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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