During the Great Depression, Mr. Nielsen developed a first-of-a-kind service that tracked the retail sales of grocery and drugstore products. The Nielsen Food & Drug Index was designed to enable marketers to measure their sales on a brand-by-brand basis against those of their competitors. Mr. Nielsen coined the term "share of market" to describe this yardstick and sold it, beginning in 1933, as a resource to help manufacturers make sound marketing decisions.
Mr. Nielsen believed that accurate information could be extrapolated from small samples and that by taking sample measurements on an ongoing basis, marketers could form a picture of how their sales and competitive positions stood at any moment and how they changed over time. At first, manufacturers were skeptical because they lacked knowledge about statistics and statistical methods, but enough signed on to keep Nielsen afloat.
In 1936, Mr. Nielsen acquired and patented the Audimeter, which recorded the time radios were turned on and off and where the radio dial was set on a minute-by-minute basis. Beginning in 1942, Nielsen added radio measurement to its catalog of tools, calling the service the Nielsen Radio Index.
While Nielsen had been the first entrant in the food and drug measurement industry, the company had competition in radio listener measurement. In 1935, C.E. Hooper Co. introduced its Hooperating system. That was soon joined by the Crossley rating system, which was devised by the network-supported Cooperative Analysis of Broadcasting organization; by the late 1930s, it surpassed Hooperatings.
Both used relatively simple sampling methods based on telephone calls and personal interviews, and, while Nielsen's system tracked shifting listener patterns over the course of a day or an evening period, it was more expensive than either the Crossley or Hooper services, which remained the preferred methods into World War II.
When Nielsen began to offer national ratings in 1946, the networks abandoned CAB's Crossley service. In 1950, Nielsen bought Hooper's operations and became the leader in radio measurement. At that time, Nielsen had 1,500 Audimeters in U.S. households, claiming coverage of 97% of the domestic market.
In 1950, Nielsen moved into TV audience measurement, using an adaptation of the Audimeter, and almost immediately won 90% of the market. Families equipped with Audimeters supplemented that information by keeping viewership diaries.
Among the statistics that Nielsen tracked in its TV ratings reports were the number of TV households tuned to a show (total and average) and the percentage, or share, of households watching TV that were tuned to a given program.
Some of the company's services included the Nielsen Television Index, which measured national network ratings; the Nielsen Station Index, which tracked ratings in designated market areas; the Nielsen Syndicated Service, which monitored syndicated program ratings published in weekly "Pocketpiece" reports sent to subscribers; and the Nielsen Homevideo Index, which rated cable networks and superstations.
The quiz show scandals of 1958 and 1959 that rocked the networks also affected Nielsen's business. The U.S. Department of Commerce launched an investigation into whether Nielsen had tampered with the shows' ratings. The Commerce Department's probe led to another one by Congress, which looked into the accuracy of ratings measurement in general and whether ratings measurement companies exerted undue influence over TV programming decisions.
All that investigative activity was one factor behind Nielsen's launch of the Nielsen Media Service in 1961. The new offering monitored the readership of magazines and magazine advertising, which Nielsen believed to be a sector that was not of much interest to Congress.
In 1963, Congress again began to probe Nielsen and its rivals, this time uncovering inconsistencies in the way Nielsen measured ratings. As in 1959, Nielsen and the other ratings companies were blamed not only for inaccuracy—a charge that had some validity—but also for creating a wasteland of poor-quality TV programming.
On the accuracy question, investigators found Nielsen's sample to be weighted toward lower-middle-income families who had enough money to buy a TV set but valued the small monthly stipend the company paid families for their participation. The congressional report argued that Nielsen employees had not taken the time to compose a more demographically balanced sample but had simply chosen families who agreed to participate.
In 1964, Nielsen stopped selling radio ratings. In the 1970s, Nielsen replaced its original Audimeter with the Storage Instantaneous Audimeter. The improved device reduced to 15-minute periods the TV set-usage information sent back to Nielsen.
Food and drug research
Despite the attention devoted to its media measurement services, 80% of A.C. Nielsen Co.'s revenue during the 1960s and 1970s came from retail food and drug research. During those decades, Nielsen's consumer products tracking services grew, with increases in both the number of clients served and the number of information management products offered.
In 1963, Nielsen began measuring sales at mass-merchandiser chains. In 1966, it added a service that tracked warehouse withdrawals and another that handled couponing operations.
The development of Universal Product Code scanners at retail stores in 1977 assisted Nielsen's business activities significantly, allowing it to collect information on consumer purchases at the cash register as they occurred. In 1980, the company introduced its national Scantrack service, which tracked specific market trends.
Mr. Nielsen retired from the A.C. Nielsen board in 1976 after a series of strokes and was succeeded by his son, Arthur C. Nielsen Jr., who had assumed the position of president in 1957. By the time the elder Mr. Nielsen died in 1980, at the age of 83, the company had grown to $383 million in annual revenue and had subsidiaries in 23 countries, offering 80 different services. TV accounted for only 10% of revenues.
In 1984, the younger Mr. Nielsen sold A.C. Nielsen Co. to Dun & Bradstreet, which acquired the company in a stock deal valued at $1.3 billion. After the acquisition, Dun & Bradstreet split its market research operations into three units: A renamed ACNielsen oversaw global packaged-goods tracking and media measurement in 15 countries, and was the largest of the three; Nielsen Media Research monitored TV ratings in the U.S. and Canada; and IMS International became a leading provider of market research data to drug companies.
Under D&B, ACNielsen entered into several marketing and technological partnerships and continued to introduce new products. In 1987, Nielsen created NPD/Nielsen, a joint venture with market researcher NPD Group to track customer response to promotions in local markets. The following year, Nielsen purchased Logistics Data Systems, developer of Spaceman, a software package used by retailers to manage shelf space and other in-store display areas.
In the 1990s, many of ACNielsen's product introductions were designed to allow its customers to analyze results at personal computers in their own offices rather than in printed report form. ACNielsen also introduced other services, such as a modeling tool for financial firms targeting consumers called WealthWise and a service called ScorePlus, which tracked product-use data and demographics for specific geographic areas.
ACNielsen's Spotlight system, launched in 1991, monitored volume and share changes in detail on a brand-by-brand basis. In 1993, ACNielsen became the first company in the industry to provide scanning information from warehouse clubs. Also in 1993, ACNielsen created an Efficient Consumer Response division to help clients increase efficiencies in sales and distribution. In 1994, Nielsen Solution Partners brought ECR to international markets.
The year 1995 was a turbulent one for Nielsen, especially in its market research division. The company was in the midst of a competitive and legal battle with Information Resources Inc., Nielsen's chief rival; IRI had prompted a U.S. Justice Department probe into Nielsen's syndicated sales tracking services and whether its marketing tactics were anticompetitive. IRI argued that it was prohibited from entering markets where Nielsen was active.
Throughout the early and mid-1990s, the two companies engaged in a price war. Many of Nielsen's clients had moved to IRI, which prompted Nielsen to price its services aggressively in order to reacquire some of that business. Both IRI and Nielsen suffered financially from the rivalry, but ACNielsen won back some of its clients.
In 1994, Nielsen's worldwide revenue grew by just 3% and the following year Nielsen's U.S. business lost $50 million, although its global operations started to perform better. Within a year, however, Nielsen's U.S. operations recovered.
In 1996, Dun & Bradstreet spun off ACNielsen and another subsidiary, Cognizant Corp., which focused on market research for the healthcare and TV industries. Nielsen Media Research went with Cognizant and retained the U.S. and Canada TV ratings services with which the Nielsen name most often is associated; in 2000, it became a subsidiary of Dutch conglomerate VNU.
In 1997, Nielsen, which had gone public and was based in Stamford, Conn., began cost-cutting to streamline its international operations while boosting its acquisition activity to bolster its international business. As of 2000, ACNielsen had more than 9,000 clients in 100-plus countries, and in February 2001, ACNielsen was acquired by VNU, putting it back in the same corporate family with Nielsen Media Research.