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What Would It Take For Measurement Alternatives To Topple Nielsen?

Despite all the talk from TV networks about using measurement alternatives to Nielsen, most ad buys placed in this year’s upfront season are still likely to be transacted on Nielsen ratings. Because advertisers haven’t had enough time to evaluate the reliability of alternatives like Innovid, VideoAmp and comScore, Ad Age estimates that only high-single-digit percentages of this year’s upfront deals will be written on anything other than Nielsen’s decades-old age and gender demos.

"It’s really difficult to imagine with all the different companies involved and tests just starting, and that we won’t have any real, solid info on regularly scheduled programming for at least three to four weeks, that anyone is going to want to make a leap to use this new audience measurement for this year’s upfront exclusively," one media buyer told Ad Age. "That doesn’t mean we might not have some deals that get done that have dual measurement systems—one as a contractual piece and one to watch."

Ongoing Support From Agencies, Networks

Nielsen has come under increasing pressure from some of its biggest clients for measurement flaws and other missteps at a time when competing measurement providers are gaining more traction. Yet for all the negative press and criticism of Nielsen and its role in measurement, “none of the large ad holding companies have hinted at bailing on Nielsen [and] most of the large networks, when pressed, admit that Nielsen remains the standard bearer,” said Douglas Arthur, an analyst at Huber Research Partners. In fact, the investment firm says Nielsen’s audience measurement revenue grew at a 5.2% organic pace in fourth quarter 2021. Elliott and its Evergreen Coast Capital arm which, along with Brookfield Business Partners, are investing $16 billion to buy Nielsen say they are “firmly convinced Nielsen will continue to be the gold standard for audience measurement.”

Veteran research executive Marshall Cohen says it will take a major commitment and investment by the media industry for anyone to challenge Nielsen’s pre-eminent position. “Nielsen will remain dominant unless programmers, agencies and advertisers step up and spend money with the alternatives so that it is possible to do the high quality work necessary on local, cross-platform, set-top box, smart TV, OTT/CTV, and audio measurement, and to have that work audited and accredited by the MRC, which is an absolute necessity today,” says Cohen who first used Nielsen in the early 80s at Nickelodeon, MTV and VH-1 and has worked with it and comScore in the years since. He notes that only Nielsen, comScore and iSpot have formally applied to the MRC for accreditation.

Nielsen’s future owners are said to have upped their initially rejected offer of $25.80 a share to $28 because they believed in the company’s growth potential. “Today's outcome represents a significant win for Nielsen's shareholders and for the business itself, as our multibillion-dollar investment will help Nielsen reinforce its transformation at this critical inflection point,” Evergreen and Elliott’s Managing Partner Jesse Cohn and Senior Portfolio Manager Marc Steinberg said in a joint statement when the deal was announced.

Of course, the company’s already rich cash flow and profits were equally tantalizing to the private equity investors. Ad Age says Nielsen had a 25% operating margin on $3.5 billion in revenue in 2021 with a more lucrative cash flow margin of 43%.

Better Research At A Lower Price?

The challenge for its future owners will be how to improve the research it provides at a price point for clients that is competitive with all the new entrants vying to topple its dominance. “The TV industry is looking to reduce the sum it spends on measurement,” Jon Watts, managing director of the Coalition for Innovation in Media Measurement, told Ad Age before Nielsen’s sale was announced.

Analysts say the deal gives Nielsen the freedom to make whatever investments are necessary to maintain and grow its dominant position at a time of increasing competition in the space. Without the pressure of reporting quarterly earnings, the company will have more flexibility to invest in the short term, given that it’s “going through a fairly significant product transition here,” Matthew Thornton, Director of Equity Research at Truist Securities, told Inside Radio.

Radio makes up a considerably smaller piece of Nielsen’s revenue than TV does. The company has long enjoyed a monopoly position in U.S. radio measurement, although Eastlan has emerged as a growing competitor in small markets. As with TV, clients may complain about Nielsen’s service but most continue to renew their deals with the company.

“There are numerous measurement companies, some with very innovative products, that could give Nielsen a run for their money,” Cohen says.“But that's only if clients truly support their work with real dollars and don’t simply use them as leverage or PR against Nielsen.”

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