Made to measure (pg. 2)

Arthur C. Nielsen Sr. founded his namesake company in 1923 to perform surveys of the production of industrial equipment. Over time, however, he saw a larger opportunity in helping companies take the mystery out of their marketing. As the retail pioneer John Wanamaker once famously mused: "I know I waste half my money on advertising. I just don't know which half." Nielsen set out to solve that riddle by counting, measuring, and analyzing what people buy, eat, read, watch, listen to, and otherwise consume. In the process he fathered one of the most powerful business concepts of the 20th century: market share. Today, as it happens, Nielsen is headquartered in the refurbished Wanamaker's department store building in Manhattan.

Having popularized the idea of market share, Nielsen Sr. and son Arthur Nielsen Jr. made sure over the years to seize as much of it as possible. Nowhere were they more successful than with the television ratings system, launched in 1950, that made Nielsen a household name. Almost six decades later the service still functions as a near-monopoly. Nielsen has honed its methods over the years, but some ad buyers and media executives are still critical that Nielsen derives its national TV ratings from a mere 14,000 "Nielsen families" who have meters hooked up to their TVs. Nielsen also rates local and cable viewership, among other things. Altogether, Nielsen Media Research makes up roughly one-third of the company's $4.5 billion in sales.

Another third of the company's revenues is generated by A.C. Nielsen, which commands more than 60% of the retail research market globally. Overall, the company gathers data by employing two separate armies. One comprises some 31,000 people worldwide who do nothing but organize and retrieve retail sales figures from stores. The other includes more than 700,000 people who participate in ongoing research panels in which, for modest sums, they anonymously lay their consumption patterns bare to Nielsen's statisticians.

How do companies use Nielsen's data? Say Nestlé wants to introduce a new flavor of Häagen-Dazs ice cream. For starters, Nielsen can tell them that Pittsburgh is the ice cream buying capital of America. (Who knew?) One Nielsen business, BASES, can forecast how the flavor will do before a single pint is produced. Another can determine the best addresses to locate a new Häagen-Dazs shop. The main A.C. Nielsen figures can parse by market how the flavor is doing against rivals. And the media side of Nielsen can help figure out how and where ads are sold, and even monitor passing mentions of it on TV shows and blogs.

The largest chunk of the company's revenues outside of media and retail research comes from a business information and trade show unit that includes The Hollywood Reporter, Billboard, and Adweek magazines and that today represents about 10% of sales.

Nielsen's current mix of businesses was mostly cobbled together by a Dutch company called VNU. The Nielsen family had sold the outfit after the death of Arthur Sr. in 1980. VNU later acquired the Nielsen portfolio and combined it with complementary ventures, but did a lousy job integrating the operation. With the buyout market booming in 2006, VNU became a target. And after some due diligence, the private equity firms banded together and swooped in. "We felt this was a company that was not broken, that in fact had a very strong franchise and talented people with significant upside potential," says Alex Navab Jr., a KKR partner who oversees media investments. "However, the company was undermanaged." The new owners needed an executive who could create a cohesive vision.

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The son of a cement salesman, Calhoun grew up in Allentown, Pa., and joined GE's management training program right after finishing his accounting degree at Virginia Tech. Known at GE for a willingness to tackle big jobs, Calhoun takes pride that despite wearing an insulin pump to treat diabetes, he has an athletic life. ("I used to play 54 holes a day with Welch, and I still can," he says.)

Calhoun says there was no friction with GE CEO Jeff Immelt. What made him jump when he did, he says, was the realization that he would be on the road 90% of the time in 2006, much of that abroad. He decided he wanted to spend more time with his wife, Barbara, and the two of their four kids who hadn't yet left for college. At Nielsen he works mostly out of a bland satellite office in Wilton, Conn., a short drive from his house. "I miss the breadth of GE today," says Calhoun. "I can't tell you I don't miss that. So whatever I had to do had to be really different."

His biggest concern about taking the Nielsen gig was whether six private-equity egos could coexist. But so far, he says, it's been smooth sailing. It can't hurt that Nielsen looks to be on track to achieve ownership's first-year goal of raising operating income by at least 20%. Calhoun has cut costs (by, for instance, outsourcing tech operations) and acquired new, higher-growth businesses. On a pro forma basis, revenues for the nine months ended Sept. 30 were $3.4 billion, up 11% from 2006, while operating income increased 19% to $196 million. If Calhoun can keep it up, he'll double the profits of the company within five years of its changing hands. And thanks to the magic of leverage, the $4 billion in equity that the company's owners invested could double or triple in value.

Next page: Made to measure (pg. 3)

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