In the media and advertising businesses, few metrics are as important as ratings and shares. That's because the two terms nail down the popularity of a piece of content such as a television show or radio broadcast.
But ratings and shares each tell a different story about the success – or failure – of that media to reach a sufficiently broad audience.
A TV show's rating refers to the number of households who tuned in to watch the content -- as a percentage of the entire population of TV-equipped homes.
If, for example, 20 million TVs dialed in to view Sunday Night Football this week, and there are 100 million households overall, then that sports broadcast earned a rating of 20%. In other words, the show reached roughly one-fifth of all U.S. homes.
Here's the calculation expressed as a formula:
Rating = (number of viewers/total universe of potential viewers)
Similarly, a broadcast's share tells us how many people watched the show, but with an important difference from a rating: Share is expressed as a percentage of the audience that was actually watching TV at the time.
Sticking with our weekend football example, if there were 60 million households watching television on that particular Sunday night, then the show's 20 million viewers qualified it for a share of 33%. That means the show reached one-third of all TV watchers during its broadcast – even if that audience represented just 20% of all homes in the U.S.
Expressed as a formula, here's how to calculate audience share:
Share = (number of viewers/total number of TV watchers)
Why it matters
Different advertisers might be happy with high share over strong ratings, depending on what they're trying to accomplish. Consumer goods giant Procter & Gamble, for example, may want to introduce America to a new line of Gillette razors (the 9-bladed Mach 3000). In this case, P&G would direct its advertising efforts to broadcasts with high national ratings over a period of several months so it can be sure that most of the country has been exposed to its marketing message.
Contrast that situation with a retailer like Target, who is aiming to draw as many customers as it can to a limited-time event like a Black Friday sale. Here, the company might be especially interested in shows that carry high share numbers during the few days leading up to the sales event. Even if that time period isn't one that typically corresponds to huge numbers of Americans watching TV, the company can still aim to reach the highest share of the population that's actually tuning in at the critical time immediately preceding its sale date.
Of course, content producers love to see high numbers for both ratings and shares. And that's why the most valuable type of content are often event-driven broadcasts that convince millions of people to turn on the TV. Sports fall in this category – think of the Super Bowl or Olympic Games, which have broadcasters bid hundreds of millions of dollars for the rights to show them.
Compelling news can also drive ratings and share figures through the roof. The 1969 moon landing, for example, attracted an estimated half a billion viewers around the world . And in the U.S., the major network broadcasters reported share of 93% between them . So, not only were a record number of people watching television on that July day, but of the homes with TV's turned on, nearly all of them were viewing that event unfold.
Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends Procter & Gamble. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.