Chief Executive Officer at Nielsen
Good morning. Thank you for joining our third quarter earnings call. Before we dive into our strong Q3 results, I want to start by taking a step back to provide context around what is happening in the media industry, and why Nielsen is becoming even more relevant as viewing habits continue to accelerate towards streaming. The media industry is going through unprecedented change only accelerated by the pandemic with an audience that is watching programming whenever, wherever and on whatever device she chooses. An industry built on linear TV programming, supported by ads is evolving to an industry that is moving to streaming content supported by subscribers and ads. According to our September 2021 release of the Nielsen Gauge data, just over 50% of viewing took place over broadcast and cable, while streaming alone grew to 37% in the 18 to 54 demographic. This compares to 2016 when more than 75% of viewing was on broadcast or cable. The evolution of our solution mirrors this massive shift, and this context is important to keep in mind as you read the news. It is evident that media measurement will be dramatically different five years from now, and we are leading the industry's evolution despite the recent headlines.
As the media ecosystem and audience viewing becomes more fragmented, having a single, independent cross-media measurement solution across streaming, broadcast and cable is essential to the industry. Both the World Federation of Advertisers, which represents advertisers globally and the U.S.-based Association of National Advertisers have put forth principles around measurement integrity and standards. Nielsen ONE, which is focused on the future of measurement aligns with these principles. We have laid out a clear time line leading up to the Q4 2022 launch of Nielsen ONE and we are looking at opportunities to accelerate this. Nielsen alone is uniquely positioned to provide the industry with a currency-grade, cross-platform measurement solution. Let me walk you through some facts about our unique market position. First, our approach to Nielsen ONE is big data, validated by panel. Over time, we have built partnerships with a wide variety of industry participants that now give us visibility into hundreds of millions of big data inputs on TV for return path data and billions of impression connected TVs, computers and mobile devices that we combine with robust, opt-in and audited panels to correct for biases and other limitations of big data.
This uniquely allows us to provide persons-level measurement that is representative of the entire U.S. population. Measurement tools derived on big data alone cannot do this. Potential competitors who want to optimize TV may claim that they can use individual-level information from other big data sources. But big data has flaws and biases. It lacks rich detail about who the people are or it underrepresents diverse populations and certain age groups. Big data alone might work for targeting and optimization, but it does not work for currency-grade measurement. Second, advertisers want independent measurement as evidenced in recent public statements by leading advertisers such as P&G and Anheuser-Busch. Walled gardens are complex and they cannot provide the independent holistic view of the market that Nielsen does. Stitching together data sources from multiple sources using different methodology would only further add to the complexity. Third, Nielsen is deeply embedded in the media ecosystem across buying platforms such as Mediaocean and with advertisers and publishers who want to transact on a common fact base. And finally, Nielsen is the trusted leader in the industry with a proven history of building alignment across the ecosystem of media buyers and sellers. I also specifically address our accreditation status for traditional broadcast television in the U.S. with the Media Rating Council, or MRC.
As discussed on previous calls, during the height of the COVID pandemic, we had limited in-home field work. As the pandemic continued, we made changes to adapt operationally, including changes to our maintenance procedures. We disclosed those changes and the impact on estimates and have since addressed the outstanding maintenance-related issues. This was obviously a fluid and unprecedented time for all of us. We followed MRC protocols around logging changes, but we accept the constructive criticism that we could have better communicated changes and their impact to clients. As a result of all these factors, MRC members voted to suspend accreditation of our national and local TV services in August. We believe in accreditation and fully support the audit process. In fact, we continue to be the only service audited across our products. We are in continuous dialogue with the MRC, and we've also engaged an external firm to support our efforts toward remediating outstanding issues. It's a methodical process and a focused work plan, all of which are aligned with the MRC's feedback. Our panel recovery efforts are well underway, and we're already back to more than 40,000 homes. We are on track to reach 41,600 homes by Q1 of 2022, which is our target, and we will continue to expand beyond that.
The Nielsen panel remains a key differentiator. I remind you that no other provider has a representative, empirical person-level panel. We will have more to share in the coming months, but I can assure you that getting reaccredited as soon as possible is a top priority. I would add that today, Nielsen remains the de facto audited currency. Across the board, broadcast, digital-first, audio, agency and advertiser clients continue to use our currency ratings every day to drive critical business as they did in this year's media upfront. We have not been perfect, but we believe in the integrity of our ratings and our high-quality panels that are foundational to measuring audiences. I am incredibly proud of the way our teams have executed over the past 18 months, demonstrating resilience and courage as we adapted to new ways of working during the global pandemic. And I want to thank you all for your dedication. You'll hear more from Linda in a few minutes, but I'd also like to touch on our third quarter financial results. We reported another strong quarter, building on our track record of execution and demonstrating continued progress on our strategic growth plan. Revenue grew 6.6% on an organic basis including 4.4% growth in Audience Measurement and 12.5% growth in Outcomes & Content. Adjusted EBITDA grew on a constant currency basis.
Our margins remained strong at 43.3% in the third quarter. As expected, these were down year-over-year as some code temporary costs return. Adjusted EPS of $0.45 increased from $0.42 in the prior year, and free cash flow year-to-date is $514 million, up from $383 million a year ago on a comparable basis. Following our strong performance year-to-date, we are raising our 2021 revenue and EPS guidance, and we are raising the low end of our ranges for adjusted EBITDA and free cash flow. Let's turn to business highlights. In Audience Measurement, we made good progress on product milestones ahead of the Q4 2022 launch of Nielsen ONE. Let me start with some recent examples using coverage, comparability and resiliency as a framework. Starting with coverage. Our objective is full coverage across all audio and video media, and we already have the broadest coverage in the industry. We have full coverage in national and local broadcast and audio and a leading position in digital, which includes streaming services across both ads and content. In Digital Ad Ratings, we have the ability to measure 75% of connected TV media spend and approximately 90% of total video digital spend across computer, mobile and connected TV. We've expanded our coverage of streaming content, which we measure at both the platform and individual program level. Platform measurement is enabled by our streaming meter.
Since launching in January 2021, we've tripled the sample size of streaming meter homes and are now at 18,000 homes. We've increased the number of platforms covered to 17 from 10 earlier this year and we now cover around 85% of the entire streaming market. Our expanded sample size will allow us to track newly introduced services faster with greater stability. We're using big data validated by panels to enhance our coverage at the program level, which includes the recently completed integration on the Roku platform. This adds to the program data collected through our household panels and we've increased the number of programs measured by 30% year-to-date. And we are continually improving our methodology. We recently rolled out our new Portable People Meter wearables to better measure media consumption outside of the home. Next, comparability. The ultimate measure of comparability is being able to measure all content and ads in a common methodology whether it's linear or streaming. This means making TV measurement more like digital. A clear proof point is our move to a common sample as we include broadband-only homes in the local panel in January 2022. This will enable the industry's transition to trading on impression-based measurement and result in more complete, precise and representative measurement. Media sellers and buyers such as Nexstar, Hearst and MAGNA Global, all voice support of these initiatives.
In National, we are incorporating big data into the measurement, which will be validated by our panels, and we're on track to share impact data with clients in January. The big data integration will enable addressable advertising, it will increase stability and support long tail channel measurement in the currency ratings. As a first step, we've already shared initial evaluation data with the MRC and their TV committee. The final point is resiliency or consistency. I discussed earlier the importance of our panel in ensuring big data is validated and fully inclusive and representative. Having a robust opt-in panel is even more important to ensure that our measurement solutions are durable and can adapt to evolving changes in the technology and privacy landscape. Clients see the value in our enhanced and expanded audience measurement products, and it is driving strong performance. Growth in the U.S. was led by national media clients and digital-first clients and we saw particular strength in digital products from our national media client base. Streaming is becoming increasingly important to our clients and the simplification of our streaming solutions makes these products more accessible. We've had key learnings with both media sellers and buyers.
Vevo, our global video hosting service, recently expanded their agreement with an emphasis on our Digital Ad Ratings, connected TV capabilities, and Apple added streaming platform ratings in addition to their current usage of content and national TV ratings. On the buyer side, GroupM recently leveraged our platform ratings in a thought leadership piece for global marketers. And in fact, 14 top agencies are using Nielsen's content ratings. The shift to streaming is creating a greater need for cross media measurement globally. Sweden is the latest example. There, Nielsen has recently been endorsed as their full-service provider of cross-media measurement. In the U.S., the enhanced value and belief in the Nielsen ONE road map continues to drive strong renewals. This year, we've renewed important contracts across national, local, audio, digital and agency clients. Both Meredith Corporation and Whitehardt, a broadcast and digital media agency, recently renewed in mobile TV. Turning to Outcomes & Content, which grew 12.5% year-over-year on an organic basis. In Audience Outcomes, we help clients across the marketing cycles, plan, analyze and maximize their marketing investments. Just as in Audience Measurement, advertisers are looking for common metrics to help drive decision-making in a complex environment.
We are focused on driving growth through market and vertical expansion, and we are demonstrating success. We are connecting our cross-media measurement to outcomes, which only Nielsen can do. Starting with market expansion, we're pleased with our July acquisition of TVTY, a leading TV attribution provider, and we're focused on leveraging Nielsen synergies to sign on new clients in the U.S. and Europe. We are expanding our industry coverage of our predictive ROI tools, which are used by advertisers, agencies and media owners, and now cover more than 75 countries globally. We are deepening our penetration with advisers across a broad range of industries. We further grew our relationship with Microsoft. And in the retailer vertical, we're working with Petco to help fuel their media investment decisions. In Europe, we're working with Ria Money Transfer in the financial services sector. And in Asia Pacific, we've won [Avon] in health care, MitoQ in wellness and Suntory in spirits. In sports, we see continued stronger partnerships around critical sports intelligence. We expanded our relationship with FIFA to help them enhance their commercial strategy, and we worked with Mondelez on their 2021 Olympics investment. Earlier this week, we announced a new offering that uses proprietary Nielsen data to help college sports teams demonstrate the marketing value of their athletic program.
Earlier this week, we announced a new offering that uses proprietary Nielsen data to help college sports teams demonstrate the marketing value of their athletic program with Duke Men's basketball signing on as the first client. Our global capabilities uniquely makes us a strong partner for global platforms. We recently entered into an agreement with Spotify, who is using our media planning software in 18 markets to help them understand the incremental reach on their platform. And we're also working with TikTok in various markets around the globe to help them demonstrate the effectiveness of their platform. On the product side, we launched new formats of Total Media Resonance, our upward funnel offering that leads an advertisers' media plan to brand metrics with a faster solution for advertisers and a new offering for media owners. We also went live with our cloud-native multi-touch attribution offering. Turning to Outcomes & Content Services. We are the market leader in metadata, and we are building on our global leadership position with geographic expansion and new solutions beyond the core metadata business. In the U.S., Gracenote is now contracted with all of the top 10 MVPDs as measured by subscribers having acquired two additional providers earlier this year.
In our top European markets, our market share is just under 20%, which provides a strong runway for growth because the remainder of the market is highly fragmented internal or point solutions. We've continued to win new business, and we are poised to accelerate our market share as we migrate new clients in 2022, extend into incremental geographies and increase our customer coverage in the markets in which we already operate. The U.S. and Europe are our largest markets, but we also have particular strength in Australia, Brazil and Mexico and several other big markets are in development. Ahead of the 2022 Beijing Winter Olympics, we published the Gracenote Virtual Medal Table, forecasting which countries will take home metals enabling clients to deliver Olympics-focused stories across digital and broadcast properties. On client wins, we renewed our relationship with LG, adding services to help them expand their global service coverage and enhance the quality of their service. We are focused on the Gracenote ID becoming the universal solution for discovering content. And as content spend continues to grow, this creates opportunities to help content distributors better represent their programs in search and better understand and manage their catalogs. The ultimate goal is for the Gracenote ID to serve as a unifier across all content, similar to a UPC code in the retail industry to help clients answer key questions around licensing and distribution.
Let me sum up. I opened the call discussing the massive shift in audiences and its impact on all of our clients, which is creating opportunity for Nielsen. In Audience Measurement, we are solving for a critical need in the industry with the development of Nielsen ONE. In Outcomes & Content, we are helping clients to maximize their investments in advertising and drive their content strategies. As you may have seen, we recently unveiled our new brand identity, which reflects the ongoing transformation of our culture and redefined strategy. And you'll see us continue to sharpen the narrative around the core strengths that differentiate Nielsen in the marketplace. Our purpose is to power a better media future for all people. We're well positioned to do so as the information services market leader for the media ecosystem. I look forward to keeping you updated on our continued progress.
I'll now turn the call over to Linda to review the financials.