Facebook Partners Nielsen to Track Online TV Viewership - Analyst Blog

By Zacks Equity Research,

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Reportedly, Facebook ( FB ) has entered into a partnership with leading TV ratings measurement company, Nielsen Holdings NV ( NLSN ) in order to measure online viewership.

The association between Facebook and Nielsen dates back to 2010 when they had partnered to collect data about which online advertisements were watched in similar fashion from desktops and laptops. However, since mobile tracking is more difficult, it took a while to start.

Per the alliance, going forward, whenever a Facebook user watches a TV show on his mobile or tablet, the social media giant will automatically come to know about it. This tracking will be enabled only on those devices that are logged into Facebook. The company will then scan the demographic statistics of the particular user and send the data to Nielsen.

This, in turn, has raised privacy concerns in the U.S. However, Facebook has refuted all of these allegations and claimed that the identities of individual users will not be disclosed as per the terms of this alliance.

Per the deal, the information that Facebook receives will be in the form of a unique code. The information that Facebook supplies to Nielsen will be in an aggregate so that the identities of the individuals are not revealed.

This is not the first time though that the social media giant has been accused of privacy breach. Recently, Facebook drew a lot of criticism when the results of an experiment conducted by it in 2012, to influence the moods of its users, were revealed in public.

Facebook's initiative to match TV shows that Americans like alongwith their demographic stats are intended to help marketers create better-targeted and more-efficient advertisements. This will help the company to fetch more ad revenues going forward.

Per EMarketer, the U.S. market for digital-advertising is set to grow 42.0% in 2014 to $5.96 billion. According to Gartner, ad market spending is expected to hit $42.0 billion in 2017.

This partnership is not Facebook's first attempt to access online video stats. Recently, it had acquired LiveRail, a startup that specializes in the delivery of online video ads to desired demographics. We believe that Facebook's strategy of acquiring startups to target ads will beef up ad revenues going forward.

As Facebook's ad business matures, top-line growth is expected to suffer. Facebook's rapid pace of acquisitions is also expected to weigh down on profitability and cash balance in the near term. Intensifying competition from the likes of Google ( GOOGL ), Yahoo ( YHOO ) and Twitter ( TWTR ) remains a major concern.

Nevertheless, we believe that Facebook's growing mobile user base, Instagram's increasing popularity, frequent launch of new products and international expansions will boost the company's top line and profitability going forward.

Currently, Facebook has a Zacks Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: FB , NLSN , YHOO , TWTR , GOOGL

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