Technology

Ganging Up On Nielsen


An upstart media-research company is poised to collect as much as $25 million from a coalition of companies anxious to take on the TV-ratings leader

A research company called erinMedia, locked in battle with Nielsen Media Research over how to measure TV audiences, is about to get backing by some powerful guns.

Media startup erinMedia is poised to receive up to $25 million in funding from a coalition of media companies and advertisers led by Spark Capital, BusinessWeek.com has learned. The backers include a division of Publicis Media Groupe (PUB), one of the world's largest communications and media buying companies and the owner of ad agency Saatchi & Saatchi, says Spark partner Todd Dagres. Other companies in the coalition include a large television network and major automotive advertiser that Dagres declined to identify. Publicis couldn't immediately comment.

Why all the interest? erinMedia says it has come up with a better way to measure TV audiences in an age where DVRs such as TiVo's (TIVO) and other technologies help viewers skip commercials. "We would get data on every second of every hour, and break it up however the customer would like it," says Brad Danaher, erinMedia's vice-president of product management, which has several patents on the technology.

Advertisers and broadcast companies are hungry for a more accurate measure of viewing habits, now that an estimated 9% of homes currently use DVRs, according to Standard & Poor's Equity Research, which like BusinessWeek.com is owned by The McGraw-Hill Companies. More than 30% of homes will use the devices by 2010 (see BusinessWeek.com, 3/02/06, "Watching the TiVo Effect").

Outmoded Methods?

Nielsen Media Research currently has a de facto monopoly on audience measurement, and it plays a key role in determining how the $250 billion spent on TV advertising each year gets divvied up. Nielsen gauges audiences by tracking the shows watched by a nationwide panel of households equipped with set-top boxes that report back data to the company. Critics say the method is outmoded.

ErinMedia's technology works with every set-top box, allowing it to track all television viewer behavior and not just a representative panel, says company Chairman and CEO Frank Maggio. It also enables the company to serve ads to particular cable subscribers based on the behavior recorded by their individual set top box. "We are empowering people who today are being ignored," says Maggio.

Until recently, Nielsen didn't measure whether its panel members were tuning in to commercials, leading advertisers to believe that they could be paying inflated prices for audience members who, in fact, were skipping their spots. In July, the company said it would begin measuring 10,000 panel members' behavior during the commercial spots (see BusinessWeek, 7/31/06, "Counting Every Last Eyeball"). The company has said it's fine tuning the commercial-ratings system.

Companies that buy television advertising slots for clients point to other regions such as Europe and Asia, which provide viewer data for specific commercials. Similarly, some networks, fearful of losing ad dollars to more easily trackable Internet video ads, have been upset as well. "Everybody agrees that the Nielsen System is flawed, but it's the currency for buying advertising," says Dagres.

Previous Suits

ErinMedia has sued Nielsen multiple times alleging, among other things, that the ratings giant aggressively wields its monopoly power to block competing services. It filed an antitrust suit in June, 2005, and another in January, 2006, accusing the company of false advertising and unfair trade practices. A Nielsen spokesman declined to comment, citing the pending lawsuit.

In January, 2006, Maggio, who made his fortune in real estate, told media outlets he would be interested in buying Nielsen and merging his company's technology with Nielsen's lucrative ratings contracts. In March, six private equity firms, including the Carlyle Group and Kohlberg Kravis Roberts & Co., took over Nielsen for $8.9 billion.

Since the takeover, the company's influence has only grown. On Feb. 5, it announced that it would pay about $327 million to buy the remaining 40% stake in Nielsen NetRatings that it didn't own. The purchase only increased Nielsen's influence over research and ratings both online and on air.

But if erinMedia has its way, that influence may soon be eroded.

Holahan is a writer for BusinessWeek.com in New York.

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