company, Audit Inc., the television advertising industry "doesn't have a reliable cost-effective audit," because last fall the Federal Communications Commission stopped requiring television stations to keep detailed records of the programs and commercials they run.
The federal government was doing random program audits of these station logs, and "advertisers had a lot of protection, pure and simple, from the federal government . . . tied to license revocation," Wilson said.
In one case in Berlin, N.H., three radio stations lost their licenses for billing for commercials that weren't run, according to Erwin Krasnow, Ad Audit's communications counsel.
"This is a $19.1 billion industry," Wilson said, referring to the amount of advertising dollars spent on television commercials as reported in Venture magazine. "The point is that many people want proof of performance.
"Mistakes do happen. . . . They are aggravating in the minimum. They are expensive in the middle. They are extremely harmful to your product in the extreme," he asserted.
What Ad Audit has developed is a means of inserting codes -- invisible to home viewers -- into commercials and a means of monitoring them when the commercials are broadcast. The company says that reports prepared from the data will tell clients whether the right commercial was broadcast at the right time and whether it ran its full length or was cut short, whether the sound, picture and color were as ordered, and whether commercials for other Ad Audit clients' competing products were broadcast during the same commercial break.
Ad Audit inserts its codes in the vertical blanking interval -- the lines making up the black bar usually seen at the bottom of a frame when a TV picture is flipping.
Wilson said that advertisers will buy his service to make sure their commercials are being broadcast as ordered, and that broadcasters will buy it to verify that they have lived up to their end of advertising agreements. Wilson said that Price Waterhouse will audit data produced by his company to assure their accuracy.
Two hundred and forty-one receivers will collect the encoded data from the broadcast commercials and transmit the information daily to a central computer. The receivers will be installed in different locations with roof-mounted antennas. Wilson chose his locations according to maps of TV signal coverage, and they could include private homes, but he doesn't want to reveal their locations for security reasons.
"I am going to have a partner that I'm very excited about . . . a national communications company" whose name he cannot announce yet, Wilson said. He won't pinpoint his own investment for competitive reasons, other than to say it's more than $1 million.
Wilson said that the verification marketplace -- including providing summaries of data and creating new markets -- will be worth between $5 million and $10 million a year in five to 10 years. Among the new markets would be working with product test-marketers. Ad Audit also plans to take data supplied to clients by other services such as Nielson and Arbitron and combine them with Ad Audit's own data.
Ad Audit has two competitors, Audicom and Telescan.
Audicom, which is based in New York City, encodes the audio track of commercials, and can monitor audio and video components of commercials. The system therefore also works with radio, according to Robert Engelke, Audicom's president. He said that the company is negotiating some contracts for the use of its service.
Telescan Inc., which also is based in New York City, monitors the audio levels and encodes one part of the vertical blanking interval to identify the commercial and to note the presence or absence of video, a spokesman said. Telescan also can detect the presence or absence of color by monitoring another part of the vertical blanking interval. The company plans to test its service in five big cities over the next six months and then expand to 75 markets over the next two years, he said.
Last year, Wilson operated Early Warning, which monitored broadcast advertising for political candidates. Working from broadcasters' publicly available listings of political spots purchased, the service developed data-collection and reporting techniques, including computer software, that form part of the Ad Audit technique.
Wilson said that, while operating Early Warning, he began wondering how he could use the techniques he had learned to make money when political campaigns weren't under way, something that would be a logical extension of the political data-gathering.
He decided that the best way to go was electronic verification of television commercials and that one important step in creating a system was to find out everything he could about relevant research.
Ad Audit was incorporated in January. It has a core staff of about 20 now and should have about 30 by July 1, when it plans to begin offering the service. The inventor's company in California is manufacturing the code inserters and receivers, while Wilson's operations will construct enclosures, with built-in modems, for the data receivers.
Wilson, whose background is political advertising, remembers watching TV in Columbia, Mo., one day last year and seeing a political spot produced by a friend. He phoned the friend, congratulated him for the spot's effectiveness, but then mentioned the problem: That particular spot included topical references indicating that it was meant to be shown 200 miles away in Springfield, Mo. "That's kind of the situation where you just can't have it happen," Wilson asserted.