Playing for Keeps – Company Business and Marketing
Maryann Jones Thompson
Media Metrix has long been the leading source of Web ratings. But the hard times may favor its archrival Nielsen.
MEDIA METRIX’S LONG REIGN AS THE leading source of Web-site ratings information may be perilously close to ending.
Long recognized as the top online-ratings company, the firm’s figures on the size of the Web’s audience have become the preferred yardstick of the Internet Economy: Companies use its data when buying online ads, analysts when valuing Internet stocks and venture capitalists when making funding decisions. And news outlets — including The Standard — cite its numbers in their Internet stories.
But now the company faces the same troubles as the dot-com industry it helped foster: slowing growth, dying clients, layoffs and a cash burn rate that may leave it penniless next year. Meanwhile, Media Metrix’s archrival, Nielsen NetRatings, is poised to take over as the leader of the online-ratings market just as a new competitor, ComScore, is emerging in the crowded playing field.
Even Wall Street analysts aren’t thrilled with Media Metrix’s prospects. They’ve lowered their revenue forecasts for its parent company, Jupiter Media Metrix, to around $100 million this year from their previous forecast of $150 million. In the most recent quarter, Jupiter Media Metrix’s revenues slipped to $14.3 million from $15.0 million in the previous quarter.
And it’s likely to get worse. From fourth-quarter 2000 to first-quarter 2001, renewals to its ratings service and to Jupiter’s market research subscriptions dipped from 75 percent to 65 percent. Cash on hand has fallen to $74 million. Analysts at Robertson Stephens and Bear Stearns have published reports saying Jupiter Media Metrix will run out of cash in 2002. The firm recently laid off 156 workers, its second round of job cuts. Officials at Media Metrix did not return calls for comment.
The economic slowdown and technology retrenchment forced many dot-coms to close and most others to slash their budgets. The bursting of the Net stock bubble has not only hurt Media Metrix’s clients, it’s also left pageviews and audience numbers out of vogue as a way of valuing stocks. Venture capitalists aren’t interested in the content or e-commerce plays that once built their reputations on such data. Other clients are merging, closing shop or closely scrutinizing their remaining expenses – and research services is an easy area to cut.
Back in boom times, Internet companies routinely bought online audience reports from several ratings services. This allowed the sites to cherry pick the data that looked most appealing. Some companies still use numbers from several firms. “If you rely on one source of data,” says Beth Baldwin, an executive at Terra Lycos, “you can get a distorted picture of the marketplace.” Many others find it a costly luxury. Sto Gray, media resource director at advertising agency BBDO, says that “in the long run, we will continue to subscribe to some services but most likely not all three.”
The competition among Media Metrix, Nielsen NetRatings and others is likely to heat up as each fights for a bigger piece of a smaller pie. Some observers of the online-ratings business see a parallel in television ratings, where Nielsen NetRatings’ ancestor, A.C. Nielsen, fought a bitter war with Arbitron for nearly 30 years before a recession in the 1980s forced Arbitron to focus solely on the radio market. “There is a tendency toward monopolization in ratings services,” says Advertising Research Foundation President Jim Spaeth.
For customers, there could be a silver lining: If a single firm dominates the business, the problem of establishing a dominant measurement standard might finally be solved. For years, companies have struggled to compare Media Metrix’s apples with Nielsen’s oranges. The two often disagree on the size of specific site’s audience. Having one fewer ratings company may not result in the most accurate figures, but it will at least reduce confusion.
And some expect Nielsen NetRatings to emerge as the Web ratings king. Nielsen Media Research struggled for years to launch its service, eventually taking a financial stake in a fledgling competitor, NetRatings, and nerging its efforts in late 1998. Spun out of Hitachi, NetRatings’ technological savvy fit with Nielsen’s media research expertise. If the oft-heralded convergence of the Web and TV takes place, Nielsen NetRatings will be positioned to measure it. Nielsen NetRatings also boasts the backing of global media research giant VNU.
To be sure, NetRatings is facing tough times itself. It reported firstquarter sales of $6.7 million. The company also lowered its outlook for the year. But it has not yet announced layoffs and has $334 million in cash. That stockpile, together with the backing of its gigantic parents, might help Nielsen hold out longer than Media Metrix.
In its favor, Media Metrix has a strong brand and loyal clients. The company has moved quickly to control costs and diversify its client base: Eighty percent of new clients in the first quarter were traditional companies. And Media Metrix has what could prove a silver bullet against its rivals: two patents on software that monitors surfers through their computers. It’s already taken one competitor, PC Data, to court for patent infringement. PC Data settled the suit this year but went out of business in March, citing the lawsuit and the lack of venture funding.
Since then, Media Metrix has filed new suits against NetRatings and NetValue. Both dismiss the suits as meritless. Nielsen could settle by merging with Media Metrix or it could wait for Media Metrix to run out of money and buy the patent from its rival.
Until the suit’s resolution, it’s competition as usual. “In the long term, this will become a market dominated by one provider” says Tim Meadows, executive VP at NetRatings. “And we’re certainly working hard to make sure that one provider is us.”
Rating the Raters
The history of online ratings in the
United States has seen many entrants
merge with others — or leave the
field altogether.
SERVICE HISTORY
Media Metrix Founded in January 1996. Merged with
Relevant-Knowledge in October 1998.
Nielsen TV ratings giant Nielsen Media
NetRatings Research merged efforts with NetRatings
in October 1998.
PC Data PC-sales researcher debuted online
ratings product in April 1999.
NetValue Formed in Paris in March 1998, the
firm’s service began in Europe and
expanded to the U.S. last year.
NetScore Launched in January. Uses ComScore
Network’s Net usage database.
SERVICE STATUS
Media Metrix Still leads the field and holds two
key patents on monitoring Web surfers.
Only $75 million in cash left.
Nielsen Strong cash reserves and powerful
NetRatings backers provide ability to withstand
hard times.
PC Data Ceased operation in March as result of
inability to obtain financing.
NetValue Being sued by Media Metrix. Bought PC
Data’s service, then sold clients to
ComScore. The two are likely to join
forces in some way.
NetScore Advanced market data drew many clients,
but methodological troubles may hold
it back.
SOURCE: COMPANIES LISTED
Last but Not Least
Just when you thought it was unsafe to go into the Web ratings market, ComScore is taking a headlong plunge.
Despite a downturn in the maturing business for measuring Internet audiences and a cutthroat battle between its two biggest players, Media Metrix and Nielsen, in January Reston, Va.-based ComScore launched yet another audience-tracking service.
Backed by venture firms like Flatiron Partners (which is also an investor in The Standard’s parent company) and bolstered with a marketing alliance by online-ad firm DoubleClick, ComScore believes it has an edge over its more-established rivals. It monitors surfing on a massive panel of 1.5 million Net users through a network of proxy servers. This gives the company a detailed online view – not just sites users surfed, but goods purchased and even stocks traded. Other ratings firms use software on individual PCs, which doesn’t allow for such in-depth data.
Critics say ComScore has its shortcomings: It monitors surfing by watching computers, not people. And its selection of surfers to track isn’t as rigorous as others’ is. But so far, ComScore has signed more than 150 customers, including Dell, E-Trade and Kraft. It’s also bought the rights to market to clients of the now-defunct PC Data ratings service. And new customers seem happy. Janay Collins, research manager at the Microsoft Network, says ComScore’s new system offers “a huge competitive advantage” over its rivals. –
COPYRIGHT 2001 Standard Media International
COPYRIGHT 2001 Gale Group
