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RealTime IT News

The Raptor Pit of Web Measurement

The restructuring of Jupiter Media Metrix's operations in Australia has brought further attention to the blood thirsty, cut throat market for Web measurement in Australia.

Under the restructure, Jupiter Media Metrix will no longer operate as a wholly owned subsidiary of the US parent, but rather will license the brand and methodology to local research firm, AMR Interactive. The move is no doubt prompted by the merciless lust by investors for any kind of profitability at any cost.

The local announcement is coupled with the news that Tod Johnson will step down as Chief Executive Officer of Jupiter Media Metrix worldwide. His departure is rumored to be related to his inability to effectively integrate the firms two core functions - Web measurement and strategic advice - following the merger of Jupiter and Media Metrix.

A license model eliminates the cash burn of the local arm and delivers a relatively small amount of revenue back to Jupiter Media Metrix - whilst, in theory, maintaining the brand in Australia. The reality however, is that their upside is limited to the license fee and their influence is restricted to the service level agreements.

One of the primary drivers for the change was Media Metrix's financial struggle in Australia. Simply, the economics of Web measurement in Australia aren't kind, and with no shortage of well funded competitors, deep pockets are needed.

It's estimated that it costs between $3-5 million to maintain a Web measurement panel each year. In an advertising market estimated to be worth around $80-90 million in 2001, the numbers simply don't add up.

Contrast that to the TV advertising industry, where free to air networks command $2.2 billion to $2.5 billion dollars in advertising revenue each year. In a market of that size, measurement services are estimated to be worth about $90 million total.

Sure, Web measurement firms have a slightly wider scope, however the market can not justify the breadth and depth of competitors in this very very niche space. Australia has Media Metrix, Red Sheriff, AC Nielson and Hitwise all vying for the crumbs of the crumbs in Web measurement dollars.

There's also a certain amount of irony in a firm such Jupiter Media Metrix failing to do its own math. Offering strategic advice and other measurement services to support the business plans and financial planning of others, whilst unsure of its own, is interesting to say the least.

To produce sustainable businesses both Red Sheriff and Hitwise are aggressively rolling out their services internationally, with Red Sheriff even relocating their head office to New York. The risks present there however, are extremely high and one would question the viability of entering other crowded markets.

The lesson to be learnt is that of many other liquidated and merged Internet businesses, and that is the market can only support a limited number of players. Television (Oztam) and Radio (AC Nielson) both have only one measurement source, yet web measurement in Australia has four. Combined with a immature advertising market and the allure of Web measurement becomes apparent.

Assumptions, assumptions.



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