Nielsen Ratings
Nielsen, A. C. (05 September 1897–01 June 1980), market research engineer and business executive, was born Arthur Charles Nielsen in Chicago, Illinois, the son of Danish immigrant Rasmus Nielsen, a business executive, and Harriet Burr Gunn, a teacher. He received his early education at the grammar school in Berwyn and Morton High School in Cicero. He went on to the University of Wisconsin, where in 1918 he obtained a B.S. in electrical engineering, delivering the valedictory address and graduating with the highest grades a student had ever achieved there. In 1918 he also married Gertrude B. Smith; they had five children. That year he enlisted in the U.S. Naval Reserve as an ensign and served during World War I on the USS Manchuria.
After returning to Chicago in 1919, Nielsen first plied his engineering skills at a number of firms. Anxious to branch off on his own, he turned to his former fraternity brothers to raise $45,000, and the A. C. Nielsen Company opened its doors in 1923. The company did performance surveys of industrial equipment and provided manufacturers of industrial goods with product evaluation reports. By 1930 the company’s annual sales had reached $205,854. But as the depression continued, sales declined 75 percent and the staff fell from forty-five to six. With only one prospect on the horizon, Nielsen persuaded his fourteen-year-old son, Arthur, Jr., to invest his life savings of $54 in the company. The funds enabled Nielsen to travel to New York City, where he made the sale. His son learned an important lesson in capitalism and recovered his investment many times over, eventually stepping into his father’s shoes as CEO.
With industrial manufacturing in a slump, Nielsen launched the Nielsen Food and Drug Index, a research service that recorded the retail flow of grocery and drug brands by regular audits of carefully selected samples of stores.Using this information, food and drug manufacturers could measure the sales of their products against their competitors’ and establish what Nielsen called “share of market”—which, Nielsen believed, could provide the facts upon which to base business decisions. He also believed that these data could be obtained from small samples, which, if systematically and continuously collected, would provide a “moving picture” of a market. Most executives of the 1920s and 1930s, however, were unfamiliar with statistical methods and viewed his work with skepticism.
Nielsen remained undaunted. In 1936 he learned of the existence of the Audimeter—a mechanical device that made a minute-by-minute record of when a radio was on and where its dial was set—that was being developed by Massachusetts Institute of Technology professors Robert Elder and Louis Woodruff. Always the engineer, Nielsen acquired the invention in 1936, and after some technical modifications he patented it under his company name two years later.
After a four-year pilot project with Audimeters installed in 200 midwestern homes, the company added 800 homes on the East Coast and began offering the Nielsen Radio Index (NRI) on a commercial basis. However, customer response to the NRI was slow. Broadcasters, publishers, and advertisers disparaged the service, believing that since radio signals were intangible there could be no empirical means of verifying the accuracy of Nielsen’s ratings. They preferred the cheaper services of the Cooperative Analysis of Broadcasting (Crossley ratings) and C. E. Hooper (Hooperatings), both of which used telephone calls and door-to-door interviews. Yet statistics prevailed: Crossley folded in 1946 and Nielsen bought Hooper’s assets in 1950. That year, with 1,500 Audimeters in place representing 97 percent of the United States in coverage area, Nielsen emerged the undisputed ratings champion.
A true visionary, Nielsen then took a chance on a device that fifty years later would prove to be an essential household appliance and business tool—the computer. His son Arthur, Jr., stationed at the army’s Aberdeen Proving Grounds during World War II, was assigned to the detail responsible for constructing a building that would house ENIAC, the thirty-ton archetypal computer designed to calculate ballistic problems for large weaponry. Arthur, Jr., sensed that the machine could prove useful for business applications. He persuaded its inventors, J. Presper Eckert, Jr., and John W. Mauchly, to call upon his father after the war.
In 1946 they signed a contract to deliver a prototype in twelve months for the princely sum of $150,000. After four years of cash problems and delays, Eckert and Mauchly sold out to Remington Rand. Undeterred, Nielsen arranged with Thomas Watson, Jr., the son of IBM icon Thomas Watson, Sr., to complete the development work. Univac I, the world’s first electronic computer, was finally delivered to Nielsen in 1955, and it enabled the Nielsen Company to produce its reports faster, more cheaply, and more comprehensively.
In the early 1950s the Nielsen Company adapted its Audimeter methodology to television, finally abandoning radio ratings in 1964. The company, which was acquired by Dun and Bradstreet for $1.3 billion in 1984, had earned a position as the premier TV ratings service.
Nielsen did more than develop market research tools. He created services that reduced the cost of distribution—marketing, sales, and advertising—involved in moving goods from factory to consumer. According to his son Arthur’s oral history, “His services caused essential goods to be priced lower than would otherwise be possible, resulting in higher standards of living through the world.”
Later in life Nielsen turned to philanthropic activities, including support for hospitals, medical research, and organizations devoted to education in economics and political economy. His son noted that Nielsen “gave much of his wealth away” to those “born in poverty with no chance to rise on that account,” while withholding his money from those he believed “could have wrecked their lives by not having to work.” Although a series of strokes in the 1970s led him to hand over the reigns of the company to his son, Nielsen never officially retired. He died in Chicago.