CEO Steve Morris reiterated that growth for Arbitron will begin in 2008 after a "trough year" in 2007 to get PPM off the ground. Q3 revenues were up 6.4% to 96.5 million, but EBIT dropped 15.4% to 27.2 million, largely due to costs for the PPM rollout. That was in line with the company’s guidance and Wall Street expectations.
Noting this week’s announcement of a five-year contract with Radio One (10/16/07 RBR #202), Morris said the "sell-in" for PPM is nearly complete, although negotiations are continuing with some other important groups. So, the focus is now on rolling out PPM to more markets.
Noting the recent controversy over in-tab levels in Houston and Philadelphia, the first two PPM markets, one analyst wanted to know whether Arbitron had decided yet on whether to narrow its current 6+ target guarantee to the 18-54 target requested by the Radio Advisory Committee. Morris has promised an answer next month and said no decision has yet been made. But he insisted there is no issue of data validity and noted that it is impossible to always hit 100 in every demographic cell. "The data is valid," he declared.
As PPM rolls out to more markets in 2008, Arbitron noted that it will incur significant cost increases over diary measurement, but company officials also noted that the earliest PPM markets will also be generating higher revenues to offset those higher costs.
RBR observation: Morris was even asked about whether he expected anything of significance to come out of the planned test in Houston by would-be competitor The Media Audit/Ipsos, but the Arbitron boss said he had no information. Later in the call, Morris said that Arbitron was continuing to look into the possibility of using cell phones to gather PPM data, but noted that there are also problems with using cell phones, as opposed to the single-purpose pager-like devices now used for PPM. Use of Smart Cell Phone technology is a key part of the challenger’s business model. But while the wannabe is still in the testing phase, Arbitron is running full speed ahead with the PPM rollout and PPM-related projects. A key decision is coming in early 2008 on whether major advertisers will continue to back Project Apollo and pay up to increase the national panel and commercialize the operation. Apollo uses PPM to track consumer behavior and produce very detailed single-source marketing information for advertisers and agencies. But that detailed data is also quite expensive, so going the decision to go forward will require a big financial commitment by the marketers.