Comscore Inc (SCOR) 2010 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter 2010 comScore, Inc.

earnings conference call.

My name is [LaMita], and I will be your operator for today.

(Operator instructions).

I would now like to turn this conference over to your host for today's call, Mr.

Kenneth Tarpey.

Please proceed, sir.

Thank you very much.

Good afternoon, and welcome to comScore's earning call for the first quarter of 2010.

Again, I'm Ken Tarpey, the CFO at comScore.

On the phone with me today is Magid Abraham, comScore's President, CEO and Co-Founder.

Before we begin, please allow me to read the following disclaimer regarding our use of forward-looking information and non-GAAP financial measures.

During the course of today's call as well as during any question-and-answer periods that may follow, representatives of the Company may make forward looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934 regarding future events or performance of the Company that involve risks and uncertainties including, but without limitation, the expected strength of comScore's business; expectations as to the growth and composition of comScore's customer base and renewal rates; expectations regarding the impact and benefits of particular lines of business and products; expectations regarding comScore's acquisition of ARSgroup; assumptions regarding tax rates and net operating loss carry-forwards; forecasts of future financial performance for the second quarter and the full year 2010, including related growth rates and assumptions; and expectations regarding the potential use of a universal shelf registration statement filed earlier today.

Such statements are only predictions based on management's current expectations.

Actual events or results could differ materially from those predictions due to a number of risks and uncertainties, including those identified in the documents comScore files from time to time with the Securities and Exchange Commission.

Those documents specifically include, but are not limited to, comScore's Form 8-K filed earlier today relating to this call and comScore's Form 10-K for the period ending December 31, 2009.

We caution you not to place undue reliance on any forward-looking statements included in these presentations, which speak only as of today.

We do not undertake any obligation to publicly update any forward-looking statements to reflect new information after today's call or to reflect the occurrence of unanticipated events.

In addition, we may also reference certain non-GAAP financial measures in the course of our presentation.

You will find in our press release and on our Investor Relations website a reconciliation of non-GAAP financial measures discussed during today's call to the most directly comparable GAAP financial measure.

The link to our investor relations website is ir.comscore.com, and our results are posted under Press Releases.

We also announced today that comScore has filed a universal shelf registration statement on Form S-3 earlier this afternoon.

The shelf registration statement is meant to provide the Company with the opportunity to raise capital from time to time in the future, depending on the favorability of market conditions and the Company's needs for additional capital.

The registration statement has been filed with the SEC but has not yet become effective.

For further details, we refer you to the press release that announced the filing issued earlier today for any questions that you may have regarding the shelf registration statement at this time.

Neither the press release nor this presentation shall constitute an offer to sell or the solicitation of an offer to buy the securities identified in the registration statement, nor shall there be any sale of the securities identified in the registration statement where such offer, solicitation or sale would be unlawful prior to registration or qualification.

With that, I'd like to turn the call over to Magid.

Thank you, Ken, and thank you for joining us on this conference call.

We are delighted by what I consider to be an excellent quarter, reflected in both quantitative metrics and a qualitative perspective on the marketplace.

Revenue in the first quarter was $36.1 million, up 18% from a year ago and 7% sequentially.

Adjusted EBITDA in the first quarter was $6.8 million, and both revenue and adjusted EBITDA were above the high end of our prior guidance.

Not only were our first quarter results ahead of expectations, but our strong momentum and improved industry conditions gave us the confidence to raise our full 2010 guidance, with revenue growth now expected to be in the range of 24% to 28%, up from the prior guidance of 21% to 25%, all while maintaining EBITDA margins at the same levels we experienced during 2009.

The stronger business environment we sensed late in the fourth quarter and so far this year has been confirmed in a recent IAB report on Internet advertising revenue that showed that while overall Internet ad spending was down in 2009 over 2008, Internet ad revenue hit a record level in the fourth quarter of 2009, with the highest sequential revenue increase since the fourth quarter of 2005.

It is important to note the strong performance by display advertising, which showed a sequential increase of 21% in the fourth quarter of 2009.

Let's now turn to some highlights of the quarter -- strong revenue, adjusted EBITDA and adjusted EBITDA margin growth; 76 net new customers in the quarter, 63 of which are organic additions and 13 are new customers from ARS; revenues from existing customers up 20% versus year ago; the rebound in project revenue to a record of $5.2 million; 17% growth in subscription revenue and deferred revenue.

Finally, the metric I am most happy about is a record free cash flow level of $13.1 million, a 161% increase (inaudible) to the fourth quarter of 2009.

We attribute these healthy results to a better market environment, sound strategy and good execution.

Our investment in developing Media Metrix 360 in 2009 is now paying multiple dividends -- one, with new customers; two, with higher client satisfaction that can lead to higher upsells; three, with more addressable market segments; four, with better mobile coverage; and five, with a stronger offering in international markets.

We believe we are still in the early phases of reaping those dividends, and, in addition, our strategic focus on advertising effectiveness for the last two years has served us and our clients well.

This focus will only be stronger and will translate into even more compelling solutions as the year progresses.

Organizationally, we have added strong outside talent with a new CPO, Chief Product Officer, Senior VP of Human Capital and a Vice President of Cross-Media Measurement.

These additions are coupled with a systematic effort to scale comScore and enable it to handle a new wave of growth opportunities.

The integration of the Certifica acquisition has been successful and is already bearing fruit in Latin America.

The integration of ARS is progressing well, whether from an organizational, technology or product standpoint.

I will quote one very important ARS client as saying, "I have been doing this for a long time and have seen a lot of acquisitions.

I can say with confidence that I have never seen an integration come together this well and this fast in its ability to meet our needs.

I need to congratulate you all on a job well done."

Speaking of acquisitions, we mentioned on the fourth quarter earnings call that we are looking at a number of acquisitions going forward in 2010, with a goal of expanding our international business; of adding new technologies and capabilities which we can offer our existing customers; of bolstering our position in mobile measurement and in other cross-media measurement, including digital TV and online video.

And if we complete acquisitions that we are currently evaluating we would expect to finance those transactions in cash, leveraging our existing balance sheet and putting our cash to work to grow the company and support our key strategic initiatives.

We have also announced earlier today a shelf filing enabling us to access up to $100 million in capital.

The filing is intended to give us strategic flexibility in the future, although we have no immediate plan to raise capital under the universal shelf.

In summary, we are very pleased by our results in the quarter, our continued momentum in the marketplace, and our strategic roadmap for growth.

Now I'll turn the call over to Ken for a more detailed financial discussion.

Thank you, Magid.

Revenue in the first quarter was $36.1 million, up 18% year over year and 7% sequentially, above our guided range.

With total revenue, subscription revenue in the first quarter was $30.9 million, up 17% year over year and 6% sequentially.

Subscription revenue represented 86% of total revenue, consistent with recent quarters.

Project revenue was $5.2 million, a record level for comScore, and was up 27% from the first quarter of 2009 and up 13% from the fourth quarter.

Renewal rates in the first quarter were within our historical range of 90+%.

Revenue from existing customers was up 20% year over year in the first quarter, to $32.3 million, and represented 89% of total revenues.

Revenue from new customers makes up the balance of the revenue.

We netted 76 new customers in the first quarter, with 13 of those representing customers acquired through the ARSgroup acquisition who were not already comScore customers.

Excluding ARS, we added 63 new customers, our highest level in almost two years.

International business represented 17% of our revenue in the first quarter and benefited from our Certifica acquisition in the fourth quarter of 2009.

Our top 10 customers represented 27% of revenue in the first quarter, which was consistent with the past few quarters, with one customer added to the top 10 ranks as a result of our ARS acquisition.

And we again have one 10+% customer based on revenue in the quarter.

Now turning to expenses in the first quarter, gross margins were 71.3%, compared to 67.2% in the first quarter a year ago.

Our total operating expenses were $34.8 million in the first quarter, including the full impact of our Certifica acquisition but only a partial impact from our ARSgroup acquisition, since that deal closed in late February of this year.

Other income and expense in the first quarter included $114,000 net.

Approximately $96,000 was due to interest income.

We also had a $117,000 loss due to foreign exchange effects.

GAAP pretax income was $1.3 million in the quarter, compared to $1.5 million in the first quarter of 2009 and above our guidance range.

The decreases compared to 2009 resulted from lower interest income, the acquisition costs in 2010 and a negative foreign exchange impact in the first quarter 2010.

Our effective GAAP income tax rate for the first quarter was 82%, while our first quarter cash tax rate was 20%.

Our GAAP income tax rate was higher from prior quarters and included a $300,000 discrete tax provision because of higher state taxes and deferred tax asset revaluation resulting from the impact of our ARS acquisition.

Our cash tax rate was higher than prior quarters with additional filing jurisdictions from our ARS acquisition.

Looking to the remainder of the year, we expect our effective GAAP income tax rate for the year will be in the 50% to 55% range, and our cash tax rate will be in the 13% to 16% range.

GAAP net income was $200,000, or $0.01 per diluted share, in the first quarter of 2010, based on a diluted share count of 31.5 million shares.

In the first quarter, stock-based compensation expense was $2.7 million, and amortization on acquired intangibles was $507,000, including the pro rata ARS amortization since the acquisition.

Non-GAAP net income for the first quarter of 2010, which excluded stock-based compensation and amortization of intangibles, was $5 million, or $0.16 per diluted share.

With our fluctuating tax rates we also believe that adjusted EBITDA is the most useful measure for investors to evaluate our operating performance.

Adjusted EBITDA takes non-GAAP net income and adjusts it to exclude the cash tax provision, depreciation, net interest income.

On this basis, adjusted EBITDA was $6.8 million in the first quarter, up 26% compared to $5.4 million a year ago.

Adjusted EBITDA margin was 19%, an increase from the 18% we reported a year ago.

Turning now to cash flow, our cash flow from operations for the first quarter of 2010 was a healthy $14.8 million, driven primarily by our strong bookings activity.

Our capital expenditures were $1.7 million in the quarter, which resulted in a free cash flow of $13.1 million in the first quarter, a record level.

And, consistent with past practices, we funded a $3.6 million storage refresh with a capital lease.

As of March 31, 2010, cash, cash equivalents and short-term investments totaled approximately $82 million.

In addition, we hold $2.8 million in auction rate securities with maturities over 12 months that are classified as part of long-term investments.

The carrying value for these investments was unchanged from December 31, 2009.

Receivables increased year over year because of the growth of our business, but at $32.8 million, decreased sequentially, with a DSO of 71 days, well within our typical ranges.

Deferred revenue was $51.5 million, which increased $7.6 million from the first quarter of 2009 and $3.4 million from last quarter, reflecting the strong order patterns we experienced during the quarter, and is at the highest level in the Company's history.

Now let me turn to our guidance for the second quarter of 2010 and the full year.

We were pleased to see the beginning of 2010 play out even better than we had anticipated as we entered 2010.

With that as a backdrop, we have increased our expectations for the full-year revenue growth in 2010 to the range of 24% to 28% growth over 2009, up from our prior 21% to 25% growth range.

We're also reiterating our expectation that our adjusted EBITDA margin in 2010 will be at approximately the same level as we saw in 2009, and therefore adjusted EBITDA growth would be in line with revenue growth.

For the second quarter of 2010, we anticipated revenues in the revenue of $39.1 million to $40.2 million.

We're anticipating second quarter GAAP income before income taxes of $1.6 million to $2 million, and we anticipate an adjusted EBITDA for the second quarter of 2010 to be in the range of $8.1 million to $8.5 million, which represents an EBITDA margin of 21%, at the midpoint of our revenue and adjusted EBITDA guidance.

And our reconciliation of GAAP net income to non-GAAP net income and adjusted EBITDA guidance for the second quarter is included in tables in our accompanying press release.

In summary, we are very pleased with our first quarter performance and believe comScore has a solid start on several fronts to what we anticipate to be the strongest year in our history.

With that, Operator, we can now open up the lines to take questions, please.

(Operator instructions).

And your first question comes from the line of Youssef Squali, from Jefferies & Co.

Please proceed, sir.

Hi, good afternoon.

This is Sandeep Swadia sitting in for Youssef.

Thanks for taking our questions.

Let me start with a question for Magid.

So you guys added 76 new customers, and even after accounting for ARS that's still a fairly healthy acceleration in customer wins.

So the question is, is this level sustainable for the rest of the year?

Any thoughts on how your pipeline is looking and what's baked into your guidance would be great.

And then I have a quick follow-up.

Thanks.

We do have a healthy pipeline going into the second quarter, and we do get a general assessment that this year is markedly different and improved relative to last year.

So, while a 63 new customer additions are probably on the high end of the range, I would expect our continuing customer additions to be in excess of 40 per quarter.

Okay.

And you have been investing and looking at expanding your international business for some time, so just any color on what kind of traction you're seeing in those regions would be great, as well.

Sure.

Well, we have made investments in Latin America through our Certifica acquisition, and that area is doing really well.

We have also invested organically in Asia-Pacific, and that's doing really well.

We are looking at other potential acquisitions that will strengthen our hand in Europe and open up new territories for us in Asia-Pacific, as well.

I think that our biggest hindrance to growth has been creating a local presence and putting feet on the ground, and we think that in some cases acquisitions can be the cheapest and the fastest way of doing that.

And, quickly, any specific color around China, what you're seeing there so far?

Well, we are selling data in China.

We have a handful of customers within China.

We have some customers outside of China.

We are, as far as sort of a presence inside China, that's still a work in progress.

But we have also efforts to cover Hong Kong and Taiwan and eventually greater China.

So greater China will be well covered, and in the PRC it's a question of time.

Got it.

Thank you.

And your next question comes from the line of Meggan Friedman, from William Blair.

Please proceed, ma'am.

Hi.

Good evening, and congratulations.

Thank you.

Thank you.

Just a few questions for you.

The first, if you could provide a little more color on the strong demand trends that you're seeing.

Can you give us some insight into the types of customers that you're seeing that in?

Is it broadly dispersed across your customer base by size?

Well, it is safe to say that the strength that we have seen is pretty much across the board, so we are firing at all cylinders at this point.

Even financial services showed an uptick.

But whether we are looking at some of the large telecoms or pharmaceuticals or consumer packaged goods, which tend to be Fortune 500 companies that are large, we have seen substantial increases there.

We have also seen substantial increases in our large Internet media clients.

We have seen increases of about 35% internationally.

And, generally speaking, the publishers and the agency environment are also doing well.

We continue to have strong growth from our Ad Effectiveness clients.

In fact, that area grew well in excess of 50% for us.

And those clients are actually spending quite a bit of money with us.

On average, they're spending much more than the average comScore customer.

It is really important to note that probably 65%, 70% of our business, Media Metrix 360 and our Unified Digital Measurement approach has played a key role in accomplishing that growth.

So, going back to my remarks, our investment in building that product has been a very -- has produced a very strong impetus for us on almost every metric you look at.

Okay, that's great.

Thank you.

And then, of the new, the 63 new customers, what percentage of those are 360 customers?

Of those, what percent would you say signed on because of 360, and how many are comScore Direct customers?

Sure.

Ken, do you want to answer that?

Sure, I'd be happy to, Meggan.

From the standpoint overall, comScore Direct is about 16 of that number, so about 25%.

Media Metrix 360 is a driver behind most of the customer acquisitions, as you know.

As Magid indicated in his words in the beginning, it really is a fundamental driver to the business overall and definitely comes up as we go through the new customer additions with our salespeople during the course of the quarter.

Okay, great.

And then one last one, in terms of the outlook for project revenue, should we be looking at the $5.2 million as a good run rate, or do we think that it'll accelerate from there?

Thanks.

Sure.

Again, overall, as we indicated, we see the business as a whole accelerating.

And in terms of project revenue, it did grow at a faster rate because of the recovery that it was doing relative to where we were in 2009.

So I think we could see some expansion of that as we continue forward during the course of the year.

Great.

Thank you.

And your next question comes from the line of Jason Helfstein, from Oppenheimer & Co.

Please proceed, sir.

Hi, thanks.

So, just first a product question.

Can you talk about where you're seeing the most demand or the types of products you're seeing the most demand for, if there's any change now from a year ago?

And then, second, are you having to discount to add new customers, or if we are seeing kind of an impact there it's more from the mix shift to international, so when you bring on new international clients, are they on average at a lower price?

And then, just lastly, can you say what the revenue impact of ARS is on the second quarter guidance?

Thanks.

Sure.

This is Ken.

I'll start it off.

In terms of the beginning, obviously compared to a year ago Media Metrix 360 wasn't introduced.

So in terms of a big shift in terms of product impetus, that's far and away the most significant item.

The Ad Effectiveness solutions, again, also as we indicated, continue to expand, as well, both in terms of the number of customers in terms of implementations as well as the size of the work that we're doing with them.

And, yes, you're right, Jason, the international customer acquisitions tend to be at a lower entry point in terms of price, so that's a bit of what's going on from that perspective.

I don't think that we are seeing discounting activity.

In fact, if you look at our RPU it actually slightly ticked up sequentially and is over 3% relative to Q1 of 2008 -- 2009.

And on the ARS question, if you're willing to disclose it?

We really -- ARS is an integrated part of our business.

It's really part of how we look at the business as a whole going forward, as we had indicated last quarter when we announced it with the last quarter's call.

All right.

Thanks.

And your next question comes from the line of Heather Terry, from FBR Capital Markets.

Please proceed.

Great.

Thanks.

It's Heath Terry.

Just, if you could, give us a sense of what kind of cross-platform interest you're seeing from your existing customer base following the ARS acquisition.

I realize it's early, but would love to know kind of what you're seeing in the first few months.

Well, we are seeing a very strong interest in expanding the methodology that ARS has developed in the TV world to the online world from a number of standpoints.

The first is that the persuasion score is predictive of sales, and it is actually, when you are measuring the branding impact of advertising, it is kind of unique in terms of being able to embody a summary metric that will give you a summary effect of whether the ad has worked and how much it has and how it will translate into sales.

Second, we are -- there is a growing recognition in the market that when you are evaluating advertising, media is only one element of whether the ad should work or not.

The other element is really the strategy and the creative content of the ad.

And so far the online advertising industry, unlike the TV industry, has not really gotten into that.

And the experience is that -- the experience from a variety of studies and data sources is that if you want to explain the success of advertising, 70% of it is the content and what the ad says and 30% of it is media.

So I think ARS is going to help us move the industry from just a focus on media, which means if I place advertising on the Internet does it work or not, to if I place -- what advertising should I place, and if I place the right advertising what kind of impact should I get?

So those are two of the important things that we are seeing.

We are also seeing some demand for combined cross-media campaigns, TV and Internet, which we expect to increase as -- in the following months and in the following years.

Okay.

Great.

And can you also give us an update on where you are with the MRC process?

I mean, we haven't heard anything, I think, officially from them since December.

Wondering if you could kind of give us any more color as to where you think we are in the process.

So I think the audit is progressing.

I don't know that we have -- we have made progress on additional phases, but I don't know that we have completed an additional phase beyond the two that we talked about in December.

But we are making progress.

We have added to the audit comScore Direct, because we wanted to make sure that that's a measurement capability that we are offering to clients, and we wanted the MRC to take a look at it and make sure it conforms to the standards that have been set by the IAB.

And I think that that's an audit that's progressing well in addition to that.

And will that stretch out the overall timeline in terms of getting the initial audit finished?

We hope not.

We're trying to proceed in parallel.

Certainly on our side we're proceeding in parallel.

I don't think that there is any contingent of resources between who's doing the regular audience measurement audit versus the comScore Direct audit.

But I'm hoping that that will be the same on the MRC side.

Okay, great.

Thank you.

And your next question comes from the line of Jim Boyle, from Gilford Securities.

Please proceed.

Good afternoon.

With the Internet ad revenue increase in Q4 after the full year decline, how tightly or perhaps not tightly at all correlated is any or all of your whether it be project or subscription business to Internet ad growth, do you believe?

You know, we believe there is some correlation, but it's not a perfect correlation.

Last year our revenue grew by 9% and Internet revenue declined by 3% to 4%.

So we are not perfectly aligned, but we're clearly influenced by it.

I would say that we need to keep in mind that last year the environment was really an environment of fear, where people were cutting expenses because of huge uncertainty on the financial markets and everything that went along with that.

And so, as a result, I don't think we just saw the effect of a smaller, or a decline in advertising revenue.

We saw the effect of abject fear among clients.

And we started seeing that lift in the fourth quarter, probably as a combination of both the increase in advertising but also by corporations feeling that the worst is behind us and they now should be investing in the future.

It is always important to remember that the vast majority of our revenue is actually for sales that can help in monetization of advertising.

So people will be spending money to arm their sales force with tools that can help them sell more advertising.

So it is something that will help generate more revenue, and we think that that helps when the market is really healthy but also when the market is struggling, as long as there isn't really a crisis environment.

When the market's struggling there will be customers that will be more aggressive at using our data for increased sales activity.

And a question for Ken.

With the higher revenue growth forecast, why no uptick tweak to the EBITDA margin forecast?

Sure.

Fair question, and, as we indicated before, as we're out there looking to grow the business and we may have some various integrations that take place with the acquisitions we've done, there'll be some impact for that on the EBITDA line.

But also, in general, in terms of our investing in our products and expanding them, Magid alluded to the fact that 360 really opens the door for lots of new opportunities that we can expand with our customers, so there'll be some investment on that side, as well.

Okay.

Thank you.

You're welcome.

And your next question comes from the line of John Blackledge, from Credit Suisse.

Please proceed, sir.

Thank you.

This is just a couple of questions.

Just wondering in terms of existing clients how many are using Media Metrix or have signed up for Media Metrix 360?

And if you can just give us a sense of client budgets now versus last year and pricing on annual renewals in the first quarter.

Thanks.

Okay.

This is Ken.

I can -- in terms of the renewals, again, we saw, as you saw, very strong renewal activity as looking at our key metric and overall in terms of the -- we're back to getting some of those increases that we had in the past, the traditional 5% to 6% increases at renewal.

The 360 is definitely catalyzing customers.

Their budgets are more available.

And it's also helping from an upsell perspective, as well.

And I apologize, John, what was the first part of your --

So the second part is how many of the clients are buying 360.

I'm not sure that we have a breakdown.

If I had to guess it would be 450 to 500 clients.

There are a lot of international clients that have not had a chance to upgrade yet.

And we also support -- remember, we do have a lot of Fortune 500 clients that are buying other services from us than just Media Metrix.

Thanks.

Thank you.

And your next question comes from the line of Jeetil Patel, from Deutsche Bank Securities.

Please proceed, sir.

Great.

Thank you.

Hey, guys, I have a couple of questions.

I guess first of all, if I go look back at your business over the last year to 18 months, obviously in the downturn the first thing that was impacted was the project revenue, and then subscription kind of lagged that.

If I look at the business today on the upturn it looks like project revenue is coming back faster, as that seems to be -- budgets get cut back and that's where you end up seeing incremental or less spending.

But is it safe to assume that project revenues are ramping nicely today and subscription revenues will follow suit as your customer base feels more confident as you progress through the year on kind of increasing marketing budgets and then obviously signing up for more products?

And then I have a couple of questions following on that.

Well, I think that subscription revenues from a booking standpoint are actually pretty strong.

I think the -- a recovery will show better in project revenue just because the amortization time period or the revenue recognition time period is shorter.

It's usually about four months, on average, versus when you are talking about a subscription you're talking about 12 months, on average.

So the lag is probably more driven by the revenue accrual mechanics than a difference in the demand patterns.

I do think that on the downside there was a revenue accrual effect, but there was also a discretionary spending effect which hurt project revenues.

I think we are seeing an uptick in discretionary spending, but we are also seeing an uptick in subscription revenue, and we think that that will continue growing as the new subscriptions start building up into a higher growth rate as we accrue more of that revenue through the year.

That's probably like a back -- second half that continues to gain momentum on subscription, while project you see it immediately.

Correct.

Okay, and then on ARS, you've got 13 new customers coming in.

Are they -- are you doing anything differently or is ARS doing anything differently to kind of cross-sell the whole platform that comScore provides?

And I guess more specifically it seems like ARS does a lot of great analytic work around television.

Is there a way to leverage the -- obviously the real-time nature of the Web in their studies, in their information, their analytics that they provide to their customers to gain insights well in advance of a major campaign in understanding what creative's going to work, especially as you're seeing tremendous integration of online -- or video between online and television today?

Sure.

Well, the first thing that -- the first priority for us in terms of integrating ARS is to make sure that we minimize the sample cost that ARS has to pay by leveraging our panel.

So that probably in the first -- I mean, we basically closed on ARS in late February, early March, so the early days have been let's just get everybody under the tent and make sure that we leverage our panel as much as possible so we can have the best impact on margin.

So that's going really well.

The other thing is that we are -- we have gone to the major clients that ARS has, and we presented full comScore capabilities, which are, frankly, synergistic on both sides.

They can help ARS get more business, but they can also help bring us in on the digital side and give us another entry in the door.

But the most exciting stuff is really on starting to offer integrated products.

And we will start seeing that -- I'm hoping by the end of Q2 we will have some client work under our belt to show the strengths and the value of those integrated products.

As you correctly said, and as I mentioned earlier, it is really important for advertisers to get diagnostics on why an ad is working or is not working, and actually it would be even better to know it ahead of time.

And so that's where we think the ARS capability allows us to do, to evaluate both before the fact and after the fact.

And that's where we will be offering a lot of product integration to help customers on both sides being able to benefit from the pre and the post evaluation.

I just think he dropped the queue.

And your next question comes from the line of Mark May, from Needham & Company.

Please proceed.

Mark, your line is open.

Did we lose a line?

Yes, Mark did not respond.

Okay, maybe he'll call back in.

Okay.

And your next question comes from the line of Robert Coolbrith, from ThinkEquity.

Please proceed, sir.

Thank you.

Good afternoon.

A few questions.

First of all, I was wondering if you could maybe give some commentary on the upsell activity from Media Metrix to the 360 product.

Is that, for the most part, coordinated with renewal activity?

And in terms of (inaudible) RPU driven by Media Metrix 360, has that mainly been just sort of linked to the 5% to 6% of annual increase and using that as sort of justification for the increase, or can it be more material than that?

Also wondering on Direct if you've -- I know it's early, but I'm wondering if you're seeing any success in getting some of those new Direct customers upgraded to full Media Metrix or if you could give any commentary there.

And also wondering with Direct customers if you're seeing, or if you could give some sort of breakdown between those are using comScore to beacon their traffic versus utilizing Omniture.

And I know there might be a revenue share component if they're utilizing Omniture that's paid out to Omniture.

Wondering if that applies to any additional products that those customers might buy in the future.

Thank you very much.

That's a lot of questions.

We need to look at -- take them one at a time.

So, when we are looking at growth in upsell, it is not just limited to the price increases.

The price increases are only a portion of what we are looking at.

We look at all the different product options that we can offer our clients, whether it is in ad measurement, whether it is in video measurement, in search, in various other options.

All of these are growing in the high single digits, and it's not stronger than that.

So I think that that's really a measure of upsell that we are seeing.

And I would attribute that to two things.

Number one is that clients are now back into business and free from their fear, I guess.

But then number two is that the good thing about Media Metrix 360 is that the data reconciliation that it brings to the party is something that allows us to focus on building the business with them rather than argue about which data set is right.

And so once we get that kind of sort of friction out of the way with some customers, we start seeing a lot of orders come in.

So, now, I'm not -- can you ask me some of the other questions?

Yes, sure.

Sorry about rapid fire questions there.

But just wondering on the Direct program if you're seeing any early evidence of getting some of those new clients who are just -- who sign up initially for Direct onto Media Metrix or any of the other products, for that matter, and sort of how the Omniture relationship is helping to drive that, and also how the Omniture revenue share works, if it just applies to Direct or if there's any sort of tail for other products that customers might get into.

Okay.

As far as the customers that sign for Direct, we see about a 20% conversion to become full-paying Media Metrix customers, and those people are buying -- or the average selling price is in line with what we sell normal customers.

I would say that we -- a lot of customers that maybe six months ago would have gone the Direct route are now going directly into buying Media Metrix because they have seen the kind of changes that Media Metrix 360 introduces by observing competitive data, and many of them just skip the step of Direct and go directly to Media Metrix 360.

In -- also in many cases people sign up to Direct so that they continue to be measured on a census basis, and they may not be intending to be long-term subscribers just because they are still in very early monetization stage.

But they feel that it is very important for them to be measured with the highest degree of accuracy possible, and as a result they sign to Direct.

As far as the Omniture relationship, I would say like anything the initial stages of it generated a lot of excitement, but it's now tapering off just because the people that had a lot of initial interest have converted.

And there are still a handful of big clients that are still in a conversion processes using the Omniture as a vehicle to do the conversion.

As far as revenue split and revenue exchange, I think the primary benefit of this relationship has been to -- for both of us to service our clients better.

There have been a handful of situations where we shared revenue with them or they shared revenue with us.

But I don't think that the most substantial benefit of the deal with Omniture is -- has been really the revenue share.

It's much more so make it easier for clients to tag their sites leveraging the Omniture presence and being able to sign up without a lot of IT effort.

So it seems to be more about enhancing the value of the Omniture pixel, I guess, for Omniture.

Is that what you're saying?

That's correct.

Okay.

Thank you very much.

(Operator instructions).

And, sir, your next question comes from the line of Robert Haley, from Gabelli Company.

Please proceed.

Hi.

Thanks for the question.

Just quickly, what were your gross customer ads in the quarter?

And then on cross-media measurement, can you talk more generally about your initiatives to build your capabilities there?

Obviously ARS is a big step.

What are some of the other things you're doing internally?

And where do you see that going?

Do you see focusing on online and TV first or online and mobile?

How do you see that developing relative to demand?

Thanks.

Okay, Ken will dig up the gross customer ads.

As far as the cross-media measurement, we have a number of initiatives going on at the same time.

Clearly, if you want to prioritize, being able to do cross-media measurement between mobile and the PC-based Internet is very important, just because there is a very fast migration happening in Internet usage going from PC screens to mobile devices, and it is really important for us to keep on top of that.

So I would say we have a lot of effort going into that.

Media Metrix 360 helps us in doing that, because if a device is actually -- if a user is coming through a mobile device we will be able to measure them through Media Metrix 360.

We also have a mobile panel.

We also have the data that we're collecting in the UK from the operators.

We are negotiating with a number of other providers to be able to get mobile data.

So on mobile, we are -- we feel that we are ahead of the curve and we're doing really well.

On TV there are a number of methods that we are using to incorporate TV and the Internet and being able to look at combined campaigns.

First of all, we are the -- I would say the leading online video tracking service with our product Video Metrix, which basically complements the viewing -- complements the measurement of the viewing that's done on TV with the measurement that's being done on the Internet.

But then second, in terms of measuring TV proper, we have a number of initiatives with different constituencies to be able to get that through a variety of methods.

I'm not really at liberty at this point to talk in more detail about that, but I am, let's say, very optimistic about the possibilities and the progress that we're making.

And, Rob, this is Ken.

It's 158 gross ads.

Okay.

Thanks very much.

You're welcome.

And this concludes the question-and-answer session.

I would now like to turn the call over to Mr.

Magid Abraham, CEO, for closing remarks.

Okay, this is actually Ken Tarpey.

Just before we turn it over to Magid I just wanted to point out a clarification for people in our press release.

In our business summary section of our press release, the dollars are actually in millions, not in thousands.

And with that let me turn it over to Magid for closing comments.

Okay.

Well, I want to thank everyone for participating in today's call.

We're obviously very pleased to see such a strong and healthy start to 2010, and we look forward to speaking with you at other conferences as well as future quarters.

In addition, we are planning on hosting an analyst and investor day in the second quarter, and we will be forthcoming with details shortly.

Thank you again.

Ladies and gentlemen, that concludes today's conference.

Thank you for your participation.

You may now disconnect.

Have a great night.