• by Joe Mandese , December 15, 2004

In a disclosure sure to demoralize clients, even as it invigorates shareholders VNU Wednesday said revenues and margins for its operating units in 2004 would end up at the "top end" of its financial guidance, including a 23 percent profit margin on a 7 percent growth in sales for its Media Measurement and Information operations, a division dominated by Nielsen Media Research.

"These rates are above the industry average," stated Rob van den Bergh, chairman-CEO, referring to results for both VNU's media and marketing research units.

While the disclosure may be heartening for VNU's investors, it also serves as a stark reminder of the control VNU has over the marketplace for media and marketing research, particularly in the U.S., where its Nielsen Media Research unit is the sole provider of critical marketplace data, and is expanding its role fast.

In fact, VNU said its growth is "being fueled by the expansion of Nielsen's national TV ratings sample, which is ahead of schedule, and the introduction of Local People Meter (LPM) service in five leading U.S. TV markets, part of the plan to launch the LPM in the top 10 TV markets by 2006." Despite the controversies surrounding its LPM rollout, VNU said Nielsen continues to sign new agreements with clients in support of the expanded services.

While VNU did not issue any new long-term guidance, the company did note that the media research group "continued to launch promising new audience measurement services in areas that are attracting increased advertising spending, including outdoor media, cinemas, video games, product placements and sports sponsorships."

The update made no mention of VNU's plans to develop joint ventures with Arbitron based on the portable people meter system. The two companies are courting national marketers to support the rollout of Project Apollo, a national single-source panel that would measure both media usage and product purchasing. A separate effort to develop a new TV and radio ratings system based on Arbitron's PPM appears to be getting waning support from Nielsen due to a conflict over the system's new market trial in Houston, which would compete with Nielsen's own plans to rollout a local people meter system in that market during 2005.

VNU said its media research results were also aided by "improved performance" at NetRatings, which VNU has a 63 percent stake in, and which expects to a further reduction of losses in 2004.

The weakest link in VNU's operations continues to be its business information unit, comprised mainly of trade magazines such as Adweek, Billboard, Mediaweek, and The Hollywood Reporter. The company said ad revenues for its publishing division would decline in 2004 from 2003, but that the market "appears to have bottomed out" and that "early signs of recovery are visible" in some trade segments.