New Nielsen Net rating system debuts
Nielsen (NYSE:NMR) -- famous for its television ratings system -- announced Monday the release of its online audience measurement service, a joint venture with former rival NetRatings. But can the so-called 'Bible of TV ratings' muscle in on soon-to-go public Media Metrix, the current leading Internet audience measurement company?
Nielsen has enlisted the participation of 9,000 U.S. Internet surfers who have agreed to become the wired equivalent of the near mythical "Nielsen family" and will allow the media research company to follow their activities on the Web.
Like Media Metrix, the Nielsen/Netratings ratings service will offer information about how many people visit top Web sites regularly, how much time they spend at individual sites and basic demographic detail, such as age, gender and income.
But whole Media Metrix offers only monthly recaps of online activity, Nielsen's system will issue weekly top Web site lists as well as more specific detail such as how many pages people look at within a site, says Manish Bhatia, vice president at Nielsen Media Research.
Such data is critical for Internet media companies; being listed as a top Web site by Media Metrix can mean millions in advertising revenue and create buzz for Internet companies looking to go public.
However, what has advertising agency executives and industry analysts particularly excited about Nielsen is its advertising banner tracking information, which will be included as part of the new system.
Subscribers to its service will get detailed information about top ad banners and how many people saw them (how many "impressions" in advertising lingo), the demographic profile of the audience that clicked on the banners, and click rates (how many people clicked on a banner) - all information that isn't readily available for online media.
"In order to evaluate Internet advertising versus other media, we need to know which people are doing what, how often and how long," says Joanne Burke, senior vice president of research, Carat North America, one of the world's largest advertising agency groups. "This is an area where Nielsen doing everything right."
Phenomenal detail
Until now, if ad sales executives at, for example, Yahoo! Inc. (Nasdaq:YHOO)
wanted to know who was advertising on rival Excite Inc., they had to visit the other Web portal, click around and see for themselves. Or if, say, Ford Motor Company wanted to know what ads General Motors Corp. was running on the Internet, there was really no accurate way to find out.
With Nielsen's new online service, Web publishers and ad agencies will get competitive information about what companies are advertising online, which sites are getting the most advertising, along with the size and demographics of the audience that saw the ads, says Dave Toth, CEO of NetRatings.
Nielsen's entry into the market is important because if the Internet is to become a truly viable advertising medium, Web content companies and advertising agencies need to know as much as possible about the people who spend their time online. While the rate of Internet ad growth continues at a healthy pace - revenues grew from about $1.7 billion in 1998 to an estimated $3 billion for 1999 - the biggest marketers in the U.S. continue to demand more accountability of how well their ad campaigns perform online.
Scope the competition
"The advertising detail is phenomenal," Jim Nail, analyst with Forrester Research, says of Nielsen's system. "For the first time, marketers will get a clear picture of where and how much their competitors are online. That's one of the biggest spurs to increased spending."
"It lets us quantify things that until now we had to use our own judgment on," says Bill Denneen, media research supervisor with Starcom, the media unit of Leo Burnett.
Where Nielsen's systems falters is providing ratings information on how people use the Web at the office, although Nielsen's Bhatia says they are working to develop technologies that could track the corporate audience.
But many Internet analysts concede that the at-work audience - where people tend to have much faster Internet connections and do much of their Web surfing - may never be accurately measured.
"The work problem may be an intractable issue because it's so tough to get companies to agree to let [outside firms monitor] their computers," says Forrester's Nail.
Jupiter Communications' Even Neufeld suggests that as faster Internet connections become more prevalent at home, work audience measurement "will be less of an issue, because people won't be using the office as much for consumer-based Net surfing."
Threat to Media Metrix?
Nielsen's arrival online may be late, but it's not unexpected. After several false starts - its Internet ratings system was originally scheduled to launch last summer - in October Nielsen made an equity investment in NetRatings, a Web ratings company that had been providing basic information about popular Web ad campaigns.
Meanwhile, competitor Media Metrix merged with Relevant Knowledge, another online audience tracker, last fall. Since then, Media Metrix has become the de facto measurement standard for the Internet. In fact, in February Media Metrix filed with the Securities and Exchange Commission to offers shares to the public with underwriters Donaldson, Lufkin & Jenrette Securities. Its expected pricing date is undetermined, although typically it takes at least two months from filing to launch an IPO.
Because of the quiet period required by the SEC prior to a public offering, president Mary Ann Packo couldn't say whether Media Metrix would roll out a competitive ad banner tracking service, but pointed out that Media Metrix tracks not only Web use, but audience behavior within America Online as well as other proprietary services such as the financial service Quicken. Nielsen's system is Web-only.
Analysts don't see Nielsen, a brand name known throughout the advertising industry, as a threat to Media Metrix's IPO.
"Media Metrix has the first mover advantage, which is obviously very powerful," says Monica Logani, investment analyst with Lehman Brothers.
In fact, the entry of a billion-dollar company like Nielsen into the Internet "could be a validation of the market," says Evan Neufeld, senior advertising analyst with Jupiter Communications.
But is there room for both? At least in the short term, analysts say the answer is yes.
"People will be willing to pay for Nielsen, in addition to Media Metrix," says Lehman Brothers' Logani. "They'll compare them for one or two years and then make a decision on an industry standard."