comScore acquires M:Metrics

At the close of business today comScore announced they had acquired M:Metrics for $44.3 million and "the issuance of approximately 50,000 options to purchase shares of comScore common stock to certain M:Metrics unvested option holders."

This is a big acquisition in the mobile space and allows comScore to quickly ramp up their mobile measurement platform.

comScore is a public company traded on the NASDAQ under SCOR. The full press release is below:

FOR IMMEDIATE RELEASE Contact: Andrew Lipsman
comScore, Inc.
312-775-6510
press@comscore.com
COMSCORE ACQUIRES M:METRICS
Acquisition Accelerates Expansion of comScore’s Mobile Solutions,
Cross Media Measurement and Global Footprint
Reston, VA, May 28, 2008 -- comScore, Inc. (Nasdaq: SCOR), a leader in measuring the digital world, today announced the acquisition of M:Metrics, Inc., the recognized leader in mobile measurement. The acquisition makes comScore the immediate leader in measuring the emerging and strategically important mobile Internet market and adds to comScore’s leading position in measuring PC-based Internet usage.

The transaction involves a cash payment of $44.3 million and the issuance of approximately 50,000 options to purchase shares of comScore common stock to certain M:Metrics unvested option holders.

M:Metrics offers three primary measurement products:

• MobiLensTM, a syndicated monthly online survey that captures overall mobile phone usage, including device information, data usage, media consumption and demographic characteristics of a representative sample of more than 40,000 mobile device users. MobiLens is available in the U.S., U.K., Germany, France, Spain, and Italy.

• MeterDirectTM, the industry’s first on-device meter that passively measures the mobile Internet behavior and media consumption of more than 4,000 existing Smartphone panelists. The M:Metrics metering technology is compatible with more than 280 device models. MeterDirect is currently available in the U.S. and U.K.

• M:AdTM, the first competitive tracking service for mobile advertising that continuously monitors clickable display advertising from a broad representative set of mobile Web destinations to reveal leading advertisers across a variety of market segments. M:Ad is currently available in the U.S. and U.K.

Going forward, comScore will increase the size of the metered panel and will offer measurement of combined Internet usage across both PC and mobile-based online access platforms. The combination of the two companies is expected to result in substantial operating synergies, cost savings and enhanced revenue growth by building a larger customer base, combining two highly productive sales forces, and leveraging comScore’s global panel and scalable technology infrastructure.

“With the substantial growth of 3G devices and Internet friendly handsets, we believe we are now at an inflection point in Internet usage on mobile devices,” said Dr. Magid Abraham, comScore’s president and chief executive officer. “Our acquisition of M:Metrics makes comScore an immediate market leader in this space and positions comScore to deliver significant shareholder value as wireless carriers, telecom equipment providers, media companies, advertising agencies, online publishers, and marketers extend their reach into the mobile Internet world.”

“M:Metrics brings compelling products and an established, customer base of over 180 clients. Adding comScore’s capabilities and scale to this mix will significantly enhance the company’s future growth and performance,” continued Dr. Abraham. “We see compelling opportunities to increase the market penetration of M:Metrics’ products within comScore’s customer base of over 950 clients and to cross-sell comScore’s portfolio of products into the wireless industry, including the major carriers and device manufacturers. In addition, we plan to leverage comScore’s panel, technology infrastructure and sales force to expand the metered mobile panel and develop new
offerings that can significantly increase the growth and profitability of M:Metrics’ business.”

In connection with the acquisition, the co-founders of M:Metrics, Will Hodgman, president and chief executive officer, and Seamus McAteer, chief product architect, will join comScore’s management team. “comScore is the ideal partner for M:Metrics and clearly the right company to leverage and build upon M:Metrics’ leadership in mobile measurement. The combined company will provide our customers with a compelling
portfolio of cross media online measurement and analytics.” said Will Hodgman, president and CEO of M:Metrics.

“We are excited about joining comScore and leveraging its vast capabilities, blue chip customer base, and innovative technologies. By combining forces, I am confident we will be the pre-eminent Internet and mobile marketing intelligence provider in the world.”

The acquisition agreement was signed, and the acquisition was closed, today, May 28, 2008, having been approved by the comScore Board of Directors and M:Metrics stockholders. The transaction will be accounted for under purchase accounting rules.
comScore is expecting the M:Metrics business to be profitable on an Adjusted EBITDA basis by the end of the fourth quarter of 2008, and to be a significant positive contributor to Adjusted EBITDA in 2009. M:Metrics’ revenues are currently forecast to be approximately $11 million to $12 million for the full year 2008, and will
contribute $6.5 to $7 million to comScore’s reported revenues for 2008 post-closing. The acquisition also enables comScore to lower its future tax payments by realizing a cash benefit of up to $7 million through the utilization of up to $20 million in M:Metrics net operating loss carry forward (NOLs).

Pro forma financials resulting from the M:Metrics acquisition will be reported in an amended 8-K that comScore expects to file in late July, when comScore also plans to announce its earnings for the second quarter of 2008.

M:Metrics, Inc. was represented by The Jordan, Edmiston Group, Inc., a New York City based investment bank that specializes in the media and information industries.

Conference Call
comScore will host a conference call and simultaneous audio-only webcast on Thursday, May 29, at 8:30 a.m.
(Eastern Time). The conference call can be accessed in two ways:
* By telephone at 719-325-4869, pass code 2461159
* Via a webcast at http://ir.comscore.com/events.cfm.
A replay of the webcast will be archived and available for playback beginning at noon that day, accessible from the same link.

About comScore
comScore, Inc. (NASDAQ: SCOR) is a global leader in measuring the digital world. This capability is based on a massive, global cross-section of more than 2 million consumers who have given comScore permission to confidentially capture their browsing and transaction behavior, including online and offline purchasing. comScore
panelists also participate in survey research that captures and integrates their attitudes and intentions. Through its proprietary technology, comScore measures what matters across a broad spectrum of behavior and attitudes. comScore analysts apply this deep knowledge of customers and competitors to help clients design powerful
marketing strategies and tactics that deliver superior ROI. comScore services are used by over 950 clients, including global leaders such as AOL, Microsoft, Yahoo!, BBC, Carat, Cyworld, Deutsche Bank, France Telecom, Best Buy, The Newspaper Association of America, Financial Times, ESPN, Fox Sports, Nestlé, Starcom,
Universal McCann, the United States Postal Service, Verizon, ViaMichelin, Merck and Expedia. For more information, please visit www.comscore.com.

About M:Metrics
Founded in 2004, M:Metrics is the mobile media authority. As the only research firm to measure the audience for mobile media using on-device metering and the world’s largest monthly survey of mobile users, M:Metrics provides the most accurate metrics on actual mobile content consumption by applying trusted media measurement methodologies to the mobile market. M:Metrics’ monthly syndicated data service gives clients the critical insights and intelligence required to inform smart business strategies and the competitive benchmarks needed to evaluate the performance of competitors and partners. M:Metrics services are used by more than 180 clients, including global leaders in the mobile, advertising, technology and consumer goods industries such as Verizon, Vodafone, Microsoft, RIM, FOX, CBS, BBC, BMW, Samsung,
Palm, Qualcomm, Ericsson, O&M, and JWT. Prior to being acquired by comScore, M:Metrics was a private, venture-funded corporation headquartered in Seattle, with offices in San Francisco and London.

Non-GAAP Financial Measures
This release includes a reference to (but does not use) a non-GAAP financial measure called "Adjusted EBITDA", which comScore defines as net income plus the (benefit) provision for income taxes, depreciation, amortization of intangible assets resulting from acquisitions, stock-based compensation, revaluation of preferred stock warrant liabilities, less interest income (expense), net. comScore believes that Adjusted EBITDA is an important indicator of the company’s operational strength and the performance of its business because it provides a link between profitability and operating cash flow. Adjusted EBITDA is also widely used by investors and analysts as a supplemental measure to evaluate the overall operating performance of companies in comScore’s industry.

comScore’s management also uses Adjusted EBITDA extensively as a measure of operating performance because it does not include the impact of items not directly resulting from the company’s core operations. Moreover, comScore’s management uses the measure for planning purposes, to allocate resources and to evaluate the
effectiveness of the company’s business strategies and management’s performance.
Whenever comScore uses Adjusted EBITDA, it provides a reconciliation of Adjusted EBITDA to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial
measure.

Cautionary Statement
This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, statements made with respect to: annualized 2008 revenue from the M:Metrics acquisition; the amount and availability of net operating losses to reduce future tax payments; anticipated synergies and other benefits resulting from the acquisition merger with M:Metrics and the timing thereof; and the plans, strategies and objectives of management for future operations, including planned integration activities and the timing thereof; the positive contribution of the acquisition to comScore’s Adjusted EBITDA; comScore’s ability to grow its existing customer base and develop new products; the expected strength of comScore’s business and client demand for comScore’s products; the future quality of client relationships and resulting renewal rates; expectations of customer growth; expectations of international sales growth; assumptions regarding interest rates and effective tax
rates; and forecasts of future financial performance, including related growth rates and components thereof, and assumptions related thereto.

The forward looking statements included in the Press Release relate to future events or our future financial conditions or performance, Words such as “forecast,” “expected,” “should,” "will," "are," "provide," "continue,"
"remain," "anticipates" or the negative thereof or variations thereon and similar expressions are intended to identify forward-looking statements. These forward-looking statements inherently involve certain risks and uncertainties, although they are based on our current plans or assessments that are believed to be reasonable as of the date of this press release. Factors that may cause actual results, goals, targets or objectives to differ materially from those contemplated, projected, forecast, estimated, anticipated, planned or budgeted in such forward-looking
statements include, among others, the following possibilities, in no particular order: the business of M:Metrics not being integrated successfully, or such integration taking longer or being more difficult, time-consuming or costly
to accomplish than expected; the failure to realize revenue synergies and cost-savings from comScore's acquisition of M:Metrics or delay in realization thereof; difficulties and delays in the further development and marketing of M:Metrics products and technologies; final determinations under GAAP of acquisition related costs, equity-based compensation expense, purchase price allocations and the impact of the loss of deferred revenues on a goingforward basis; limitations under applicable tax laws on the sources of income with respect to which the NOLs are
available for offset, the amounts of the NOLs available for use in any given year, the useable life of the NOLs, and any other limitation on the use of the NOLs; the early stage of the market for digital marketing intelligence and the rate of development of such market; comScore’s ability to manage its growth; the rate of development of the Internet advertising and eCommerce markets; comScore’s ability to effectively expand sales and marketing; comScore’s reliance on subscription-based revenues; comScore’s ability to retain existing large customers and obtain new large customers, including with respect to M:Metrics; continued growth of the Internet as a medium for commerce, content, advertising and communications; inability to sell additional products and attract new customers; dependence on growth of international operations; product obsolescence with technological developments; volatility of quarterly results and analyst expectations; comScore’s history of losses and the risk of future losses; and comScore’s limited operating history.

For a detailed discussion of these and other risk factors, please refer to comScore’s Annual Report on Form 10-K for the period ended December 31, 2007 and from time to time other filings with the Securities and Exchange Commission (the “SEC”), which are available on the SEC’s Web site (www.sec.gov).

Stockholders of comScore are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date such statements are made. comScore does not undertake any obligation to publicly update any forward-looking statements to reflect events, circumstances or new information after the date of this
press release, or to reflect the occurrence of unanticipated events.

How to fix Twitter...my two cents.

In the last year Twitter has raised over $20 million dollars, yes that is $20,000,000 US Dollars, but what do they have to show for it? The interface has remained the same for the most part and the outages continue to come at an increasing pace. So why do new users continue to sign-up and old users continue to actively utilize the service? Well, frankly there is no other solution that is comparable at this time. Friendfeed is coming close, but doesn't have the person-to-person capabilities and IM/SMS connections that Twitter does.

I am beginning to question what Twitter is doing with the money it has raised. They obviously are not putting enough of it towards building a scalable architecture and if I were an investor I would question the direction they are heading. While they will always have users, it will not take long before a large majority of the heavily active users begin rethinking their use of the service.

I know that some people will bitch saying that it is a free service and what should I expect. While that is true to some extent, it is not the point. The point is that if Twitter is going to build a revenue model around its service at some point in time, they need to show the world they are capable of delivering a reliable service and that is just not the case at this point in time. As outages continue to occur at an ever increasing pace the press associated with these outages will continue to hurt Twitter's chances of showing potential advertisers or any other possible revenue sources that they can succeed.

Twitter is a great service and there is obviously a "need" for it (shown by the mere number of users and Tweets sent on a daily basis), but just how long will it remain at the top of its game? While I am sure there are many smart people working on both development and infrastructure at Twitter, I am beginning to question if there is any true direction in to their madness. It seems they have a habit of implementing changes that they perceive as "routine" without a thorough test policy and it also appears that there is no change control involved in their policies to revert should something go wrong. Like any other web application or website something will inevitably go wrong when you make a change, there is no such thing as "routine" in the IT world. Databases will fail, app servers have a mind of their own sometimes, and developers make typos that only some user in the middle of nowhere will happen to enter the specific sequence of commands that finds that one little typo.

My recommendation to Twitter (and if they have already done this then I think they need to do a big reassessment) is to step back for a minute, stop all development and infrastructure changes, and do the following:

The Twitter 12-step Program:

1. Make sure everything is completely documented with your architecture.
2. Hire a seasoned change control manager. One that understands technology, computing-on-demand, databases, and web applications (yes these people exist). They do not have to be an expert in those areas, but they need to understand how it all works together.
3. Hire several test engineers.
4. Build a test environment that is to scale of your production environment.
5. Have the change control manager create a workflow for implementing even the simplest of changes (yes even correcting a typo on the About Us page).
6. Create a 3 hour weekly outage window for implementing all changes (you can even have two outage windows a week). If a change can not be implemented in that time period notify users ahead of time of the exact length.
7. Stick to your outage window. If it gets to be 30 minutes left in the window and something is not going as expected it is time to rollback and go back to the drawing board to determine what went wrong. DO NOT CONTINUE WITH THE CHANGE AT THIS POINT.
8. Emergency changes can be done outside of the windows, but the same policies and attention to detail must be followed. Believe me I know that when an emergency pops up that everyone wants to rush to fix it, but you need to have a command structure and change control policy in place for even these situations. Again, a good test engineer and change control manager can manage these situations.
9. Look at other scalable architectures (i.e. Google, Facebook, MySpace, etc...). See what they are doing with their infrastructure. There are plenty of scalable platforms out there and there is no need to reinvent the wheel entirely when it comes to this.
10. Document everything. Even what you may think is the most remedial or minute detail, those are the ones that will come back and bite you in the ass. The guy you hire tomorrow is not going to know the difference between what you think is a ridiculous detail that no one will ever need to know.
11. Don't be afraid to take input from outside sources. With as many outages as Twitter has experienced over the last year there are plenty of blogs and other websites with ideas for creating scalable Twitter infrastructure. While I know everyone becomes a developer or system engineer in a time of crisis (I am kidding of course, but everyone likes to armchair quarterback - hey, what am I doing here), I would be willing to bet that over half the ideas floating around are viable solutions to the problem.
12. Finally... Communicate with your users. The key to surviving as a business is keeping your customers happy. Your users are your customers. Let them know what is going on. Most people are very understanding if you just communicate with them. Let them know what you are doing to address the situation. Don't just communicate when there is a problem. Let them know what your plans are to the extent you are able to. Let the users know what your change window(s) are and not the day of or day before.


Yes, I understand that no test environment will simulate a production environment 100%, but you can build it so that the vast majority of your issues will be seen. A good test engineer and change control manager working together can simulate just about any environment. I managed a network operations center for a large ASP that hosted many large scale e-commerce sites across 4 worldwide datacenters, and while we would occasionally have problems, we did not have them at the interval that Twitter does. Why? Because we followed the steps listed above.

Steve Ballmer gets Egged!

This is classic. At a speech today at a university in Budapest, Steve Ballmer (CEO of Microsoft in case you didn't know) had 3 eggs thrown at him by a student in the audience. The student claimed that Microsoft had stolen money from the Hungarian people and was wearing a shirt with "Microsoft Corruption" written on the back. Luckily (or unluckily, whichever way you view Microsoft) Ballmer was able to hide behind the podium and avoid being hit. My guess is that the student is actually upset at the problems with Vista and the money Microsoft is stealing from end-users by continuing to sell a product that is at best still a Beta version.

Anyway, YouTube has the video.

This week in mobile... 5/19/08

Well after a hectic week last week we are back in the office. Today is filled with development and digging out from the paperwork overload from the past week. This past Thursday we attended the PopSignal event in Boston. On Friday our COO Colin and myself met with Christine Perkett, Greg Wind, and Stephanie Trussell from our PR agency, PerkettPR, for a "messaging session" to go over our current plans, marketing/PR strategy, and to ensure our corporate, solution, and industry messages are clear. Looking forward to working with them and excited about the direction we are headed in. Now it is back to the office for the week to work on development of our new solution and prepare for additional investor meetings and presentations.

In reviewing the industry news this morning I did find some interesting links to share with everyone:

Rolling Stone Magazine selected SnapTell to connect print ads to the mobile web SnapTell has been making some excellent strides in the Physical World Connection (PWC) market and by the looks of it are leading the industry right now with their solution.

Nielsen Mobile highlighted that 25% of subscribers recall and over 50% of subscribers respond to ads from restaurants in the mobile space. McDonalds, Hardees, and Starbucks have all conducted mobile campaigns and have found it to be an excellent way to reach their target demographics.

Power96, a Miami radio station, reports that over 4 million messages were received in their "High School Spirit" contest powered by HipCricket.

TechCrunch vs. Wired

Wow! The argument between TechCrunch and Wired has been heating up over on Twitter. If you aren't familiar with the situation, last week The Washington Post and TechCrunch announced that TechCrunch articles would now be syndicated on the Post website in the Technology Section. Wired Magazine quickly jumped on the story saying that it creates a conflict of interest because Mike Arrington (founder of TechCrunch) has, and continues to, invest in companies that are covered on TechCrunch.

I will give Mike credit as he is usually pretty vocal about situations like this that he has kept the argument off his blog while Wired continues to cover it on their website. It is curious to me at this point as it is beginning to appear as if Wired is almost jealous of the arrangement. Today Wired had a blog post that quoting the Washington Post Standard and Ethics document. In there it basically states that the Post has "pledged to avoid conflict of interest or the appearance of conflict of interest, wherever and whenever possible. We have adopted stringent policies on these issues, conscious that they may be more restrictive than is customary in the world of private business." However, while linking to the document, the Wired left out a couple key paragraphs clarifying the Post's stance. In particular the following paragraph is key to the situation:

"We work for no one except The Washington Post without permission from supervisors. Many outside activities and jobs are incompatible with the proper performance of work on an independent newspaper. Connections with government are among the most objectionable. To avoid real or apparent conflicts of interest in the coverage of business and the financial markets, all members of the Business and Financial staff are required to disclose their financial holdings and investments to the assistant managing editor in charge of the section. The potential for conflict, however, is not limited to members of the Business and Financial staff. All reporters and editors, wherever they may work, are required to disclose to their department head any financial interests that might be in conflict or give the appearance of a conflict in their reporting or editing duties. Department heads will make their own financial disclosures to the managing editor."

So basically what Wired is saying is that in order for ANY financial or business reporter to NOT have a conflict of interest they cannot have any investments (stock, mutual fund, 401K, etc...) in any company they write about. While this may be an extreme viewpoint since I would bet that Mike's investments are much more significant then that of the average reporter, but it is the point that matters. If you are going to apply a rule to one reporter you would need to apply it to all reporters regardless.

My second argument to Wired's philosophy would be that Mike nor any of the TechCrunch writers work directly for the Post. The Post does not try to pass off TechCrunch articles as ones written by Post reporters and clearly marks each article with the TechCrunch logo and lists them under their partner section.

With mainstream newspapers looking to increase readership I believe we are going to start seeing more and more of these type of agreements between bloggers and papers. As this occurs this question of "conflict of interest" I am sure will arise again. I do not believe these agreements are a conflict of interest AS LONG AS there is disclosure. Mike openly discloses his investments and typically tries to have other TechCrunch reporters cover stories surrounding companies he has or is invested in.

So does the Post consider this a conflict of interest? Guess we will have to wait and see as they have remained quiet on the situation so far; however, TechCrunch's articles continue to run on their website. Personally I hope they continue to run TechCrunch articles.

UPDATE: TechCrunch Response: "Ok, Wired, Let's Do This."

Links & Stuff

This is going to be a quick post as we will be on the road for the majority of the week around here. Besides our normal meeting/presentation schedule we will be heading to Boston on Thursday for two days. On Thursday evening we will be attending the PopSignal event as well.

As you may already know, on May 1 we attended the CrunchGear event in NYC and PerkettPR has a good review of the event on their blog as well.

As for this past week we saw the acquisition of Mowser by dotMobi and the Sprint/Clearwire WiMAX merger.

Everyone have a good week and as always you can keep up with us on Twitter.

dotMobi buys Mowser

Terms of the deal are still unknown but this is definitely a fitting acquisition. I still believe the technology behind Mowser is invaluable and a purchase by dotMobi only ensures that the technology will live on.

dotMobi buys Mowser