Does Twitter Make Nielsen a Good Investment?

Photo credit: Aaron Escobar/Wikimedia Commons.

Nielsen Holdings (NYSE: NLSN  ) wants to make the TV ratings system better, and it's turning to Twitter for help via a new service called Twitter TV Ratings.

The two companies first partnered in December. Now, as Twitter is preparing an IPO, Nielsen is sharing details. In short: Twitter TV Ratings multiply the number of people tweeting about a program by their total following to arrive at an estimated online audience.

In a press release, Nielsen said that each "author" tends to reach 50 engaged viewers. Thus, if 10,000 are tweeting about the season 2 premiere of Arrow tonight, those posts could reach a half-million following online.

You can bet Time Warner would love for me to be right about that. You can also bet that networks would love anything that increases the odds of viewers watching live TV, especially when the Viggle app seems like a misplaced bet.

But is Twitter really the answer? If so, how should Nielsen investors think of Twitter TV Ratings? For now, I'd call it an incremental product sold to a limited audience (i.e., network executives and advertising agencies). And yet, after taking a closer look at Nielsen's financials, I wonder if a little incrementalism could take Nielsen a long way. This is a healthy business.

For example, Nielsen's "Watch" segment, which specializes in audience measurement, accounted for 35% of revenue and more than half of operating income last year. According to S&P Capital IQ, the "Watch" segment has grown operating income substantially since 2009. Nielsen also generates a lot of cash from operations -- $949 million over the last 12 months alone, triple what the entire business produced in 2008.

Color me impressed. Mix in a rush of new Twitter data to track and a reasonable valuation -- 21 times trailing earnings, 15 times next year's earnings target -- and I'm compelled to rank Nielsen to outperform in my Motley Fool CAPS portfolio.

Now it's your turn to weigh in. Do you think Twitter makes Nielsen a better investment? Tell us about it in the comments box below.

Watching out for a winner
If Americans reportedly spend nearly 34 hours a week watching television, how much of that time do they spend tweeting about shows? How much money flows to the big networks in the process? We tackle the big questions about investing in the new Golden Age of TV in a new free report titled "Will Netflix Own the Future of Television?" Find out where our experts think the big money will be made when you click here to access your copy now.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2675946, ~/Articles/ArticleHandler.aspx, 8/22/2014 11:51:41 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement