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comScore, Inc. (SCOR)
Investor Day Conference
June 03, 2013 1:30 pm ET
Gian M. Fulgoni - Co-Founder and Executive Chairman
Magid M. Abraham - Co-Founder, Chief Executive Officer, President and Director
Cameron Meierhoefer - Chief Operating Officer
Anne Hunter - Vice President of Advertising Effectiveness Products
Serge Matta - President of Commercial Solutions
Tim Avila - Vice President of Product Marketing
Kenneth J. Tarpey - Chief Financial Officer and Principal Accounting Officer
Jason S. Helfstein - Oppenheimer & Co. Inc., Research Division
Youssef H. Squali - Cantor Fitzgerald & Co., Research Division
Previous Statements by SCOR
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First, I'll keep an eye and make sure the IT system works. We have tested this extensively.
We have Wi-Fi network here. The Wi-Fi network you'll see is marked as guest. The login and password is the same, lowercase xcorscore.
I'll also let you know that the presentation that you'll be seeing today will all be posted to ir.comscore.com today at 5:00, and you'll be able to get them at that point.
A couple of additional things to note. You have an agenda that's part of your packet. You'll also see a little USB drive that has some materials from comScore, some white papers that may be of interest. There's also a QR code on the back of your badge, which you can scan. It will take you to a page where there's some other material from comScore for you to digest.
Other things to note today. We will be going until, I think, about 3:00 and having a 10-minute break, at which time, we'll bring some clients up, who are going to share, after the break, their experience working with comScore. And then after we finish presentations and provide plenty of time for Q&A, we invite you to join us for cocktails. There is a master sommelier, who will be doing what I understand we're calling -- or is called a knowledge transfer on whiskey, so that's something hopefully of interest to you.
All right. There we go. I said all that, right?
You'll be hearing today from senior executives at comScore, some of whom you may know, others are new faces: Gian Fulgoni, our Executive Chairman and Cofounder; Magid Abraham, our Cofounder and CEO; Serge Matta, there in the back, our President of Commercial Solutions; Ken Tarpey, our CFO; Anne Hunter, my colleague who leads our Global Marketing Strategy; Jodi McDermott, who is the Vice President of Product Development for our digital enterprise, our products; and Cameron Meierhoefer, our Chief Operating Officer, sitting over there.
Each of us will speak to you about important aspects we think of the comScore story. And the plan is to talk to you about what we do at comScore and how we do it, then walk through our 3 basic product lines. We'll have a break, as I mentioned, client voices; Ken will discuss finances; Magid will close; we'll do the Q&A and then, as I mentioned, before whiskey.
You're probably familiar with this. I just like to draw your attention to forward-looking statements and Safe Harbor provisions. This will obviously be in the materials posted on our website at 5:00 p.m.
And then also, you'll see in the presentation, in the Financial Review section, the use of non-GAAP measures. I just wanted to call your attention to that detail.
Without further ado, let me hand it over to Gian Fulgoni, Executive Chairman and Cofounder of comScore, to welcome you to Investor Day 2013.
Gian M. Fulgoni
Thank you, Mark. So welcome to our Investor Day. This, as you can imagine, for any company is an important day, and I think especially so for comScore given the position that the company is in and the way that we are capitalizing on the opportunities that the digital revolution is creating. And in that sense, whether you are familiar with the company or whether you're new to the company, I think that today will be somewhat of an eye-opener for you as you see the products and the services that we are either -- either have introduced or are in the process of introducing.
So last week, I was invited to speak at Procter & Gamble's digital day down in Cincinnati. And if I ever needed confirmation of the importance of digital and the opportunities it's creating to attend a day, where we had something like 8 hours of presentations hosted by Marc Pritchard, who's the CMO of Procter & Gamble, where he was making the point that for any company, it's always been true that you have to have the consumer insights and understand the consumer, where the consumer is going. But one could argue that's probably never been as true as it is today given the change that are occurring in this digital world and the rate at which things are changing.
So I thought that it might be interesting to kick off the day with some key points that in a sense [indiscernible] some of the foundation planks of the comScore go-to-market strategy that kind of drives the products that we deliver and how we deliver them.
So here on the Internet, in the U.S., we now have 235 million people who are online. That's a large number, obviously. But I think the more important number here is the amount of time that they're spending on the Internet. They're spending 2 hours and 21 minutes per day. And importantly, put into context, that's equivalent to about 46% of the time that they spend watching television. So if you think of the Internet as a medium, and obviously it's a lot more net sales of a sales channel, it's really, really come of age.
The other thing that's happening that will form the basis of a lot of what you will hear about today is the growth of these mobile devices. And it's the stat that whenever I use this, I can't help but remember, if this device had been available in 1985, it would have been the most powerful computer in the world that you could've bought. And so when you think of that processing power in the hands of billions of people around the world, it really starts, to me, makes me realize the opportunities that exist for marketers to communicate with consumers in a better way.
Here's a stat that, again, I think you might find surprising. 46% of all the Internet time that people spend here in the United States are now spent on mobile devices, mobile being defined here as the smartphone and the tablet. And again, I think that, that's indicative of maybe the challenge and the opportunity for marketers as these devices proliferate.
Video. You'll see and hear about our video offerings, and here are the stats there. 180 million people now in the U.S. in a month will watch at least one video, and on average, they'll watch 200 videos per person. 75 million people in a day today will watch online videos, and they'll see 80 or more video ads.
Another important stat in conjunction with that, that I don't think is often well understood is if you think of long form versus short form video content, long form being originally scripted television shows, that content makes up probably no more than about 5% to 6% of all the videos that are viewed. So the majority of the videos are actually these shorter videos, which present some interesting opportunities for new entrants, and you'll hear about that today.
Search. Today, the Internet Advertising Bureau put out its numbers for online advertising for the first quarter. The number is $9.6 billion, growing at 15% a year, which is about 4x faster than all measured media is spending. And search represents somewhere around 40% of all of that spending.
So I just wanted to put some stats up here to show you how many people are using the Internet to obtain information, 200 million searches, conduct 50 billion combined searches per month. That's 100 searches per person.
And then if you think of the Internet as a sales channel, you've got major changes occurring there. So now we are measuring that if you think of discretionary spending, so take out food and beverage, you've got about $1 in every $10 that the consumer spends in the United States now spent on the Internet, growing also with 15% a year. And if you compare that to consumer discretionary spending in total, about 7x faster growth, again, just illustrating the magnitude of the shift in how fast it's occurring. So the Internet clearly is both a really powerful medium, it's being affected dramatically by mobile, but it's also a really important sales channel.
And this isn't just an issue obviously here in the United States; this is a global issue. And comScore is a global company, and we'll talk about that today. And so the opportunities that we have as the Internet grows and all of its manifestations is really a global opportunity.
So what does that mean? Is that there are 2.4 billion Internet users that's growing at 8% a year. And then the phones grow 1.5 billion smartphones around the world. And actually, the growth there is a staggering 31%. And internally and maybe in a lot of countries, mobile Internet connections allow people to get online way faster than they had to wait for a landline type connection.
The other change related to mobile is tablets, and in the fourth quarter of last year, tablets shipments exceeded desktop computers for the first time. And so, that's affecting everything and creating again opportunities for comScore that you'll hear about today.
And then finally, if you think of big data, which is a moniker that is being mentioned by the media, it seems, every hour, 92% of the world's data was created in just the past 2 years. That's how fast things are expanding. And it's being driven by the explosion in the number of computers, sensors and the drop in computing costs that's occurring.
McKinsey did an interesting study here that I think is relevant to some of the software products that you'll see that comScore introduced. Well, they said that this is, big data, the frontier for competitiveness, innovation and productivity. That's great. But they also pointed out that there is a dramatic shortage of people. We, in the U.S. alone, lack 1.5 billion people who could -- who are needed to handle all of this data. And in that sense, one of the comScore product lines that's very relevant, our Digital Analytix product line, really helps enterprises handle their data, process their data, analyze their data while minimizing the number of data savvy people that are required. And so I think in this particular area here, where maybe comScore, if you think of ComScore's legacy and reputation, if you will, we're probably not as well-known, we hope that will change by the end of the day. I think we're producing some really, really powerful and valuable capabilities for our clients.
So one more slide, and then I'm going to turn it over to Magid. Let me just illustrate to you with one set of numbers, you'll see a lot of numbers today, that's the comScore way, if you will. I want to show you what's happened over just a 3-year period from February of 2010 to February of 2013 in terms of the amount of time that's spent on the Internet by device. This is in total, and if I were to run through it by type of content, you'd see dramatic differences across the content, everything that we are measuring.
So these are comScore numbers. So in a 3-year period, total time spent on the desktop didn't drop despite the advent of mobile devices, although it's affecting certain types of content more than others. Here's the phone, up almost 400% in a 3-year period, and you can see that the total time spent compares very favorably now to the desktop. And then if you put tablets on top of it, and if you add it all up, we're sitting here today with a total time consumption that has doubled in just a 3-year period.
And so I hope with these few stats and my comments that you'll see a couple of things. First of all, the way in which consumers' lives are being transformed by the Internet and all of the ways in which you can tap into the Internet, the power of mobile and the way that the Internet is not just an advertising medium that allows marketers unprecedented efficiencies and effectiveness in terms of reaching their consumers, but the Internet is also importantly a sales channel that is offering marketers a lot of opportunities, but also posting some challenges for some of the retailers, especially the multi-channel retailers with the physical stores. Again, things that are happening that represent challenges for marketers, but for us almost inevitably, when that happens, it represents opportunities to provide services that drive value for the clients.
So those are my few opening comments. I hope that sets a good foundation for the day. And I hope that at the end of the day, you will have an enhanced appreciation for comScore as a company and where we are today and where we're headed.
So with that, let me turn it over to Magid Abraham, our CEO, and he'll take you through his comments.
Magid M. Abraham
Okay. Can you hear me? Thank you, Gian. And welcome, everyone. We really appreciate you joining us today to hear the comScore story and get an update on what we have been doing and the things we've been working on.
So everybody who's familiar with comScore and familiar with how ubiquitous the comScore data is used, whether in the media or by advertising agencies or by customers, by Wall Street, certainly get the idea that comScore is the leader in measuring the digital world. All kinds of stats about the digital world are sourced from comScore.
But in the last 2 years, what we have been doing is working on effecting a transformation, where not only do we do measurement, but we do measurement plus analytics. Not only do we deliver industry information, but we deliver industry information enhanced by client information, rather the other way around, client information and software to use it, enhanced by industry information.
And so we have been architecting a transformation in the company, and I'm happy to say today that the transformation is working, that we see traction and a lot of momentum in the marketplace.
So why is that? I think what Gian showed you earlier in terms of all the growth and all the trends that are happening in digital is one of the fundamental reasons. So businesses now are becoming entirely digital and -- are becoming not necessarily entirely digital, but they have all kinds of ways for consumers to interact with them digitally. And with all kinds of multiple devices, that creates a plethora of data that poses a challenge for people to analyze. And it opens the opportunity for companies like comScore that have the skill sets to provide value-add to be able to have offerings to help the clients leverage the data that they are collecting.
Now we're not just sitting on our laurels and being satisfied with being the leader in measurements. We are taking some of the skills and the strengths that have made us leaders in measurement, and we're applying them to also be leaders in analytics. And I'll explain how those skill sets and unique assets transfer into what we believe is a long-term sustainable advantage.
Everything that you will see that comScore is working on has a multi-platform dimension to it. Platform is a method of access or device or so, tablets, smartphones, a digital radio, a GPS device, anything that can be instrumented is a platform of access, and comScore is in the middle of measuring that. And so that multi-platform provides an unparalleled view of how consumers are interacting with you. And not only are we deploying our measurement expertise, but we are also coupling it and delivering it in a SaaS, software as a service, model that provides attractive characteristics like good revenue visibility, good operating leverage and some free cash flow.
So how do we get here? Back in 2010, as we looked at where we're going, we could have thought that yes, we have achieved a very strong market position in terms of measuring audiences, and the question is, what's next? And as we gazed into the crystal ball, we saw a few things that were good bets that's going to happen, things like where mobile is going to become very important and not only in the United States, but particularly outside the United States.
Another thing that we were hearing all the time is that while search is doing great, but display advertising is still lagging and a lot of companies that advertise for branding purposes are not using the Internet enough. And we, as well as a lot of people, thought that ultimately for digital advertising, to grow and capture its fair share, it needs to be more accountable and it needs to be more transparent. And therefore, we saw a lot of opportunity to not only put the spotlight on measuring audiences, but also on measuring advertising.
Third, we saw that the way we consume videos is changing very fast. So around 3 years ago, you couldn't walk into a Best Buy without seeing walls of TVs all over the place. But those TVs, despite the fact that there were LCDs and digital and all that, it was just the beginning of internet-enabled TVs. But today, if you want to watch a TV program, the majority of the TV programs or any kind of entertainment program, you can watch on your tablet, you can watch on your laptop, you can watch over-the-top, you don't really have to have a classic cable or set-top box set up to be able to watch it. That creates a lot of implications in terms of how you can relate to consumers, how you can reach them and, from our standpoint, how we can measure the audiences and deliver them.