• by Frank S. Foster , December 17, 2008

"Sure. Go ahead."

"Do you think Google will buy Nielsen Media Research?" My drinking companion leaned into the table and uttered the question in a hushed tone.

"Are you asking me if the broadcast networks' worst nightmare is just one private equity deal away from happening?" I responded.

"Yes, that's what I am asking."

"I think Google could buy Nielsen ..."

"So you think the rumor is true?"

"Well, hold on a minute. I didn't say they would buy Nielsen, I said they could. I am not convinced Google actually wants to buy Nielsen. But I am sure Google wants Nielsen to think they want to buy them."

"So what's your prediction? Will it happen?"

"I think it will come down to how badly the banks want out of their investment in the Nielsen Company. If Google is smart, they will wait for the banks to blink."

"You didn't answer the question."

"The deal won't ever close."

"Why?"

"Unless the four broadcast networks support a sale of Nielsen to Google, there's no reason for Google to pay what the bankers will command." I finished my beer and put on my coat.

"And ABC, CBS, FOX and NBC would be crazy to choose Google over Nielsen?" My friend asked.

"The devil they know. Exactly."

While there are undoubtedly those in the industry who would vociferously disagree, most researchers would admit in a private moment that the current way of measuring television audiences has reached its practical limits. Hundreds of networks available on multiple distribution systems with widely available time shifting and on-demand services cannot be effectively measured with a small sample. End of story. Nielsen's time honored "gold standard" has lost its luster. To add insult to injury, the long-term prospects for Nielsen Media Research are less than rosy due to several factors, including:

1. Nielsen has lost industry leadership on the issue of new technologies like video on demand, time-shifted viewing and addressable advertising to companies like Acxiom, Experian, Rentrak, Tivo, and TNS;

2. Well funded potential competitors (WPP and Google) have purchased or announced independent forays into television audience measurement; and

3. The cable operators have formed a joint venture to compete directly against Nielsen Media Research in the area of television audience measurement or to force Nielsen to use their data.

So why would Google want Nielsen? If it bought Nielsen, Google could change Nielsen's very costly and dated infrastructure, do away with panels and collect as much data as possible from set-top boxes, digital video recorders, video-on-demand servers, broadband video servers, mobile video platforms, you name it. They could create behavio- based ratings and demographic ratings using mathematics instead of small sample statistics. Error margins and confidence intervals would improve. Viable ratings could be published for nearly every network, station and piece of content on television. But most importantly, Google could make these changes without the distraction of competing with Nielsen for revenue. While competition would drive prices lower, if Google purchased Nielsen, they could arguably raise rates. And honestly, who would want to compete with a Google/Nielsen juggernaut?

But would Nielsen sell their crown jewel? Don't look now, but the private equity banks that purchased the company from VNU back in 2006 are reeling. Many of those involved in the purchase would have hoped Nielsen would be in the middle of a public offering by now. Most would now agree their exit strategy is years away. Unfortunately, capital calls are on the horizon and, as Wall Street is fond of saying, "cash is king." So the question is not, "Will Nielsen sell its television audience measurement business?" but "How little will Nielsen take for the television audience research business?"

And there, as they say, is the rub. At the end of the day, any sale of Nielsen Media Research will be valued not on what assets Nielsen has in its offices but the value of the contracts it has on its books. If the networks that make up the majority of Nielsen's revenue balk at the idea of a new owner for the company, the deal will not go through at a price the private equity banks can stomach. Even in this market.

So that begs the question, "Would the broadcast networks support a sale of Nielsen to Google?" If you believe that is a possibility, I have some condos down in Miami I'll sell you with no money down.