Audience measurement is a critical component of the advertising ecosystem. Advertisers want to know who they are reaching when they buy advertisements, regardless of the medium. Those selling advertising space or time do not always themselves know how many users are listening or viewing. In broadcast media, such as radio and terrestrial television, the broadcaster has no way of knowing how many people are tuning into a signal once it is beamed out.

One company dominates the field of audience measurement: Nielsen. The company began measuring US radio and television audiences in the 1940s and 1950s; US advertisers still rely on the company’s metrics. Nielsen has a strong presence even in countries where audience measurement is overseen by industry bodies, such as the UK. In that country, TV ratings are managed by the Broadcasters’ Audience Research Board Ltd. (BARB), a non-profit organisation owned by a group of UK broadcasters and by the Institute of Practitioners in Advertising, an ad industry trade group. BARB contracts with several third-party research firms to perform the actual audience measurement, however. Chief among them is Nielsen, which handles ‘metering’ (measurement), data collection and data processing for BARB.

The techniques used for measuring television audiences have changed little since 1950; in some American TV markets, Nielsen’s only available data comes from paper diaries in which participants log their weekly viewing. In mid-size and large TV markets, Nielsen also uses metering technology which automatically records which station a family is viewing and in some instances who within a household is watching. Nielsen has used both paper diaries and electronic metering for decades.

The introduction of new digital mediums, such as the world wide web and mobile phones, has presented a new set of challenges for audience measurement. Nielsen has responded through a series of acquisitions, buying startups which fill gaps in its offerings. The Nielsen Online division, which tracks Internet traffic and audience behaviour, was built on the back of two of Nielsen’s acquisitions: NetRatings and BuzzMetrics. Nielsen acquired majority interests in both companies during 2006 and bought the remainder of both in 2007. BuzzMetrics tracks online discussion on blogs and message boards, while NetRatings measures online audiences. BuzzMetrics itself was formed through a series of mergers involving Israeli startup Trendum and US startups Intelliseek and BuzzMetrics.

Last summer Nielsen acquired Telephia, a San Francisco-based startup that measures the reach of mobile content, for example the number of mobile games users download or how often mobile users surf the web on their phones. Nielsen launched its Nielsen Mobile division shortly before the acquisition, and Telephia became the core of that division. Nielsen’s acquisitions continue: just yesterday the company announced the acquisition of Audience Analytics, whose software will help Nielsen measure interactive TV and video-on-demand usage on digital set-top boxes.

Which companies might pop up on Nielsen’s M&A radar in the future? Startups continue to proliferate in the audience measurement space. Last week UK-based Magpie raised €670,000 to continue development of its Brandwatch platform, which like BuzzMetrics tracks users commentary on blogs and forums. Several other startups are focusing on tracking audience behaviour in social networks: Xtract, which analyses links between users; Peanut Labs, which runs market research surveys over social networks; and Invite Media, which tracks advertising in social networks.

US-based Mochi Media has developed a metering tool for Adobe Flash files, which complements the company’s primary business as an online advertising network for casual games sites, as Flash is a popular platform for casual games development. Visible Measures, another US startup, measures the audience for online video. Last month the company raised €9.2 million from General Catalyst Partners and Mohr Davidow Ventures.

Nielsen is not the only potential acquirer of audience measurement startups, nor are trade sales the only possible exit for these companies. comScore, a venture capital-backed rival of Nielsen in the internet analytics business, floated last year on NASDAQ. comScore is much smaller than Nielsen, but has close to $100 million (€68 million) in cash on hand and a history of its own acquisitions, from market research firms Q2 Brand Intelligence and SurveySite (acquired in 2004 and 2005, respectively) to the purchase of Jupiter Media Metrix’s assets in 2002, making it a possible acquirer. Lastly, despite Nielsen’s overall size, that company does not yet dominate audience measurement for digital media. As comScore itself proves, there is still room for sizeable, independent rivals to Nielsen; perhaps a company from this latest crop of startups will be one of them.