BROOKE GLADSTONE: Despite calls from some legislators, so far the FCC has not weighed in on the question of disclosure in VNRs. This week, the FTC or Federal Trade Commission, also thwarted Congress by refusing to intervene in a dispute over another aspect of the media business - TV ratings. When Nielsen replaced its paper diaries with automatic set top boxes in New York last year, the Fox Broadcasting Network backed some minority groups protesting that the new system undercounted them. Why Fox? It turns out that the more accurate meters showed it was losing viewers to cable, a trend that will soon become clear for all to see in stunningly intimate detail. According to a story in this Sunday's New York Times magazine, Nielsen's competitor, Arbitron, will soon be testing a brand new audience measurement device called the Portable People Meter. It's a plastic box the size of a pager that volunteers will wear throughout their waking hours and that will eventually record virtually all their media consumption. Jon Gertner, who wrote the Times story, says the small box is putting big smiles on the faces of advertisers who, of course, largely determine what gets produced on television in the first place. Traditional Nielsen data, says Gertner, has simply not kept up with the ever-expanding TV universe.

JON GERTNER: At this point, the average Nielsen family gets something like 104 channels delivered to their home. What that does is it splits members of households into all sorts of smaller slices. To compound that, Nielsen isn't measuring everybody in the country. They only measure, on their national sample, that is, about 8,000 households, so if you divide that 8,000 household by, say, the number of channels and the number of television sets, it gets harder and harder to get an accurate reading of these smaller channels. And the other problem with measuring television in the house is it's very expensive. It takes quite a bit of leg work, and people are more and more using media out of home. At the moment, there's something like 10 to 20 percent of television is watched out of the house - in bars, in hospitals, airport terminals. The people at Arbitron wondered if maybe it would be better to measure the person, as opposed to the appliance.

BROOKE GLADSTONE: And the way that you describe the Arbitron device in your piece is that it tracks media consumption by the sound that the media emits. How do they do that?

JON GERTNER: The engineers at Arbitron began with a couple of military contractors and some other academic advisors to look at this idea called psychoacoustic masking. Psychoacoustic masking places an electronic digital code just beneath the frequency of the sound we hear. The engineers at Arbitron hope that, by getting every channel, whether it be television or radio, in the country, to code their broadcasts with this kind of digital repeating code, their portable people meter could then pick up the code. The CEO of Arbitron believes that eventually all media with sound will be encoded. That includes DVDs, video games, supermarket muzak, anything you can think of, really.

BROOKE GLADSTONE: And the fascinating application of all of this is that, if you get up and go to the bathroom wearing this meter, they'll know that you've skipped the commercials. And if you're passing a bunch of televisions on sale in some store, and you stop in front of a TV where a show is playing, they'll even pick up that momentary exposure.

JON GERTNER: That's right. It does change the definition of what, what it means to consume media. If advertisers are becoming increasingly unhappy with their ability to get accurate readings in a world where technology is becoming more portable, well, this portable people meter follows that trend in a lot of ways. And it also has a motion sensor, so they know if the people they've recruited aren't wearing it one day, they know and they can contact it and say - hey - what's up? They've done some trials in Philadelphia, and it's shown that people who actually wore this meter, listen to twice as many radio stations than they'd ever previously noted in their old diary system. I find that not surprising. I think there's a lot of media coming at us all different ways, and I think a lot of times it fails to make an impression in the sense that we can't necessarily recall it at the end of the day, if we were to write it down.

BROOKE GLADSTONE: Obviously, the quest to more accurately measure media consumption is driven by the advertisers' deeply held conviction that advertisements actually work. But has that premise ever really been adequately tested?

JON GERTNER: It will be tested probably next year. At the moment, Arbitron and VNU, which is the parent company of Nielsen, have gotten together using this portable people meter to try something called Project Apollo, which in effect will look at - I guess you could say cause and effect - cause being the advertisements and the effect being the buying - and if this portable people meter registers well, this person listened to these specific ads and then this same person bought these specific products, the hope is to give advertisers a better sense of what works in advertising and what tactical approaches to advertising succeed.

BROOKE GLADSTONE: How do they go about tracking the purchases?

JON GERTNER: Nielsen already tracks purchases through what's called Home Scan data, where they have a very large group of thousands of Americans who already note all their purchases. What Apollo does is sort of integrate the advertising aspect with the Home Scan aspect, so in other words, a family that already scans their purchases, those families will also be metered for advertising.

BROOKE GLADSTONE: Jon, as somebody who's researched this, would you step forward and take on a portable people meter yourself?

JON GERTNER: I don't think so.

BROOKE GLADSTONE: [LAUGHS] Why not?

JON GERTNER: I don't mind being an anonymous media consumer.

BROOKE GLADSTONE: But don't you want them to serve you better? I mean the advertisers with their products and the programmers with their programs? You could have an inordinate amount of influence on the whole process.

JON GERTNER: I think one of the nice things about measurement is that you do have a vote in the culture. I think one of the perhaps more unsettling things is they know you better than they ever knew you before.

BROOKE GLADSTONE: I can see a wonderful time in the future where we're all implanted with a microchip at birth.

JON GERTNER: That may be some marketer's dream, to really find out. The chip in the head would certainly tell them whether we're concentrating on the advertisement in front of us or not.

BROOKE GLADSTONE: [LAUGHS] Thanks a lot.

JON GERTNER: Thanks, Brooke.

BROOKE GLADSTONE: Jon Gertner wrote the cover story in this Sunday's New York Times magazine entitled Our Ratings, Ourselves. [MUSIC]