Message from Our CEO

The changes occurring in these markets are challenging our business and propelling us forward in new and exciting ways.

We’ve contended with the challenge of change throughout our 90-plus-year history. Our company began in 1923 with a 26-year-old founder backed by cash from friends and family. Nielsen grew quickly through the Roaring Twenties before stalling in the face of the Great Depression. Our response was to innovate. The new product we launched in 1933 is known today as retail measurement of sales of consumer products, initially in drug stores and grocery stores. Retail measurement rapidly developed into our first flagship product, and our clients’ fortunes have risen and fallen with their market shares ever since. In 1939, with a push from one of our U.S. clients, we made our first expansion internationally. It would have been safe to stay closer to home and expand first to Canada, but our client asked us to go to the UK, so we did, despite the onset of World War II. Short-term challenge led to long-term success and, today, we operate in over 100 countries.

In the following years, we parried a steady stream of challenges. Some of the most visible involved the ever-changing television landscape. We launched our television audience measurement product in 1950, initially focused on broadcast television. The subsequent decades brought the introduction of cable, satellite, VHS, DVR, video-on-demand, and now digital across a variety of screens and platforms. With each new challenge brought by the evolution of how content is distributed and consumed, we followed the consumer and adapted our measurement accordingly, repeatedly renewing and refreshing our business over and over again in the process. As a result, we’ve evolved from being known as the TV ratings company to one that provides media companies, agencies, and advertisers with a comprehensive view of their total audience for ads and content across all screens and platforms. This is known today as our Total Audience Measurement system.

We’ve repeatedly turned challenges into opportunities because we have a clear sense of who we are, confidence in our long-term vision, and a proven ability to execute. We are a measurement company that fuses data and science to help our clients understand what’s happening today, what will happen tomorrow, and how to act on this knowledge to deliver results that matter. We are the science behind what’s next.

2017 marks our 94th year as a company. For all 94 of those years, our measurement products have been the core of our business. This won’t change. We are the global leader in what we do: measurement of retail sales for fast-moving consumer goods in our Buy segment and measurement of audiences for the media industry in our Watch segment. These are our largest, best, and most profitable products. Our leadership position is bolstered by our unmatched global footprint spanning more than 100 countries, the integrity and depth of our data across both Watch and Buy, and world-class data science that helps us connect and integrate data from multiple sources to create highly useful and actionable measurement and analytics products for our clients.

As we move forward, we’ll strengthen and extend our leadership position by investing in more platform-oriented, open systems that enable more scalability, flexibility, and speed, particularly when connected directly to our clients’ systems. In our Buy segment, the most important example of this is our Connected System initiative. Our largest fast-moving consumer goods clients are seeking productivity in the face of a more challenging growth environment. The Connected System will bring more speed and efficiency to our clients, helping them to understand not only what happened, but also why it happened, and what to do next. Transitioning our clients onto the Connected System platform will be a multi-year process, but we’re confident in our long-term strategy and our ability to execute. This process is similar to what we’ve been executing on successfully in our Watch business over the past few years with our Total Audience Measurement system, and we have confidence in our ability to do the same in Buy. And as we do, it will lead to a stronger, more profitable business.

2016 In Review

Along with the challenges of 2016 came important learning, progress, and achievement. Total company revenue growth was 4.1% on a constant currency basis, reflecting the progress that we’ve made, as well as the more difficult growth environment in which we’re operating.

In our Buy segment, revenues grew 2.3% overall on a constant currency basis. Emerging Markets revenue grew 8.6% constant currency, driven by our continued investments in coverage and granularity, as well as our balanced strength with both local and global clients. The long-term tailwinds of population growth, a growing middle class, and ongoing urbanization will continue to drive demand for even more coverage and granularity of our measurement products in key markets like India, China, and Brazil.

Turning to Developed Markets, the environment was much more challenging, particularly in our largest market, the United States. Many of our largest fast-moving consumer goods clients are in a cycle of zero-based budgeting, sharply focused on productivity, and we are seeing the impact of this in our business. We are also seeing clients’ needs evolve, as they look for more speed, efficiency, and integration from our data and analytics, helping them manage their sales and marketing activities with more control and precision. The Connected System will help address this, bringing together our powerful measurement data and analytics capabilities into a single integrated and open platform. The Connected System will launch to an initial list of clients in 2017 and will continue rolling out more broadly as the year progresses and into 2018.

In our Watch segment, our top priority in 2016 was to gain broad marketplace adoption of our Total Audience Measurement system by both buyers and sellers of media. Our teams executed extraordinarily well on this, and we have solidified our position as the leading ratings provider today and for many years into the future. Our Total Audience Measurement system is perfectly aligned with what the market needs: independent, comparable measurement of audiences across all screens and platforms. The system is also robust and flexible enough to continue to deliver on market needs as they evolve in the future. Nielsen is the only company able to do this. Watch segment revenue grew 6.3% overall on a constant currency basis in 2016. This included 8.3% constant currency growth in Audience Measurement of video and text, driven by both the strength of our national television audience measurement product and growing adoption of our digital measurement offerings. In 2017, we will continue to drive client adoption of the Total Audience Measurement system as the foundation for the media industry’s ratings currency for the future.

Within the Watch segment, Marketing Effectiveness growth of 16.2% constant currency was driven in part by the Nielsen Marketing Cloud, which integrates Nielsen’s data management, analytics, media planning, and activation applications, all on a single platform to help advertisers reach consumers more efficiently and precisely and to help media companies sell advertising more effectively. We feel great about our position in this part of the market.

We also took steps to better align our portfolio with the future direction of our markets. We acquired Repucom, expanding our presence in the growing sports marketing business and the burgeoning native advertising market. We also acquired Gracenote, the leading provider of metadata for video, audio, and sports. Gracenote is a great business on a standalone basis, and its talent, data, and technology are highly complementary to our existing Watch portfolio. On the divestiture side, at the end of 2016, we exited a consumer segmentation business and some of our custom survey research services, both in the U.S. These moves enable us to shift more focus and resources to our core business priorities.

We generated record free cash flow of $941 million in 2016, up 16.5% versus the prior year. Growing free cash flow enables us to invest in our growth initiatives while also delivering incremental value for our shareholders via a growing dividend and our ongoing share repurchase program. In total, in 2016, we returned more than $850 million to shareholders. As of year-end 2016, we had $438 million remaining under our existing share repurchase authorization. We remain committed to delivering incremental shareholder value through our balanced approach to capital allocation.

Also in 2016 . . .

• We strengthened our focus on data privacy and data security, reflecting heightened regulatory attention, especially in Europe. We engaged policymakers to help them to understand the positive role Nielsen’s data products play in creating high skilled jobs and improving the functioning of markets.

• We published our first Global Responsibility Report in 2016, based on an internationally recognized framework for sustainability reporting. We launched the Nielsen Foundation to fund investments in the communities and markets in which we live and work. These include Data for Goodprojects, such as Project 8, a data platform designed to help forecast food and water needs in emerging markets with growing populations and changing demographics.

• We continued to advance our Diversity & Inclusion objectives internally, which are key to our growth, strength, and ability to innovate. For the first time, we made Fortune’s 50 Best Workplaces for Diversity list. For the third year in a row, we were recognized by DiversityInc’s Top 50 Companies for Diversity and, for the fourth year in a row, we received a perfect score for the Human Rights Campaign’s Best Places to Work for LGBT Equality. We also ranked #4 on Diversity MBA’s Best Places for Women & Diverse Managers to Work. This external recognition is an objective validation of our significant focus and progress.

Our Future

As we look out into 2017 and beyond, independent measurement will remain at the center of our business, where it has been since our founding 94 years ago. That said, the manner in which we produce and deliver measurement to our clients in the marketplace will continue to evolve, as we increasingly leverage technology and automation to adapt to the changing landscape.

Historically, most of our measurement products drew from a single data source and we produced the highest quality, most useful measurement products that we could from that single data source. Today a growing portion of our measurement portfolio integrates data from multiple sources, yielding better coverage, more granularity, and more usefulness for our clients.

To do this well requires world-class data science and data integration capabilities, which have been strengths of Nielsen for decades. The science of combining rigor with innovation is core to our ability to deliver what our clients need. Central to this is our deep, well-sourced reference data, the connective tissue that allows us to integrate data sets that weren’t originally designed to be put together. Reference data has always been essential to our business, but its importance will only continue to grow as the complexity of our measurement products increases. This is the future of measurement.

With the growing abundance of data in the markets we serve, no one company, including Nielsen, will own all the data it needs to create the best possible measurement and analytics products. Collaborative models are the key to the future, and they are already playing a large role in our business today. For example, with the launch of our Connected Partner Program in 2016, we opened up data pipelines to enable Nielsen, our partner companies, and clients to connect and collaborate efficiently and at scale. Collaboration models like this amplify the underlying value of our measurement data, the core of our business.

Our product portfolio will continue to evolve, moving from today’s point solutions to systems of connected datasets and applications that link directly with our clients’ business processes and systems. The Connected System, the Nielsen Marketing Cloud, and our Total Audience Measurement system are all examples of this. In conjunction with this shift toward a system-based product architecture, our commercial model will gradually transition from today’s professional services business model to more of a data-as-a-service and software-as-a-service business model. As we become more technology-centric, employing more automation and machine learning in our business, we’ll deliver more speed, efficiency, and value for our clients; a stronger, higher-margin business for Nielsen; and incremental value for our shareholders.

Closing

In 2016, we renewed our company values: Open, Connected, Useful, and Personal. These values anchor our company culture, inform our decisions, and guide our business and personal conduct and growth.

Open: We design our products and systems to be open, more easily connecting with and leveraging external collaborators. We’re also open with one another, seeking to collaborate with colleagues with different backgrounds and experiences than our own.

Connected: Our products are increasingly connected to one another, forming powerful systems, which then connect directly to our clients’ systems. And as individuals, we’re connected by shared objectives and shared risk, supported by the connected platform of our global company.

Useful: The more useful, the more valuable. We prioritize usefulness over perfection as we design and produce our measurement and analytics products. “Useful” also drives a client-centric mindset externally and a low-bureaucracy bias internally.

Personal: Because we feel a sense of personal ownership of our company, its culture, and its future, we are personally accountable for our contributions. We also have the freedom to pursue progress in the areas that matter most to each of us personally, and this adds up to collective strength.

We’ll continue to align our business and culture to these values as we look out into 2017 and beyond, with confidence in our strategy and our ability to execute.

Thank you for your investment and trust in our company.