Comscore Inc (SCOR) 2010 Q4 法說會逐字稿

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

earnings conference call.

My name is Erica and I will be your coordinator for today.

At this time all participants are in a listen only mode.

We will be facilitating a question and answer session towards the end of this conference.

(Operator Instructions)

I would now like to turn the presentation over to your host for today's call, CFO, Ken Tarpey.

Please proceed, sir.

Good afternoon and thank you.

And welcome to comScore's earning call for the fourth quarter of 2010.

Again, I'm Ken Tarpey, CFO of comScore, and 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 opportunities including new customers and markets for comScore; expectations as to the growth and composition of comScore's customers base and renewal rates; expectations regarding the impact and benefits of particular lines of business and products; expectations regarding comScore's acquisitions including those of ARS Group, Nexius and Nedstat; expectations regarding new market opportunities for comScore; assumptions regarding tax rates and net operating loss carry forwards; and forecasts of future financial performance for the first quarter and full-year 2011, including related growth rates and assumptions.

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, and Form 10-Q for the period ending September 30, 2010.

We caution you not to place undue reliance on any forward-looking statements including 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 in 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.

With that, I will now turn the call over to Magid.

Thank you, Ken.

And thank you for joining us on our earnings conference call for the fourth quarter of 2010.

2010 was a transformational year for comScore in several ways.

A year ago, we said that we were starting to see business momentum increase, and we are pleased to report today that this momentum not only carried throughout 2010, resulting in a very successful year, but there is already evidence that this momentum will continue in 2011.

Let me summarize some of the key milestones that we achieved in the past year.

Number one, we have significantly expanded our international footprint, we now have 32 offices in 23 countries and provide measurement services in 43 countries.

As a result, international revenues accounted for 21% of the Company's total revenue in the fourth quarter of 2010.

Number two, we continue to expand the implementation and adoption of our unified digital measurement system where we are approaching 90% of the top 100 US media publishers and we are making steady progress internationally.

Number three, we moved from providing primarily audio measurement services to providing additional site analytic services through our Nedstat acquisition.

Enabling us to upsell our existing customers with SaaS services.

These additional services are a significant enough that they provide the potential to more than double revenue per customer converted from audience measurement services alone.

In addition, these new products open and expand our target customer base both domestically and internationally.

We have also significantly expanded our advertising analytics offerings with our ARS acquisition, which enables us to improve our advertising effectiveness services and to offer message and media effectiveness metrics across multiple media platforms including TV.

We took a substantial step forward in the mobile market with the Nexius Xplore acquisition, which allows us to offer high impact services to mobile operators.

Our combined services help operators maximize the return on their customer and network infrastructure investments.

And finally, we have secured access to TV and mobile data, allowing us to create the first of its kind panel to measure usage activity across TV, PC and mobile screens.

Based on our internal estimates, these new capabilities more than triple our addressable market and help us to consolidate a leadership position in digital measurement and analytics.

They help us sustain a new stage of growth for the Company across a broad swath of the digital marketplace.

Looking at the numbers for the fourth quarter, GAAP revenue at $51.2 million was up 52% from the fourth quarter a year ago and up 12% sequentially.

We added 17 new customers in the fourth quarter, bringing our total customer count to 1,752 customers, an increase of almost 500 customers from a year ago.

Operationally we executed well, to deliver adjusted EBITDA of $11.5 million, representing an adjusted EBITDA margin of 22.5%.

On a full-year basis, we reported our best year ever with revenue up 37%.

Even if you exclude the contribution from our recent acquisitions, the growth in our base business was very healthy.

Our bottom-line performance was equally compelling with adjusted EBITDA of $38.3 million representing an adjusted EBITDA margin of 21.9%.

In the fourth quarter, we saw strength across the board.

Media Metrix 360 and our unified digital measurement, continues to open the door for new customers, and helped to expand our relationship with existing customers.

Our site analytics products, as well as advertising analytics and mobile analytics products, have started generating positive line reactions and new customer opportunities for comScore.

We are pleased with the reception generated during our early client discussions about our Nedstat product line, which has started to gain traction with US clients.

We've also made substantial progress with several Nexius clients with joint offering opportunities that we will discuss shortly.

Looking forward, the proliferation of mobile devices, the large and growing need to understand the return on investment for digital advertising, the consumption of content and advertising across disparate media platforms, the continued globalization of stakeholders in the digital ecosystem, the rise of social networking on a global scale, and the growing need of advertisers, publishers and agencies to plan across platforms and geographic borders all are factors that create demand opportunities that we believe we are now, more than ever, well poised to capitalize on.

We expect to see parallel growth in each of our core offerings.

This includes audience analytics, where we continue to innovate and expand our planning functionality as well as measurement capabilities for video and for social media.

In advertising analytics, where we offer copy testing, campaign verification and add effectiveness tools.

And, mobile analytics, where, in addition to mobile audience measurement, we offer carrier specific tools for insight into subscriber behavior and network optimization.

In the site analytics space, we are leveraging core Netstat technology in the comScore measurement aspects to drive the convergence of what analytics and audience measurement, combining revisitation analytics with new insights into the demographic and behavioral makeup of the site audiences.

In March, we expect to launch a new product, digital analytics, built on the Netstat Atomics platform, to bring these new capabilities to the marketplace.

We are packaging and delivering this product in a completely new interface and we expect we will make it faster and easier than ever to capitalize on insights.

Early responses from customers have been very positive.

Importantly, this is being designed as a global solution so it would be available across markets and will appeal to our customers that compete in multiple countries and regions.

In advertising analytics, we are forging new trails by integrating creative quality measurement into our syndicated advertising effectiveness products, providing measurement around both the quality and the creative message as well as the performance of the campaign.

Creative quality measurement and optimization is an established and long-standing discipline in the TV world, but is just taking shape in digital.

By coupling these into a combined offering we expect that advertisers will be able to better understand and optimize digital advertising and be in a better position to allocate their overall advertising dollars.

Similarly, in mobile analytics, we aim to help mobile operators understand the experience of their customers in new and important ways.

Examples include insights into which categories of usage are happening and when, on which devices, at what location, using what network resources.

And leveraging these insights to improve customer experience, enhance customer acquisition and retention efforts and optimize the value of network investments.

Here again, initial client reactions are very encouraging.

We also believe that cross media measurement will be increasingly important as viewers consume data and media across multiple streams.

We recently announced a partnership with AT&T to gather panel-based usage data from 25,000 opt-in subscribers to AT&T's video, Internet and mobile services.

This initiative is being very well received and is generating excitement in the marketplace.

In addition to measuring video content, viewing behavior across TV, computers and mobile devices, comScore will also be the first in the industry to provide audience reach and effectiveness across media campaigns for advertisers who are now beginning to leverage both TV and digital media to reach their customers.

Last week the coalition for innovative media measurement, or CIMM, an industry group backed by 21 media companies, ad agencies and marketers, announced that it has commissioned two independent proof of concept pilots to measure free-stream video usage.

We are excited that CIMM has chosen comScore as one of the proof of concepts to be evaluated, and we look forward to working closely with them as we develop new products in this space.

We are currently embarking on building this panel with AT&T and expect to have the first results in early Q3.

A large portion of our investment in the development and rollout of all these capabilities will take place in the first half of the year, and we expect to see the results of these investments begin to materialize in late 2011.

In summary, we are pleased with our continuing business momentum and execution.

We are excited about the business transformation that we have activated last year, as well as our largely expanded geographic presence.

We feel we are well-positioned to grow from our leadership in -- to grow our leadership in digital audience measurement and to be a leading digital business analytics Company.

This transformation also increases the software as a service aspect of our business model, improving our already strong visibility.

We believe this strategy not only strengthens comScore as a Company, but it also creates compelling opportunities for all of our stakeholders including employees, customers and shareholders.

With that, I will turn the call back to Ken for a more detailed financial discussion.

Thank you, Magid.

GAAP revenue in the fourth quarter was $51.2 million, up 52% year-over-year.

Looking at non-GAAP revenue, which adds back the impact of purchase accounting on acquired deferred revenue, it was $53.3 million in the fourth quarter.

Within total revenue, subscription revenue in the fourth quarter was a quarterly record of $42.9 million, up 47% year-over-year, and 12% sequentially.

Subscription revenue represented 84% of total revenue.

Project revenue was $8.3 million, also a record for comScore, and was up 80% from the fourth quarter of 2009 and up 14% sequentially.

Renewal rates in the fourth quarter were above our historical threshold of 90% on a same contract dollars basis.

GAAP revenue from existing customers was up 45% year-over-year in the fourth quarter, to $43.6 million, and represented 85% of total revenues.

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

Again, we added 70 net new customers in the fourth quarter with our customer count now standing at 1,752.

Our strategic focus on international expansion resulted in strong year-over-year international revenue growth of 93%, to $11 million from outside the US.

International revenue was 21% of Q4 revenues, as compared to 17% in the fourth quarter of 2009.

On our balance sheet, deferred revenue grew 50% year-over-year to a record $72.2 million at December 31, reflecting our strong business activity in the quarter, our largest renewal period, as well as the impact of our acquisitions.

Our top 10 customers represented 28% of revenue in the fourth quarter, and we again had one customer that was 10% plus of revenues.

Turning to expenses in the fourth quarter, gross margins were 70% in the fourth quarter, comparable to the third quarter, and gross margins were 71.8% in the same quarter a year ago.

Gross margins in the near term are somewhat impacted by the effects of our recent acquisitions.

GAAP pre-tax loss was $1.5 million in the quarter, an improvement from our third-quarter GAAP pre-tax loss of $3.3 million.

GAAP pre-tax income in the fourth quarter of 2009 was $3.1 million, with decrease in income attributable to added costs from acquired companies, acquisition related costs, higher intangible amortization of $1.6 million, higher stock-based compensation of $2.7 million, and the impact of the purchase accounting on acquired deferred revenue of $2.1 million.

Stock-based compensation charges in the fourth quarter of 2010 included a $1.5 million impact from the market-based option grants awarded in the second quarter 2010.

Those grants trigger upon comScore's shares averaging at trading price of over $30 per share over continuous 30 day period.

Our effective GAAP income tax rate in the fourth quarter was a 68% tax benefit rate, and our fourth quarter cash tax rate was a 59% tax rate based on GAAP pre-tax income.

The Q4 GAAP effective tax rate was favorably impacted by an income tax benefit of $1.6 million resulting from the reversal of the Company's valuation allowance previously recorded on certain UK deferred tax assets which consisted principally of net operating loss carry forwards.

The Q4 cash rate was high as a result of our profitability in certain international jurisdictions like Canada and certain South American countries, where we do not have NOLs available.

We continue to hold net operating loss carry forwards with the balance of approximately $60 million, and those are primarily spread among the United States, Netherlands and UK.

For 2011, our expectation is that the GAAP tax rate will be in the range of 58% to 60%, and our cash tax rate will be in the 10% to 12% range.

GAAP net loss was $0.5 million, or $0.02 per basic share in the fourth quarter 2010, based on a basic and diluted share count of 31.5 million shares.

Non-GAAP net income for the fourth quarter 2010, which excludes stock-based compensation, amortization of intangibles, acquisition related expenses and the previously mentioned adjustment for purchase accounting impact on acquired deferred revenue, was $7.8 million, or $0.24 a share.

With our varying tax rates we believe that adjusted EBITDA is a useful measure for investors to use to evaluate our operating performance.

Adjusted EBITDA takes non-GAAP net income and adjusts it to exclude the tax cash provision, depreciation, intangible, amortization costs, stock-based compensation expense, acquisition related expenses, net interest income and the impact of purchase accounting on acquired deferred revenue.

On this basis, EBITDA was $11.5 million in the fourth quarter as compared to $8.6 million in the fourth quarter 2009, an increase of 34%.

We believe that the adjusted EBITDA margins from our recent acquisitions should eventually be consistent with comScore's historical levels as the impact of the purchase accounting on deferred revenue wanes and we increasingly leverage common resources and execute on product integration and cross selling opportunities.

Cash flow from operations for the fourth quarter of 2010 was $537,000.

Our capital expenditures were $1.8 million in the quarter as well as a $1.8 million payment to AT&T related to our cross media partnership.

Consistent with past practices, we funded approximately $5 million of infrastructure expansion with capital leases.

These expenditures related in larger part to the expansion of hosting centers and necessary infrastructure expansion.

These factors, combined with our strong Q4 customer renewals, and a Company increase in accounts receivable at December 31, resulted in a free cash flow outflow of $249,000 in the fourth quarter.

We anticipate our free cash flow return to normal levels consistent with our historical averages in Q1 of 2011, as necessary capital investments normalize and receivable collection activity increases.

For 2010, our free cash flow was a healthy level of $25.7 million.

As of December 31, 2010, cash, cash equivalents and short-term investments totaled $33.7 million.

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

With a carrying value of these investments increase of approximately $200,000 at the end of September based on our updated independent valuation.

Receivables, at December 31, were $54.9 million, increased year-over-year and increased $17.7 million sequentially, because of the growth of our business, and the timing of the Q4 bookings were skewed a bit later in the quarter than had occurred in the past.

This resulted in a somewhat higher DSO of 89 days above our typical ranges though we expect to return to more consistent levels as in prior periods in early 2011.

For the full year, revenue was $175 million, up 37% from 2009.

GAAP net loss was $1.6 million, or $0.05 per share.

Adjusted EBITDA was $38.3 million, or up 34% compared to 2009.

The adjusted EBITDA margin was 21.9%, consistent with the 22% level we recorded for the full year of 2009.

Non-GAAP net income was $28.1 million, or $0.88 share.

Now, turning to our guidance for the first quarter of 2011, and the full year.

Customer interest in comScore's products and services continues to be very healthy, resulting in strong overall business levels.

At the same time, recent acquisitions add to the momentum for 2011.

Accordingly, we are providing guidance for the full year GAAP revenue growth in 2011 in a range of 34% to 36% over 2010 revenues.

While we are pleased with the incremental contributions we are seeing from recent acquisitions, it's important to point out that our core products continue to be a significant element of our growth.

We will continue to balance investments in our long-term growth with driving margin improvements and we expect that adjusted EBITDA margin in 2011 will be slightly above 2010 levels on the full-year basis.

On a longer-term basis, comScore remains committed to delivering adjusted EBITDA margins in our target range of 28% to 32% on a full-year basis, and we believe as we recognize synergies from our acquisitions, that we can achieve the lower end of that range in the next 2 to 3 years.

For the first quarter of 2010 (sic), we anticipate GAAP revenues in the range of $52.3 million to $52.9 million, which represents an expected increase of 45% to 47% over Q1 revenues of 2010.

We considered in our full-year and first quarter guidance is our anticipation of small revenue risk with the work that we do in the Middle East, particularly in Egypt.

We anticipate first-quarter GAAP loss before income taxes of $4.3 million to $4.8 million.

Let me point out the key facts that we expect to have an impact on our GAAP results.

First, we expect to incur $2 million in amortization of intangibles.

Second, we expect to incur approximately $6.4 million in stock-based compensation expense, which includes the impact of $1.1 million from the previously mentioned market-based option awards granted in the second quarter of 2010.

Third, we anticipate the impact of purchase accounting on acquired deferred revenue of about $1.3 million.

We anticipate adjusted EBITDA for the first quarter of 2010 (sic) to be in the range of $8.5 million to $9 million.

Which represents an adjusted EBITDA margin of 17%, at the midpoint of our revenue and adjusted EBITDA guidance.

We are estimating fully diluted share count for the first quarter of 32.5 million, and our reconciliation of GAAP net income to non-GAAP net income and adjusted EBITDA guidance for the first quarter is included in the tables to our accompanying press release.

In summary, we are pleased to have delivered a solid performance in the fourth quarter and the full-year, and are optimistic about 2011 as we look forward to our longer-term prospects.

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

(Operator Instructions)

Our first question comes from line of John Blackledge with Credit Suisse.

Please proceed.

Thanks for taking the question.

Just a couple questions.

Wondering if you can give some more color on the EBITDA margin ramp on a quarterly basis for 2011.

It looks like the implied margin in the first quarter is like 16%, so if you can give us some color on there for modeling purposes?

And then, Magid, if you could talk about the cost measurement initiative, provide maybe a little more detail?

I think you said it was going to be rolled out in the third quarter.

That would be helpful.

Thank you.

Okay.

And I will start, John, and you're right in terms of the first quarter, the midpoint of our range is about 17% as we start the year.

The investments that Magid has mentioned we have throughout the year, but particularly in the first half when we make those investments -- example being the AT&T cost being amortized over the course of year, which is a new expense relative to prior modeling.

Which would result in the second half of the year of our margins stepping up quite nicely during the course of the year, more to what you have seen in the past.

Both because of the growth of the revenue and the leveraging on the investments we've made, and of course, that cyclical impact we always have of vacations and payroll taxes giving us a somewhat lower EBITDA margin in the early part of the year.

But I'm a contributing to upside or uplift in margin in the latter part of the year.

Okay.

And on cross media measurement, this is our entry in the market to measure the Holy Grail of three screens, meaning PC, TV and the mobile devices.

We were very pleased that we were able to reach an agreement with AT&T to be able to recruit among their subscriber base which, as you know, includes TV services as well as mobile services as well as Internet.

So, we have in one place on the same people, measurement of activity across these three screens.

Now, this is very exciting because what we are looking at is something that has never been done before in the industry, something that we know everybody is interested in and it is something that is really needed in a changing media landscape.

So advertisers are looking at, how do I spend my money across these different platforms.

Let's say traditional TV broadcasters or content providers are interested in, how does my traditional TV audience now expand across with video consumption across the PC and the mobile screen.

And, obviously, advertising agencies are interested in what is the right allocation.

Our core audience measurement constituency, which represents the online publishers, they are interested in how digital can be used to supplement TV campaigns and enable brands to reach incrementally more users.

So, virtually anybody that we deal with in our customer base has a need for this and we are really excited to be the first company to be able to do it across all three screens and to be doing it at such a scale of sample size.

That's great .

Thank you very

Thank you.

Our next question comes from line and Meggan Friedman with William Blair.

Please proceed.

Hi.

Thanks and congratulations on a strong quarter.

Thank you.

Thank you.

Couple of questions.

The first is, can you talk about the strength in project revenue?

This is the second quarter where we've seen especially strong project revenue.

Is this something we should expect to continue, or is this a run rate we should be using?

Hi, Meggan, this is Ken.

I'm happy to take that.

To a lesser extent there was some impact of the full quarter of the acquisitions, like with Nedstat we had a full quarter.

And that was a couple hundred thousand dollars and about $300,000 of benefit, which will kind of be a run rate going forward.

But the most important part is, our project pipeline has continued to expand at a very good rate.

We expect that to continue through the third quarter, fourth quarter, add effectiveness-type projects on a project basis, as opposed to also the subscription work were examples of it.

So we're definitely seeing things expand, we do -- historically, the Company has had a little bit more strength in project revenue in the fourth quarter, in terms of companies using budget money and things of that nature.

So, $8 million is a strong number in the fourth quarter and maybe in terms from a modeling purpose, may start a little bit lower.

But we see project revenue continue to be an important part of the business.

Yet, overall, the growth is great because it still was about 16% of our revenue, fairly close to traditional splits.

Okay.

Great.

Thanks for that additional color.

And then can you talk about the competitive landscape?

With your new product introductions, how is the landscape for you changed, how is it changing, and can you talk about how we should be thinking about that?

Well, so far, I would say the competitive landscape in our day-to-day life has not really changed.

And I look at as, we are competing with ourselves.

In the sense that we are really focused on executing well, making sure that these new products we'll get by integrating acquisition assets with our assets -- that those will be well delivered a well-received in the market.

And when we do that well, I believe that we will determine our own fate, and don't really focused too much on competition.

Now, obviously, when we start getting some of the site analytics products become a bigger part of our revenue, we will get some competition from people that have offerings in those spaces.

But, so far I would say the key thing that we worry about is to make sure that we deliver on our plan.

And we know that if we deliver our clients are very happy with it.

Great.

Thanks.

And one quick housekeeping question, and pardon me if I missed this -- did you provide a gross adds number?

No, we did not --

We can look for and maybe we can get another question and can answer it.

Thank you.

Meggan, it's 202.

Great.

Thank you very much.

Our next question comes from the line of Jeetil Patel with Deutsche Bank.

Please proceed.

Hi, guys.

A couple of questions.

First of all, looking at your business modeling -- can you talk about roughly what the contribution of analytics-based products was in 2010?

Or maybe fourth quarter may be a better run rate to look at.

And then second, and on that, can you talk about this year, how much of the growth do you think is going to be driven, or what do you think contribution is from call it the analytics bucket in terms of the business?

It seems to be a pretty important going kind of business in general.

Second, on Nedstat -- obviously, it sounds like you're going to be launched in March, and I'm trying to figure out in terms of what's the feedback?

Your win rates, how many clients do you have up and running in the US today?

And what is the attention level around that?

And I'll have a quick follow-up.

Yes.

So, the launch of the product will be done sometime in March at an analytics conference.

But we have started discussions with a number of customers, and we have a couple of active proof of concept projects going on.

What's important to know about the analytics kind of business is that it's more akin to IT type projects and therefore it tends to have a longer sales cycle and the plan for it is that -- for the year, is that our penetration in the US will take into account that longer sales cycle.

What it means is that we think we have a very good starting pipeline right now, which has been generated really primarily from inbound requests from customers, rather than us going out and pushing it.

But we think that once the launch is in there, we will put all these customers into the early funnel of sales cycle from proof of concept to finalizing an agreement to beginning implementation.

And so there is going to be a significant lag from the time somebody signs on to a proof of concept to the time when we start seeing significant revenue accrual.

So, while we are very excited about the potential for the product in the US, we are not assuming more than a couple million dollars in revenue from the expanded products coming from the US.

In Europe, we think that the business will do well compared to its existing base, and will maybe grow at a rate of 20% or so.

And, curious in the mobile space, curious if you're seeing a lot of interest or a lot of inbound request of mobile audience measurement today, and where that sits in terms of priority, revenue, and maybe product-wise how far along are you on that?

Well, we had a good fourth quarter in mobile, where our revenues saw good growth throughout to prior quarters.

Obviously, mobile is very hot and we are seeing some of the large clients ask for much more in-depth analysis of the interaction between the mobile user on mobile devices versus on the PC and we are seeing some really fascinating data that's coming out of that.

So, we think that that's going to be expanding this year.

We also are seeing early signs of significant opportunities to expand our relationships with operators.

By providing them with data that the combination of comScore and Nexius can uniquely provide.

And those would be subscription-type services that they would be buying from us to monitor competitive performance and to understand how they stack up in various sub segments of the market, whether it is voice or data, et cetera.

So, it's one of the good growth areas for us, this year.

And we're optimistic that it will be particularly strong internationally as we target international carriers and where the revenue potential internationally, even in smaller countries relatively speaking in a digital space, in mobile there could be some strong revenue potential.

Our next question comes from the line of James Cakmak with Sidoti and Company.

Please proceed.

Hi thanks for taking my questions.

Since you guys reported in the last quarter, there's been an increasing amount of noise on the FTC's push for the Do Not Track legislation, with the growing support from the major search engines.

Can you talk about how you see that, how they might affect your analytics services and any advantages you see that you might have versus competition?

And if this legislation does push through, how do you see changing the landscape and expenses associated with it?

Sure.

First of all, anything that's being talked about does not affect the way we collect our final data.

Our final data is all opt-in and so these Do Not Track lists don't really affect us and we do the collection differently from the browser anyway.

As far as tracking via tags, which I think, is what your question is on -- what -- if the legislation were to go through, we -- our products will actually adapt to that.

We have a good methodologies in place to take advantage of both direct tracking via tag, as well as the supplemental information that we have in our panel, to be able to provide the most accurate measurement services out there.

And in places where there is -- where there is a lack of coverage because of the Do Not Track, we would be able to supplement that from our proprietary databases.

Okay.

And on Nedstat you mention a lot of the inquiries were now inbound, but once everything is up and running and you make the new product launches, what exactly is going to be your approach, at least domestically?

I would assume a lot of your customers already subscribe to analytics services.

Is it going to be trying to displace incumbents, or are we going to go after a new customers?

What's the sales strategy there?

Well, our immediate priority is going to leverage our relationships with existing customers.

And those are -- that's clearly the low hanging fruit, so that's what we will target.

I suspect that our outbound efforts in terms of trying to generate new customers, we will have some resources dedicated to that.

But the primary focus is to make sure that we leverage opportunities within almost 2,000 customers we have now.

Got it.

And if you bundled services, DC comScore much better to be able to compete on price then?

Well, I would say that the one advantage that we have is that if a customer is already tagging with us, on Media Metrix 360, that the expense associated with the data collection and the bandwidth and all of that has already been bourne, so there is a cost advantage that might accrue from that.

I would say that we, we have a cost effective platform to be able to deliver it and we will be competitive.

But our approach is not going to be -- to go and compete on price.

We think we have a product that has some very unique functionality and sales -- fills a long-established need in the market that's being unmet, and we think it will command the attention and the market share that it deserves.

Okay.

Thank you.

Our next question comes from line of Mark May with Needham & Company.

Please proceed.

Thanks.

I had two questions.

First, was around your strategy for the -- the sales strategy for this year.

As you enter some of these two markets like the site analytics and expand your presence in mobile with carriers and the other new products that you have, how are you approaching it from the sales standpoint?

Are you really developing -- I imagine it really takes specialist to sell each of these individual products.

Is that the way you're structuring the sales organization?

What happens in cases where you might be an existing client with -- you have a Media Metrix sales person has a strong relationship selling into the same person, but a different product.

How are you handling upsales?

And on the sales floor, big picture, how much are you planning to expand your sales force in general this year?

And I have one follow-up, please.

Sure.

So, let me answer.

On mobile, the business units are basically handling telecom, are all under one roof.

So, the existing resources that are selling comScore products as well as the Nexius sales and resources are integrated and we do have a common approach to the client and the products are largely complementary, so there is a lot of sales synergies from that standpoint.

So, on mobile the effort that we are going to have is to be able to leverage our resources in Europe and to be able to start some sales resources in Latin America and in Asia .

We already have a presence in the Middle East and, obviously, we have a good presence in North America.

On the site analytics side, the approach that we are taking is that we have analytics sales specialist that can provide either sales or sales engineering support that will be managed centrally and will go hand-in-hand with their -- with another comScore salesperson to an account.

And basically the function of the account manager is to leverage the relationship and open the door.

And the sales specialist would essentially sell the product and make sure that we answer all the client questions and we move to a favorable decision.

So, we are not building a parallel sales force, so to speak.

We are building a specialist sales force that will complement our existing sales people.

And from a goals standpoint , our existing salespeople will get revenue credit for analytics sales, so they have a significant incentive to do this and avoid internal

Okay that's very helpful.

And my follow-up was, when you launched 360 it seems like -- I know this happened a few months later, but you announced a partnership with Omniture, where clients could opt to have your tags tag along with the Omniture tags.

And my hunch is that you have several clients that choose to go that route, maybe that's the only route that they had?

Maybe you could fill us in on that, and how might that get disruptive as you are launching a somewhat competitive product in the US?

Will those clients need to re-tag sites?

Is Omniture going to continue working with you going forward?

Well, the relationship and some of these implementations that have been implemented through Omniture have not really changed.

I'm not aware of a situation where it has changed.

Essentially this is something that is a choice that the client makes, and it is ultimately an agreement between the client and Omniture on whether they will send their tag through Omniture or directly to comScore.

Now, we -- as you know, in the digital space it's hard to -- you often have good relationships in competitive relationships at the same time.

So it's hard to avoid.

But, at the same time, we do have solutions for clients that may want to go the direct route to basically make the implementation pretty easy and seamless.

To be able to switch out of capturing -- of tagging and capturing the information.

Are there a significant number of clients that have gone that route in implementing 360 or --?

No, it's a minority at this point.

Okay.

Great.

Well, another great quarter.

You guys have had several strings in a row, particularly since the economic meltdown, if you will.

So, congratulations.

Thank you.

Our next question comes from the line of John [Merrick] with Oppenheimer & Company.

Please proceed.

Hi, guys.

It's actually [Jason Helfstein].

How are you doing?

A few questions.

So, I just want to clarify a few things.

The margin guidance for 2011, that's -- the implication is margin to be slightly up versus 2010.

That's GAAP correct?

Not taking into account the deferred revenue, the acquired deferred revenue?

It would factor that in, but that's really going to be decreasing as you know -- you may have been able to look at the back of the Press Release, and our guidance for the first quarter, we indicate what that amount is.

I think it's a little more than $1 million, or so.

And then it really drops off in the second quarter, it's a couple hundred thousand dollars, and then it's gone after that.

So, it's less than a $2 million impact for the whole year.

Right.

So, it really doesn't impact in your comments as far as margins for '11?

That's right.

Okay.

And then can you give out what the impact of acquisitions was for the fourth quarter?

And then what you think the impact of the acquisitions will be for 2011?

From a revenue standpoint?

Oh, in terms of the -- we talk about these things from the standpoint of the business as a whole.

They were both relatively small acquisition in terms of our ability to produce the results we did in the past quarter.

Okay so you have no pro forma adjustment?

No.

Okay.

And then, fourth quarter margins I think were higher than your guidance.

So I'm wondering, did you not spend money in areas that you had planned to?

And is that falling out of the first quarter and, at least in our model specifically, I think G&A was a lot lower, so --?

And then I've got one more follow-up.

I think, if anything, sometimes some of those things, Jason, are just timing in terms of when we were actually -- when we think we are going to be able to incur the costs and when we do.

Nothing more significant than that.

Okay.

And then, Magid, you did comment on what you guys are seeing in mobile and opportunities there.

What about social?

Are we starting to see that having any impact on your business, and perhaps some new clients and what they spend?

Sure.

Social is a major area of interest for clients.

And it has to do more than just measuring what the audience of Facebook or Twitter, et cetera.

It has a lot to do with the question that marketers are asking, which is, what do I do with social media?

How do I handle it?

And there are several aspects to that.

One aspect is how much commentary and user-generated content is there about me, and how widely is that being received?

And then other comment, the other aspect is, in terms of paid advertising, how should I use -- how should I think about social media for paid advertising?

So, we have a number of approaches to handle that in the mobile space this year.

And, there is also clearly a mobile element of it , which is -- which starts getting interesting when you start combining location-based with social-based kind of advertising.

So, it's all part of a comprehensive offering that we will be delivering and developing continuously throughout the

Thank you.

Our next question comes from line of Youssef Squali from Jefferies.

Please proceed.

Hi.

This is [Kip Paulson] for Youssef.

I have a couple of questions.

First, what was organic revenue growth in the fourth quarter, and how is organic deferred revenue growth?

And secondly, what's implied in guidance in terms of sub growth in pricing?

Thank you.

This is Ken.

I think in terms of the second part of it, in terms of pricing, we've continued -- our pricing practices with our customers have continued to do very well and specifically with all these different products, it really depends on customer relationships and that's not really something we talk about generally speaking.

From the standpoint of, as I mentioned before, in terms of our revenues, these are minor acquisitions, small acquisitions, in terms of the overall size of the enterprise now.

So, from the standpoint of the growth of the business, as Magid mentioned in our prepared comments, our core comScore business has really been the key driver in terms of our year-over-year growth.

Okay.

Great.

Thank you.

At our last question comes from line of Jim Boyle with Gilford Securities.

Please proceed.

Good evening.

Let's say 2013 and beyond, could you see your rather a surge in international revenue perhaps 25% to 30% share of total revenue?

Or would that be getting ahead of it?

No, we definitely see that as a possibility.

The two things that help us is that we continued making progress on our core business.

But then the news services that we are introducing, the mobile service and the site analytics service, they offer us -- they give us offerings that we can make available in markets where we would normally not go for basic audience measurement, just because the size of the advertising market would be very small there.

So, there are a lot of countries where we have a realistic and sizable revenue opportunity in terms of dealing with the mobile operator, in terms of dealing with some large customers from a site analytics standpoint.

Where we would normally not expand a lot of effort to just sell audience measurement services.

Okay.

I hadn't thought of it that way, but that makes sense.

Finally, putting macro economic impacts to one side this year, are there any other pricing pressure concerns that plausibly could crop up?

Nothing that is on our radar screen right now.

As Ken said, we are very pleased by the pricing trends that we have seen.

Essentially, we are enjoying very healthy renewal rates and renewal rates that are typically expanding the size of our relationships through price increases and through upsales.

And you can actually see that from the revenue statistics in growth among existing customers.

You can see that those were very strong.

And how are those healthy renewal rates compared to historical levels?

They are at or above historical levels.

Okay.

Thank you.

Yes.

We have no further questions at this time.

I will now turn the call over to the CEO, Magid Abraham for any closing remarks.

Okay, well thank you for your questions and for participating in today's call.

We are pleased with our continued business momentum and strong fourth quarter performance.

We are really enthusiastic about our business transformation and the opportunities that it represents.

In 2011 and beyond we look forward to speaking with you again in the future.

Thank you very much.

Thank you for your participation in today's conference.

This concludes the presentation.

Everyone may now disconnect, and have a great day.