Gorilla in the Internet Mist
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Audience measurement services company Media Metrix is in a fairly unique position among Internet start-ups: It has a legitimate chance to fend off the 800-pound gorilla that lurks on the outskirts of its market jungle.
The corporate anthropoid in this case, of course, is Nielsen Media Research, the fabled television audience measurement giant more commonly known as A.C. Nielsen.
Almost any adult who regularly parks himself in front of the tube has heard of the Nielsen ratings, and the company's weekly and overnight rankings of television shows are the recognized yardstick for determining who stays on top in Hollywood and who goes back to doing dinner theater in Encino.
Since launching as PC Meter in early 1996, Media Metrix has emerged as the Nielsen of the Internet. But the real Nielsen is making its move in cyberspace through a relationship with NetRatings, Media Metrix's only existing rival.
Media Metrix began as a division of The NPD Group, a market research firm. It spun out on its own in March 1996 as PC Meter, renaming itself a year later as Media Metrix. NPD still owns one third of the company.
Much like Nielsen monitors the television viewing habits of representative "sample" American families, Media Metrix tracks the Web usage patterns of 40,000 users to determine which sites they frequent.
In many ways the debut PC Meter report, issued in January 1996, was a legitimizing moment for the World Wide Web. It was the first effort to quantify Web site traffic, and finally advertisers had a tool -- however rough -- for determining where they should place their billboards in cyberspace.
PCMeter also made order of the Web, providing independent statistics showing the most popular Internet sites, as well as how long users stayed and whether they were visiting from home or the office.
While it was no shock that AOL and Yahoo! were near the top, the survey delivered some surprises that spelled opportunity for advertisers and Web site operators. For example, in one of the first quarterly reports issued, PC Meter ranked Switchboard.com -- an Internet directory of U.S. telephone numbers -- as No. 1 for the average length of a user's stay on a site. Who'd a thunk it?
Last November Media Metrix acquired its chief rival, RelevantKnowledge, thus solidifying its position as the premiere Web audience measurement company.
Media Metrix sells its Web measurement products and services on an annual subscription basis. About 90% of its revenues comes from syndicated products, with the remainder coming from customized products and services.
As a sign of its brand strength (and the relatively open playing field in which it roams), Media Metrix tripled its customer base in 1998 to more than 300. It also boasts an extremely high retention rate of 95% for customers with annual contracts.
Revenue growth has been impressive, going from $1 million in 1996 to $3.2 million in '97 and $6.3 million last year. However, losses also have risen ($3.4 million to $4.7 million to $7.2 million) during that same period.
While there are many site-centric products allowing companies to measure and analyze their own Web traffic and patterns, Media Metrix is the clear leader among independent providers of such data. Its high retention rate hints at the strength of its brand.
Nielsen will have its work cut out to overtake Media Metrix, which must continue to increase revenue. That should happen as advertisers become more confident about buying on the Web, making Media Metrix a promising investment.