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September 2007 Presentations

September 18, 2007

Nielsen BuzzMetrics: The Creation of An Industry

When Mike Nazzaro founded PlanetFeedback in 1999, he never dreamed that his start-up would end up part of the conglomerate The Nielsen Company. Yet that's precisely what happened, and Nielsen BuzzMetrics is setting the standard for consumer-generated media, a term Mike and his team coined to describe the emerging online influence industry.

Consumer-generated media, or CGM, is online content created by consumers in blogs, message boards, discussion boards, etc, to educate others about products, brands and services. This information is often informed by relevant experience and typically archived online for easy access by others.

Word of mouth has always been powerful. However, prior to the Internet, it was more limited: friends talking to friends, co-workers passing on tips. Perhaps you might receive information from a contact across the country, but that was limited in scope and effect.

The Internet has changed all that. Now, anyone can create a blog or write an online message about their experiences - good or bad - with products and services, and the information can instantly be seen by millions across the country. While it's easy for a company to recognize that CGM is affecting its business, it's another matter to track and analyze this data in any meaningful way. That's where Nielsen BuzzMetrics comes in.

Their charge is to archive and organize the myriad of online data available about their clients, then analyze it and provide a summary report of what is happening in the virtual world. Cincinnati-based Intelliseek, which merged with PlanetFeedback in the early 2000s, was the "anchor" company in Nielsen BuzzMetrics. Intelliseek was market leader in CGM; in fact, it created the space. Now a wholly owned subsidiary of The Nielsen Company and with a new name, BuzzMetrics has several hundred blue-chip customers and is achieving 100%+ sales growth a year.

With an increasing number of people online each year, and new tools such as blogs making it easy for everyone to share an opinion, CGM is growing. There are currently 1 billion consumer comments each year. These are entirely unaided, come from large sample sizes, are real-time, and are naturally segmented according to key data fields. Virtually every research company finds that consumers trust CGM and word of mouth far more than any other information source - 76% say a friend's recommendation makes people most comfortable when purchasing a product (Mediaedge); a Yankelovich study found 67% thought another consumer was the best source for advice on a new product; and according to NOP, 92% of consumers in 2005 felt word of mouth was among the best sources for new ideas about products, compared to 67% in 1977.

One key to using CGM effectively is that, like any other research data, it needs to be measured. BuzzMetrics does just this, through sophisticated technology and products. The content system reads over 40 million blogs and 50,000 boards. It pulls the general data on a company, mines it to categorize and classify it, then sends it to analysts for evaluation and reporting. Services provided help brand tracking, new product launches, marketing effectiveness, product quality monitoring, reputation management, and trend analysis. With clients ranging from Procter and Gamble and Unilever to Pfizer and Walt Disney, clearly BuzzMetrics is succeeding in their mission of helping companies understand online consumer data.

So how did Mike lead his start-up PlanetFeedback through an emerging industry to be purchased in a few short years by market leader Nielsen? Through his passion, listening to consumers. "In 1997, I became driven by the idea of listening to consumers," he said. "I saw the Internet as a huge reflection point." In 1999, when he made the leap from Procter and Gamble to entrepreneurship, "money was flowing." Mike found backers, River Cities & Blue Chip, and developed strong partnerships with them: "You've got to feel good about the people you're taking money from," he feels. "You should be very careful about choosing your partners."

While there was pressure for them to move to a Coast, Mike felt it was better to be out of the day-to-day "craziness" of these areas. He also wanted a more loyal employee base, which he felt was possible here.

And so PlanetFeedback opened its doors. "We started as simply a feedback portal," he said, "and we quickly saw the limitations of the model. Our original business plan was a guide. We knew monetizing consumer feedback was a good idea, but how do you do that effectively?"

As PlanetFeedback examined different measurement approaches, the definition of success used by their backers changed. Mike explains, "When we started out, the definition was traffic and registered users. In the middle, it became revenue, which made us approach things much differently. If we'd kept on the way we were going, we would have run out of money before critical mass would drive the revenue stream." Facing more and more challenges with their current business model, Mike had to find a new way to approach the problem.

In 2001, an opportunity presented itself in the form of Intelliseek. "They had been in business since 1997 as an enterprise software company, and they had the same culture as PlanetFeedback," Mike feels. At the time, message and discussion boards were exploding over the Internet, and the two companies felt they could do business together. Mike says they "stuck to original principles but started using a different approach."

However, they tried to do too much by continuing to run two businesses under one roof. "River Cities is the one who called us out," laughs Mike as he remembers. "They were absolutely right, we couldn't do it all." They moved away from software and became a marketing services company.

They continued to optimize strategy, deciding what kind of company they wanted to be. "We were a technology-enabled marketing services firm, but we needed to focus more on the service proposition - technology wasn't enough." They also needed to build the right team by adding to sales and customer delivery, and solve three major problems: 1) topline growth; 2) customer satisfaction; and 3) profit and margins. It was an exciting time for them all, says Mike: "We were shaping the industry, creating Consumer Generated Media."

In 2006,Nielsen entered the picture. "The deal made sense because Nielsen has always stood for measurement," Mike feels. "They were the logical acquirer given the strategy." They also provided product opportunities through syndicated products, merging CGM with other data and predictive modeling - not to mention the global reach their sales channel provided. However, it was not a no-brainer: "There were many conversations about whether this was the right deal," according to Mike. "Others would pay higher multiples, but there were such great synergies with Nielsen." In the end, Nielsen became 51% owner of the company.

In 2007, after much discussion about an IPO vs. an acquisition, BuzzMetrics became a wholly owned subsidiary of Nielsen. They are now seen as the "tip of the spear" for the company. "We are the sharpest point, even though we're not the biggest part of the company," Mike explains. "Becoming part of Nielsen was the bigger idea, combining the best in class in online measurement services."

Through this whirlwind, Mike learned many valuable lessons. Many are those all entrepreneurs echo: respond nimbly to the market, find the right people, don't underestimate the difficulty of M&As, focus on profitability, find the right investor partners, and execution is more important than the idea itself. Others are from Mike's personal experience: don't forget what you learned at the Big Company, such as rigorous planning and focus; find the "game changer" that can shape the industry; and get market leaders as early customers.

Clearly, Mike has learned these lessons well, as he now finds himself once again working for a top company after just a few years in an entrepreneurial role.