Online monitor gets switched off

By IRENE CHAPPLE marketing writer

The online business fraternity has a problem - how to plug the hole in media buying information after eRatings.com's decision to pull out of New Zealand.

Originally run by research group ACNielsen, eRatings.com closed its local office last month, making its six staff redundant.

It was a sudden move. Local staff knew about it only a week in advance and Pacific area managing director Brian Milnes knew just 10 days before that. Clients were taken unawares.

Some of the group's major clients found out about the change from others in the industry as eRatings.com, which they paid between $35,000 and $115,000 annually, had not contacted them.

The closure was part of a global reshuffle in which eRatings.com's American parent, NetRatings, lifted its share in that company from 20 per cent to full ownership at a cost of $US16.4 million ($39.1 million).

At the same time NetRatings also bought its main competitor in the United States, Jupiter Media Metrix, for $US71 million.

eRatings.com works as a big brother that watches internet users' surfing habits.

It was regarded as the most useful tool for online media buyers, as it tracked a random 3300-person "panel" of New Zealanders.

It had been criticised for tracking home-users only, but its value lay in the demographic information that it provided to clients, such as website publishers, advertisers and financial institutions.

That information allowed online businesses to target their advertising and to track consumer behaviour.

Although the company's office is closed its panel remains active, and this is expected to keep providing local clients, including Xtra, TVNZ, INL and Wilson & Horton, with information for a further six months.

This service will depend on the attrition rate among the panellists, but with the past average drop out rate 1.7 per cent a month, it appears to have a long life ahead of it.

But the information would be less reliable if the panel fell below 2500 members.

eRatings.com was launched in New Zealand two years ago and at its peak had 30 clients. When it closed it had around 22 clients.

New Zealand is one of 12 countries whose local operation was closed by the new owners.

Mr Milnes said the figures for operation in New Zealand did not add up.

He said that clients had baulked at the sign-up cost, but the overheads for the service were high and the New Zealand operation never broke even.

The operation's costs included panellists who were given quarterly incentives such as record vouchers, costing about $100 a year, for each 2.6 person household.

Other incentives added to the cost, such as monthly draws. These totalled about $200,000 a year, including recruitment and maintenance costs.

Top-level employees were collecting salary packages of more than $100,000, and the annual data processing and reporting costs, using a central server in the US, were $US150,000.

The budget for setting up the system in each country was $US1 million and although New Zealand's operation came in under budget, it was at the "thick end of a million" said Mr Milnes.

The parent company also expected a royalty return each year, based on revenue.

Mr Milnes would not say what the royalty percentage was.

The withdrawal leaves advertisers and online publishers with other internet tracking options, such as Hitwise and Red Sheriff.

Hitwise uses three internet service providers to track 185,000 websites a day. It catches the movements of 150,000 New Zealanders and 24 per cent of national internet traffic.

Hitwise is largely a ranking service that looks at visits, the average time spent on each site and page impressions.

Industry commentators say that because Hitwise doesn't have the Xtra or Clear internet providers on its books, the sample must be skewed.

But Hitwise managing director Paul Hashfield denies this, saying the ranking trends remain the same.

"Anyone who thinks there is a skew is either ignorant of our methods or has a vested interest."

He said the company's methodology had been audited by PricewaterhouseCoopers and this showed there was no skew whatsoever.

The business had been going well since its New Zealand launch nine months ago.

He had picked up 25 clients last month and aimed to have 100 by the end of January.

Although the Hitwise service is different to that which eRatings.com supplied, it does compete for research funds.

Since eRatings.com's withdrawal, Hitwise had been approached by eight advertising agencies.

Australian-owned Red Sheriff also offers a different monitoring technique.

It reports on traffic by adding Java script software to a client's website. The script follows visitors' movements.

Red Sheriff also researches marketing campaigns.

The company's business development manager Marcus Lloyd is Red Sheriff's only employee in New Zealand, but a new researcher is being sought.

John Stewart, managing director of the Internet Bureau, an online media buyer, says the biggest problem is the confusion resulting from different methods of measurements being offered to the market.

Hitwise is at present promoting an extension of its New Zealand service, a "publishers category" but Mr Stewart says the company already has too many categories, undermining the validity of the information.

More than half of online media buyers go directly to a publisher. Mr Stewart buys on behalf those advertising agencies that do not have specialist online buyers.

Mr Stewart says direct buyers can't have the knowledge necessary to make smart choices and often rely on information supplied by the site, which can be coloured by self-interest.

He is pushing for an industry measurement standard that is independently audited and probably run by the main publishers.

He says it is in publishers' interests to supply good quality information to advertisers and to submit to independent scrutiny.

The internet will not be seen as a mature medium without a standard, he says.

The eRatings.com withdrawal has added impetus for regular talks among the industry's main players.

Industry discussions are now focused on how reliable demographic information can be delivered in the absence of a supplier such as eRatings.com.

Mark Ottaway, general manager of Wilson and Horton Interactive, says a large online marketing campaign costs as little as $10,000 a month.

He says eRatings.com's information is critical for media buyers, because Hitwise doesn't give enough information about reach, frequency and market.

The main publishers are already brainstorming, and specialist sites are also voicing concern, he says.

"Basically everyone accepts advertising has got an issue now."

Two main options are being juggled, the employment of a third party to create and run an industry standard, or the industry setting up its own in-house body.

In either case, independence of the information, and proof of that independence through an auditing process, is seen as vital before the product will be valued by suppliers and media buyers.

Also in the background are Mr Milnes' negotiations with the eRatings.com parent company to buy a franchise for the New Zealand operation.

Despite what appears to be evidence to the contrary, he says the system is a financially viable business proposition.

As a franchisee he would buy the panel, methodology and software.

This would give him ownership of the data and the right to sell it in New Zealand and overseas.

Mr Milnes believes the arrangement would cost him less than $1 million, even if NetRatings seeks to recoup some of its original set-up costs.

He says that if it could keep a presence here, its global operation will only benefit.

Mr Milnes says that although there are significant risks in setting up a New Zealand franchise the market now is of the size required to create an excellent business.

ACNielsen figures show that New Zealand has a high internet penetration and usage rates.

Sixty-five per cent of the population have access to the internet, that's some 2,081,000 people. More than 1.5 million people have accessed it in the past four weeks.

Mr Milnes says New Zealanders are early adopters of technology and this with support from the industry will give him a viable platform for the proposed franchise.

He says the discussions are still in a concept phase, but he will move rapidly with approval to replace any panel "churn" so that the panel's numbers are kept at the present level.

Six months appears to be the deadline for action.

"That is plenty of time," says Mr Ottaway.

"I don't claim to speak for the industry, but something will happen."