Soon To Be Worthless: Nielsen Net Ratings and comScore Media Metrix

Reuters (RTRSY) is creating a new financial "blog ghetto." Its business model appears to be essentially a "Seeking Alpha" aggregation approach, with the added element of splitting advertising revenue with the analyst/authors. Over the summer, I was asked to participate in this. I wasn't interested in 30% of the revenue for 100% of my content.

Howard Lindzon notes some of the more onerous requirements of the Reuters contract at his blog. One item in particular grabbed my eye:

"You agree to sign the Letters of Agreement assigning all key syndicated traffic measurement firms, including but not limited to Nielsen Net Ratings and ComScore (SCOR) Media Metrix . . ." -Reuters blog revenue sharing contract

Over the past quarter, two other media outlets looking to share advertising revenue each asked for a similar clause:

"All traffic to your blog will then be assigned as traffic to ________."

This is intriguing: I have now seen this or similar demands from 3 separate mainstream media outlets: A wire service (Reuters), a financial magazine, and a major newspaper. In all three examples that I reviewed, the blog itself isn't transferred or sold to the media outlet (for examples, see Kevin Drum/Washington Monthly or Andrew Sullivan/The Atlantic).

Note that this is not only measure ads, but for all traffic: While I do understand they are trying to show the collective reach of the advertising, that is not how it is stated in the contract. "Blogger will assign ALL MEASURES OF WEB TRAFFIC" just seems wrong.

That is not what this about -- they are merely acting as an advertising agency, selling and placing ads, and then sharing the revenue. It would be one thing if they had a specific ownership relationship (purchase, employer etc.).

This is big business, with online advertising now $20 billion per year.

What does this clause actually mean -- to the new measuring metrics, to bloggers, and to the Media's push onto the web? Let's consider the ramifications:

1) This is nothing short of a naked grab to steal Blog traffic numbers, and artificially boost MSM web traffic numbers.

The print editions of newspapers and magazines have been seeing their circulation numbers ebb, while the web versions are significantly growing. However, trying to figure out how to "game" these traffic ratings is not exactly what competition in the market place is all about. Imagine if Baseball teams could buy wins, if TV shows could buy ratings, if CDs could buy sales.

There is a faint whiff of desperation to this.

2) Nielsen Net Ratings and comScore Media Metrix data are soon to be -- assuming they are not already -- worthless bull$h%t. If these ratings companies are complicit in this arrangement -- or if they even know and tolerate it -- their business model goes kaput. Since major MSMedia are attempting to buy ratings, these ratings will no longer accurately measure true traffic. I'm not saying its fraud, but it sure smells like bullshit.

What will occur instead is that Nielsen Net Ratings and comScore Media Metrix will actually be a measure of how many fools various publishers can get to sign documents assigning the bloggers' traffic to themselves.

Neat trick, but the data becomes meaningless.

3) This means that, very soon, web Advertisers will no longer be able to trust the data they get from publishers or these traffic rating agencies. Ad revenue rates are based on click-throughs and page-views. However, CPM rates are negotiated -- not measured. Hence, I assume is that this is for setting higher CPM rates (plus bragging rights).

4) I don't know the VCs behind the rating outfits, but I cannot believe the original pitch included anything like "And, our ratings can be easily traded and assigned, making them essentially worthless as a web metric."

I don't know if "Fraud" is too strong a word, but if I were them, I would be very, very pissed off. Why? I will bet you that the web traffic scores will soon be as informative and reliable as the S&P or Moody AAA ratings on sub-prime mortgage CDOs.

5) I have seen what is practically the identical proposal from several different, unrelated media firms.

This makes me think that the same brain trust is behind it -- some law firm/think tank/McKinsey-type group. Amusingly, it looks like the sleazy consultants/law firms sold it over and over to different media outlets.

If their advertising model lacks ethics, do you suppose these firms have any themselves? Lesson for the media: When you get into bed with these sleazoids, expect them to try to screw you over also!

To err is human, but it takes an MBA-laden consulting firm to create a true clusterf@#& . . . .

Sources:
U.S. Web Ad Spending Nears $10 Billion In First Half '07
Reuters
InformationWeek, October 4, 2007 03:00 PM
http://www.informationweek.com/news/showArticle.jhtml?articleID=202201206

A New Ratings System Stirs Up the Fall TV Season
BRIAN STELTER
NYT, October 8, 2007
http://www.nytimes.com/2007/10/08/business/media/08ratings.html

The Battle for the Consumer Online
RICHARD PÉREZ-PEÑA
NYT, October 8, 2007
http://www.nytimes.com/2007/10/08/business/media/08zuckerman.html

Extra! MSNBC.com buys Newsvine
Paul J. Gough
Hollywood Reporter, Sun Oct 7, 2007 11:52pm BST
http://uk.reuters.com/article/industryNews/idUKN0727411220071008

Comments

[Derrick She...:]

I'm confused by the premise of the article. Give me an example of how a blogger can assign a measure of web traffic themselves...

You agree to sign the Letters of Agreement assigning all key syndicated traffic measurement firms, including but not limited to Nielsen Net Ratings and ComScore (SCOR) Media Metrix . .

This isn't clear to me. Where and how do you just 'assign' metrics like this to these companies?

2007 Oct 09 11:29 AM

[User 113182:]

I had the opportunity to read Mr. Ritholtz’s blog “Soon To Be Worthless: Nielsen Net Ratings and comScore Media Metrix” and I wanted to take the opportunity to set the record straight regarding the practice of traffic assignment in our industry. First, I want to fully disclose that I am a comScore employee serving as Executive Vice President in charge of the Media Metrix business. As Mr. Ritholtz points out in his blog, the use of traffic assignment is a very strong practice within our industry and it is for a very good reason. As the Web has become more fragmented, publishers are constantly challenged to deliver more relevant audiences and value to advertisers and marketers. The aggregation of traffic with similar content is one way to accomplish this. But at the end of the day, it comes down to a numbers game where higher reach is more desirable and larger audiences will get an advertisers attention. Perhaps a good illustration is Conversational Media, where individual sites/blogs have small audiences, but in aggregate, the category reaches over half a billion people worldwide, based upon comScore's tracking

Hundreds of companies employ this practice of traffic assignment to other companies. However, it is important to note that ownership of these sites is in no way impacted nor does the traffic from these sites disappear. Instead, it allows them to be aggregated into a larger roll up that at the end of the day can hold more appeal for a prospective advertiser. The traffic from the individual sites can still be viewed as part of the roll-up assuming it is requested by the aggregator, and the traffic meets minimum sample and reporting standards. In many situations, traffic of assignment can actually benefit a site in terms of visibility within ratings reports and can allow it to further monetize its traffic without having to build up an expensive sales force on its own.

It is worthwhile to note that traffic of assignment has been within our industry for many years now and in fact has been incorporated into the proposed industry-wide IAB Nomenclature project that has the active involvement and support of leading players within the industry including publishers, advertisers and agencies. Our procedures for accepting traffic assignments are very rigorous. We require consent, a legitimate business purpose, and do not allow the traffic to be assigned multiple times. The latter requirement ensures that the audience represented in the ratings report is not double counted as a result of different publishers claiming assignment to the same site. With these safeguards in place, the notion that traffic is being stolen is simply not true. The fact that Mr. Ritholtz opted to not acquiesce with the three requests he was presented with during the summer validates the rules of full consent and non-duplication. If he did not consent, his traffic will not be credited to anyone but himself assuming his site is large enough to show up in the ratings report.

From a business and online ad sales perspective, it’s all about delivering audiences to advertisers that allow them to meet their goals and objectives. The aggregation of larger audiences with relevant content whether it is through 100% ownership or traffic assignment, is a legitimate way to make the audience more compelling to buy by marketers and advertisers. At the end of the day, this continues to be a business measured through dollars and cents. And through these practices, stronger online audiences can be created to drive more ad revenue and that is what will help to continue to make the online world go round.

2007 Oct 12 01:59 PM

[user123455:]

A great response to a horribly written article. I love when hedge fund managers know nothing about an industry, blog about it using a shocking headline to get attention OR to hype a short position gone bad, and then get shot down. LOL!

2007 Nov 01 09:50 PM

[user123455:]

A great response to a horribly written article. I love when hedge fund managers know nothing about an industry, blog about it using a shocking headline to get attention OR to hype a short position gone bad, and then get shot down. LOL!

2007 Nov 01 09:50 PM

[Munger75:]

What is his point? would Barry like to be able to retain 100% of the ratings value that is brought to his blog via syndicate so that he could charge higher CPM rates? He-and other creators of content-can decide whether the reveune share agreements offered are good deal for them. As long as the traffic is correctly measured and marketed then the assignment of traffic isn't the scam that is rant claims it is.

2007 Nov 04 10:11 PM

[sfskeptic:]

Barry, you are completely uninformed. Stupid and completely worthless post. Traffic assignment has been occurring for very legitimate reasons for well over 5 years. Oh and fyi, SCOR's market cap is currently cost to $1B. With predictions like these, I'm glad you're not managing my money!

2007 Dec 18 10:02 PM