Jupiter to Join Forces With Media Metrix
Media Metrix Inc. agreed Tuesday to buy Jupiter Communications Inc. for about $342 million in stock, creating one-stop shopping for those who need to know how many people are using the Internet and how the Web is changing the way consumers and businesses interact.
The two companies, neither of which is profitable, are among the leaders in their respective fields. Media Metrix sells Internet usage data to advertising agencies, media companies and Internet competitors. Jupiter provides forward-looking research to Internet players.
The deal is being driven in part by increased pressure on Internet-related companies to become profitable, industry experts said. As capital markets dry up, competitors are rushing to build revenue and turn a profit. On Monday, two unprofitable online grocers, Webvan Group Inc. and HomeGrocer.com, announced that they would join forces.
Media Metrix Chairman Tod Johnson, who would head what will become Jupiter Media Metrix, said the deal would create immediate “cross-selling opportunities, joint product development and further international expansion.”
Some industry analysts questioned how the combination would play out.
“We’re not sure right now where the strategic synergies are,” said Greg Kyle, president of Pegasus Research, a New York-based firm. “It seems to be a case of one plus one equaling a little bit more than two. There are bottom-line savings from consolidation, but as for [increased revenue] we’re not sure at this point whether they can deliver on that.”
The two companies are responding to an ever-increasing demand for reliable data and forecasts about online traffic. International Data Corp. estimates that the number of Web users will grow to 500 million by 2003, up from 142 million users in 1998.
It’s unclear whether Tuesday’s deal will spark a wave of mergers and acquisitions in the Internet consulting and research industry. Jupiter, founded in 1994, competes head-to-head with Forrester Research as well as with such consulting firms as GartnerGroup, which is now providing Internet commerce research.
Media Metrix competes against Nielsen/NetRatings, a company that’s part-owned by Nielsen Media Research, the nation’s leading television audience measurement service. Media Metrix faces potential competition from France’s NetValue, which provides European Internet usage data and is now attacking the U.S. market.
Jupiter Media Metrix, which would be based in New York, would have more than 700 employees, 1,700 customers and, based on Tuesday’s stock closing price, a market value of about $1 billion.
Jupiter shareholders would receive 0.946 share for each Media Metrix share held if the deal clears regulatory reviews and is approved by shareholders at both companies. Media Metrix shares fell by $4.88 to $23.38 on Tuesday, while Jupiter’s shares fell by $1.94 to $21.06, both on Nasdaq.
Media Metrix lost $21.9 million on $20.5 million in revenue last year. Jupiter broke even during the first quarter, but reported a $630,000 net loss on $38 million in 1999 revenue. Jupiter generates a third of its revenue from highly publicized Internet conferences.
Both companies have used acquisitions to expand their businesses. Jupiter paid $50.6 million in cash and stock for Internet Research Group and Net Market Makers Inc. Media Metrix in October paid an estimated $65 million in stock for AdRelevance.
Although the deal could produce the synergies predicted by Johnson, industry observers say the two operating units still must make their own way in the hotly competitive Internet arena.
“The biggest issue will be who has the best research, the most comprehensive research,” said Joe Mandese, editor of The Myers Report, a New York-based media industry newsletter.
“Users of this kind of data will continue to find the best pockets of research. The fact that one company can now build it out and package it is nice, but it still comes down to which research is the best.”
