NETRATINGS INC - 10-Q Quarterly Report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2002

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-27907

NETRATINGS, INC.

(Exact name of Registrant as specified in its charter)

Delaware		77-0461990
(State or other jurisdiction of incorporation of organization)		(I.R.S. Employer Identification No.)

890 Hillview Court Milpitas, California		95035
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (408) 957-0699

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date:

The number of shares of the Registrant’s Common Stock outstanding as of November 7, 2002, was 33,611,594.

NETRATINGS, INC.

FORM 10-Q INDEX


Part I.	FINANCIAL INFORMATION	3

Item 1.	Condensed Consolidated Financial Statements	3

	Condensed Consolidated Balance Sheets—September 30, 2002 (Unaudited) and December 31, 2001	3

	Condensed Consolidated Statements of Operations—Three and Nine Months ended September 30, 2002 and 2001 (Unaudited)	4

	Condensed Consolidated Statements of Cash Flows—Nine Months ended September 30, 2002 and 2001 (Unaudited)	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24

Item 4.	Controls and Procedures	24

Part II.	OTHER INFORMATION	25

Item 1.	Legal Proceedings	25

Item 2.	Changes in Securities and Use of Proceeds	25

Item 6.	Exhibits and Reports on Form 8-K	25

	Signatures	27

	Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	28

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NETRATINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

	September 30, 2002			December 31, 2001
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	93,643		$	87,483
Short-term investments		156,790			235,080
Accounts receivable, net		10,625			4,371
Due from related parties		2,364			2,877
Prepaid expenses and other current assets		3,795			1,088

Total current assets		267,217			330,899
Property and equipment, net		4,525			2,402
Deferred acquisition costs		—			3,565
Intangibles		25,797			—
Goodwill		49,828			—
Other assets		5,882			4,833

Total assets	$	353,249		$	341,699

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,723		$	2,834
Accrued liabilities		19,617			6,362
Deferred revenue		12,214			7,031
Capital lease obligations		—			89
Due to related parties		5,300			6,915
Restructuring liability		8,217			—

Total current liabilities		49,071			23,231

Minority Interest:		6,247			—

Commitments and contingencies

Stockholders’ equity:
Common stock, par value $0.001:
Authorized shares: 200,000
Issued shares 33,608 and outstanding shares 32,108 at September 30, 2002; issued and outstanding shares 33,154 at December 31, 2001		34			33
Additional paid-in capital		420,129			399,836
Deferred compensation and other costs		(19,031	)		(25,939	)
Accumulated deficit		(82,571	)		(55,462	)
Treasury stock		(20,630	)		—

Total stockholders’ equity		297,931			318,468

Total liabilities and stockholders’ equity	$	353,249		$	341,699

See accompanying notes to the condensed consolidated financial statements.

NETRATINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2002			2001			2002			2001
Revenue	$	8,698		$	5,582		$	20,294		$	18,393
Cost of revenue		4,659			3,441			11,187			10,083

Gross profit		4,039			2,141			9,107			8,310
Operating expenses:
Research and development		2,727			1,723			6,126			5,659
Sales and marketing		4,081			3,358			10,452			11,950
General and administrative		1,583			1,486			4,637			4,512
Restructuring expenses		—			—			6,969			—
Acquisition expenses		—			—			3,033			—
Amortization of intangibles		806			—			1,416			—
Stock-based compensation		2,281			2,476			7,153			7,568

Total operating expenses		11,478			9,043			39,786			29,689

Loss from operations		(7,439	)		(6,902	)		(30,679	)		(21,379	)
Loss from joint ventures		(266	)		(1,665	)		(2,377	)		(4,334	)
Interest income, net		1,690			3,815			5,908			12,556

Net loss before minority interest		(6,015	)		(4,752	)		(27,148	)		(13,157	)

Minority interest		39			—			39			—

Net loss	$	(5,976	)	$	(4,752	)	$	(27,109	)	$	(13,157	)

Basic and diluted net loss per common share	$	(0.18	)	$	(0.14	)	$	(0.82	)	$	(0.40	)

Shares used to compute basic and diluted net loss per common share		33,468			32,972			33,022			32,784

See accompanying notes to the condensed consolidated financial statements.

NETRATINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

	Nine Months Ended September 30,
	2002			2001
OPERATING ACTIVITIES
Net cash (used in) provided by operating activities	$	(5,373	)	$	1,445

INVESTING ACTIVITIES
Acquisition of property and equipment		(1,941	)		(1,252	)
Purchase of short term investments		(320,546	)		(552,632	)
Sale of short term investments		394,373			581,719
Acquisitions, net of cash acquired and investments in joint ventures		(41,576	)		(1,755	)

Net cash provided by investing activities		30,310			26,080

FINANCING ACTIVITIES
Proceeds from stock issuances		1,942			2,165
Stock repurchase		(20,630	)		—
Payments on capital lease obligations and notes payable		(89	)		(114	)

Net cash (used in) provided by financing activities		(18,777	)		2,051

Net increase in cash and cash equivalents		6,160			29,576

Cash and cash equivalents at beginning of period	$	87,483		$	47,610

Cash and cash equivalents at end of period	$	93,643		$	77,186

Supplemental non-cash disclosures:
Accrual of stock issuance costs	$	—		$	2,965

Stock issued related to acquisitions	$	16,760		$	—

See accompanying notes to the condensed consolidated financial statements

NETRATINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. BASIS OF PRESENTATION

The accompanying financial statements of NetRatings have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The balance sheet as of December 31, 2001 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying financial statements should be read in conjunction with the audited financial statements and notes thereto included in NetRatings’ annual report on Form 10-K for the fiscal year ended December 31, 2001.

The financial information included herein reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair presentation of the results for the interim period. Operating results for the three and nine months ended September 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002.

2. LITIGATION

Securities Class Action Complaint

A class action lawsuit was filed on November 6, 2001 in the United States District Court for the Southern District of New York on behalf of purchasers of NetRatings common stock alleging violations of federal securities laws. The case is now designated as In re NetRatings, Inc. Initial Public Offering Securities Litigation, related to In re Initial Public Offerings Securities Litigation. The case is brought purportedly on behalf of all persons who purchased NetRatings’ common stock from December 8, 1999 through December 6, 2000. The complaint names as defendants NetRatings; two of its former officers or directors; and investment banking firms that served as underwriters for NetRatings’ initial public offering in December 1999. The Plaintiffs electronically served an amended complaint on or about April 19, 2002. The amended complaint alleges violations of Section 11 and 15 of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934, on the grounds that the prospectus incorporated in the registration statement for the offering failed to disclose, among other things, that (i) the underwriters had solicited and received excessive and undisclosed commissions from certain investors in exchange for which the underwriters allocated to those investors material portions of the shares of NetRatings’ stock sold in the initial public offering, and (ii) the underwriters had entered into agreements with customers whereby the underwriters agreed to allocate shares of NetRatings’ stock sold in the initial public offering to those customers in exchange for which the customers agreed to purchase additional shares of NetRatings’ stock in the aftermarket at pre-determined prices. The amended complaint also alleges that false analyst reports were issued following the initial public offering. No specific damages are claimed.

NetRatings is aware that similar allegations have been made in lawsuits relating to more than 300 other initial public offerings conducted in 1999 and 2000. Those cases have been consolidated for pretrial purposes. On July 15, 2002, NetRatings (as well as the other issuer defendants) filed a motion to dismiss the complaint. The motions were heard on November 1, 2002. NetRatings believes that the claims against it and its officers and directors are without merit and intends to defend them vigorously. NetRatings’ management currently believes that the resolution of this matter will not have a material adverse impact on NetRatings’ financial position. However, the litigation process is inherently uncertain, and an adverse outcome could materially affect NetRatings’ results of operations and financial position.

3. COMPREHENSIVE LOSS

The components of comprehensive loss are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2002			2001			2002			2001
	(in thousands)						(in thousands)
Net loss	$	(5,976	)	$	(4,752	)	$	(27,109	)	$	(13,157	)
Accumulated translation adjustment		63						63
Unrealized gain on short-term investments		456			958			274			1,514

Comprehensive loss	$	(5,457	)	$	(3,794	)	$	(26,772	)	$	(11,643	)

4. NET LOSS PER SHARE OF COMMON STOCK

The calculation of basic and diluted net loss per share is as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2002			2001			2002			2001
	(in thousands, except per share data)						(in thousands, except per share data)
Net loss	$	(5,976	)	$	(4,752	)	$	(27,109	)	$	(13,157	)
Weighted-average shares of common stock outstanding		33,468			33,053			33,054			32,907
Less: weighted-average shares subject to repurchase		—			81			32			123

Weighted-average shares of common stock outstanding used in computing basic and diluted net loss per share		33,468			32,972			33,022			32,784

Basic and diluted net loss per common share	$	(0.18	)	$	(0.14	)	$	(0.82	)	$	(0.40	)

5. GOODWILL AND INTANGIBLE ASSETS, NET

As a result of the purchases and acquisitions which occurred during the second and third quarters of 2002, NetRatings recorded $49.8 million in goodwill. In accordance with SFAS 142, NetRatings does not amortize the goodwill balance; however, the goodwill will now be subject to an annual impairment test. Also in connection with the purchases and acquisitions, NetRatings has recorded $27.2 million in specifically identifiable intangible assets. These assets are currently being amortized based on useful lives ranging from 1 to 13 years. The specifically identifiable intangible assets include core technologies, customer contracts, and patents and other assets.

The intangible assets have original estimated useful lives as follows: Core technologies—seven years; Customer contracts—two years; Patents and other—one to thirteen years. Based on the current amount of intangibles subject to amortization, the estimated amortization expense for each of the succeeding five years is as follows: 2002: $2.4 million; 2003: $3.8 million; 2004: $2.9 million; 2005: $2.0 million; and 2006: $1.7 million. See also Note 7—Acquisitions.

	September 30, 2002
	Gross carrying amount		Accumulated amortization			Net
	(In thousands)
Core technologies	$	4,960	$	(235	)	$	4,725
Customer contracts		2,530		(483	)		2,047
Patents and other		19,723		(698	)		19,025

	$	27,213	$	(1,416	)	$	25,797

6. RESTRUCTURING

During the first quarter of 2002, NetRatings’ management approved and initiated a restructuring plan intended to streamline its business to focus on core products, refine its product line, and consolidate space at its Milpitas facility. The restructuring plan has resulted in a reduction of 15% of NetRatings’ workforce. Accordingly, NetRatings recognized a restructuring charge of approximately $7.0 million during the first quarter of 2002. The restructuring plan involves the termination of 24 employees worldwide, all of which have been terminated. Positions were eliminated primarily in NetRatings’ executive management, engineering, and sales functions.

In connection with the acquisition of the AdRelevance division of Jupiter Media Metrix in April 2002, the May 2002 acquisition of the @plan research product line of DoubleClick, Inc., the 80.1% of ACNielsen eRatings.com that NetRatings did not already own, and the August acquisition of 52% of NetValue SA, NetRatings capitalized, as acquisition related costs, an additional $6.8 million in restructuring liability. The restructuring plans involve the termination of 133 employees worldwide, 66 of which have been terminated for the nine-month period ended September 30, 2002. Positions were eliminated primarily in the executive management, general and administration, engineering, and sales functions.

The following table summarizes activity associated with the restructuring plan as of September 30, 2002:

	Restructuring Charge		Acquisition Related Restructuring Liabilities				Paid			Non-Cash Charges			Accrual as of September 30, 2002
	Q1		Q2		Q3		Paid			Non-Cash Charges			Accrual as of September 30, 2002
Employee severance benefits	$	3,737	$	2,675	$	1,600	$	(2,698	)	$	(1,019	)	$	4,295
Costs incurred due to discontinuation of certain services and other expenses		1,551		—		693		(876	)		—			1,368
Lease commitments and related write-down of property and equipment		1,681		1,149		707		(340	)		(643	)		2,554

Totals	$	6,969	$	3,824	$	3,000	$	(3,914	)	$	(1,662	)	$	8,217

7. ACQUISITIONS

On April 9, 2002, NetRatings acquired substantially all the assets of the AdRelevance online advertising expenditure measurement division of Jupiter Media Metrix, Inc. for $8.5 million in cash. The assets acquired include the AdRelevance suite of services and related patent applications, trademarks and copyrights, associated contracts, accounts receivable balances, and related deferred revenue balances.

On May 6, 2002, NetRatings acquired substantially all the assets related to DoubleClick Inc.’s @plan research product line for $18.5 million in cash and stock. The assets acquired include the @plan suite of services and related trademarks and copyrights, associated contracts, accounts receivable balances, and related deferred revenue balances.

On May 7, 2002, NetRatings acquired from ACNielsen Corporation the remaining 80.1% interest in ACNielsen eRatings.com that NetRatings did not already own for $9.6 million in common stock. In connection with this transaction, NetRatings also entered into a services agreement with ACNielsen pursuant to which ACNielsen will provide NetRatings with marketing, panel management and back-office services and personnel for a period of five years, and amended the operating agreement between NetRatings and Nielsen Media Research (an affiliate of ACNielsen) to provide that, in lieu of paying sales commissions to Nielsen Media Research, NetRatings will pay the actual costs associated with the operation and maintenance by Nielsen Media Research of a sales force dedicated to selling NetRatings’ products and services.

Also on May 7, 2002, NetRatings acquired selected assets from Jupiter Media Metrix related to its European Internet audience measurement services for $2 million in cash.

On August 5, 2002, NetRatings announced the acquisition of 52% of NetValue’s outstanding common stock which was completed on August 9, 2002 through direct purchases from certain NetValue stockholders. NetValue is a French company traded on the “Nouveau Marche” of the Euronext Paris exchange whose business is focused in the international Internet media and market research industries. In exchange for 52% of NetValue’s outstanding common stock, NetRatings paid $7.1 million in cash and issued 266,000 shares of NetRatings’ common stock to certain NetValue common stockholders. See Note 8—Subsequent Events for further detail regarding the NetValue transaction.

The following pro forma summary of consolidated revenues, net loss and net loss per share for the nine-month period ended September 30, 2002 and the year ended December 31, 2001 assumes the eRatings and NetValue acquisitions occurred on January 1, 2002 and January 1, 2001, respectively. The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of NetRatings’ financial results.

	Three months ended September 30, 2002			Nine months ended September 30, 2002			Year ended December 31, 2001
	(in thousands, except per share data)
Revenue	$	11,086		$	24,748		$	36,334
Net loss		(9,416	)	$	(33,233	)	$	(54,138	)
Net loss per share:
Basic and diluted	$	(0.27	)	$	(0.99	)	$	(1.60	)
Shares used in the calculation of net loss per share:
Basic and diluted		33,592			33,595			33,879

NetRatings is accounting for its acquisitions under the purchase method as of the date of acquisition. The allocation of purchase price related to the aforementioned acquisitions is preliminary and reflects estimated fair value adjustments to their assets and liabilities, since those amounts have not been finalized. The fair value of the assets and liabilities will be determined as of the date of the acquisition through independent appraisal. The accompanying table represents the estimated purchase price allocation:

	eRatings		NetValue			All Other Acquisitions		Total
	(in thousands)
Cash paid	$	—	$	7,090		$	37,308	$	44,398
Stock issued		9,079		1,563			6,118		16,760
Acquisition costs		1,784		2,250			3,474		7,508
Restructuring costs		2,073		3,000			1,751		6,824
Minority Interest		—		6,201			—		6,201
Net (assets) liabilities assumed		1,410		(8,833	)		2,772		(4,651	)

Total Purchase Price	$	14,346	$	11,271		$	51,423	$	77,040

Purchase Price Allocation
Intangibles	$	2,700	$	2,400		$	22,112	$	27,212
Goodwill		11,646		8,871			29,311		49,828

Total Purchase Price	$	14,346	$	11,271		$	51,423	$	77,040

See Note 5—Goodwill and Intangible Assets, net.

8. SUBSEQUENT EVENTS

On October 7, 2002, NetRatings commenced a simplified all-cash take-over bid to acquire the outstanding shares of NetValue that NetRatings did not already own for a price of 2 Euros per NetValue share. On November 4, 2002, the Conseil des Marches Financier, Paris France, issued a statement announcing that NetRatings had acquired 2,858,000 shares of NetValue in the simplified all-cash take-over bid, which ended on October 28, 2002. The acquisition on August 9, 2002, combined with open market purchases for cash and the shares acquired in the simplified all-cash take-over bid, resulted in NetRatings owning 8,011,000 shares of NetValue representing approximately 86% of the capital and 87.5% of the voting rights of NetValue.

9. RECENT ACCOUNTING PRONOUNCEMENTS

In August 2001, the Financial Accounting Standards Board issued SFAS 144, Impairment or Disposal of Long-Lived Assets, which addresses accounting and financial reporting for the impairment or disposal of long-lived assets. SFAS 144 is effective for the Company beginning in the fiscal year ended December 31, 2002, and the Company is currently evaluating the impact, if any, that the implementation of SFAS 144 will have on its financial statements.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ substantially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Risk Factors That May Affect Our Performance” and elsewhere in this Quarterly Report on Form 10-Q. The following discussion should be read together with our financial statements and related notes thereto included elsewhere in this Report.

Overview

We were incorporated in July 1997 to provide technology-driven Internet audience measurement information solutions for media and commerce. Our products and services enable our customers to make informed business-critical decisions regarding their Internet strategies. Our customers include leading advertising agencies, media companies, financial services institutions, e-commerce companies and traditional marketers requiring analysis of the online environment. We have formed strategic relationships with Nielsen Media Research, the leading source of television audience measurement and related services in the United States, and ACNielsen, a leading global provider of market research information and analysis. We believe that these relationships enable us to offer the most accurate and globally comprehensive Internet audience information currently available.

On April 9, 2002, we acquired substantially all the assets of the AdRelevance online advertising expenditure measurement division of Jupiter Media Metrix Inc. for $8.5 million in cash. The assets acquired include the AdRelevance suite of services and related patent applications, trademarks and copyrights, associated contracts, accounts receivable balances, and related deferred revenue balances.

On May 6, 2002, we acquired substantially all the assets related to DoubleClick’s @plan research product line for $18.5 million in cash and stock. The assets acquired include the @plan suite of services and related trademarks and copyrights, associated contracts, accounts receivable balances, and related deferred revenue balances.

On May 7, 2002, we acquired, from ACNielsen Corporation, the remaining 80.1% interest in ACNielsen eRatings.com that we did not already own for $9.6 million in stock. Separately on May 7, 2002, we acquired selected assets from Jupiter Media Metrix related to their European Internet audience measurement services for $2 million in cash, allowing us to further expand our global customer base.

On May 7, 2002, we and Jupiter Media Metrix entered into a settlement agreement under which Jupiter Media Metrix agreed to dismiss with prejudice the patent infringement action it filed against us in March 2001. As part of the settlement agreement, we paid Jupiter Media Metrix $15 million in cash. We also acquired from Jupiter Media Metrix its patents for computer use tracking (United States Patent Nos. 6,115,680 and 5,676,510, related patent applications and all patents issuing from such applications) and related materials, and we granted to Jupiter Media Metrix a non-exclusive, assignable license to use the

patented technology until June 30, 2005 in exchange for license fees totaling $750,000, $1.5 million, $1.75 million and $1 million, payable in 2002, 2003, 2004 and 2005, respectively. However, the license to Jupiter Media Metrix was terminable by Jupiter Media Metrix or by us under specified conditions and Jupiter Media Metrix terminated its license from and royalty obligations to us. Accordingly, subject to Jupiter Media Metrix’ compliance with its obligations under its license agreement with us, substantially all of the future license fees under the agreement may not become payable to us.

On August 5, 2002, we announced the acquisition of 52% of NetValue’s outstanding common stock which was completed on August 9, 2002 through direct purchases from certain NetValue stockholders. NetValue is a French company traded on the “Nouveau Marche” of the Euronext Paris exchange whose business is focused in the international Internet media and market research industries. In exchange for 52% of NetValue’s outstanding common stock, we paid $7.1 million in cash and issued 266,000 shares of our common stock to certain NetValue common stockholders. On October 7, 2002, we commenced a simplified all-cash take-over bid to acquire the outstanding shares of NetValue that we did not already own for a price of 2 Euros per NetValue share. On November 4, 2002, the Conseil des Marches Financier, Paris France, issued a statement announcing that we had acquired 2,858,000 shares of NetValue in the simplified all-cash take-over bid, which ended on October 28, 2002. The acquisition on August 9, 2002, combined with open market purchases for cash and the shares acquired in the simplified all-cash take-over bid, resulted in our owning 8,011,000 shares of NetValue representing approximately 86% of the capital and 87.5% of the voting rights of NetValue.

The operating results of the acquired businesses are included in our operating results from the respective acquisition dates.

Results of Operations

	Third Quarter 2002			Third Quarter 2001			Year-To-Year Change		Nine Months ended September 30, 2002			Nine Months ended September 30, 2001			Year-To-Year Change
	(amounts in thousands, excluding percentages and per share data)
Revenue	$	8,698		$	5,582		56	%	$	20,294		$	18,393		10	%
Cost of revenue		4,659			3,441		35	%		11,187			10,083		11	%

Gross profit		4,039			2,141		89	%		9,107			8,310		10	%
Gross margin percentage		46	%		38	%				45	%		45	%
Research and development		2,727			1,723		58	%		6,126			5,659		8	%
Sales and marketing		4,081			3,358		22	%		10,452			11,950		(13	)%
General and administrative		1,583			1,486		7	%		4,637			4,512		3	%
Restructuring expense		—			—		—			6,969			—		N/A
Acquisition related expense		—			—		—			3,033			—		N/A
Amortization of intangibles		806			—		N/A			1,416			—		N/A
Stock-based compensation		2,281			2,476		(8	)%		7,153			7,568		(5	)%

Total operating expenses		11,478			9,043		27	%		39,786			29,689		34	%

Loss from operations		(7,439	)		(6,902	)	8	%		(30,679	)		(21,379	)	44	%
Loss on joint ventures		(266	)		(1,665	)	(84	)%		(2,377	)		(4,334	)	(45	)%
Interest income, net		1,690			3,815		(56	)%		5,908			12,556		(53	)%
Minority Interest		39			—		N/A			39			—		N/A

Net loss	$	(5,976	)	$	(4,752	)	26	%	$	(27,109	)	$	(13,157	)	106	%

Basic and diluted net loss per common share	$	(0.18	)	$	(0.14	)	29	%	$	(0.82	)	$	(0.40	)	105	%

Shares used to compute basic and diluted net loss per common share		33,468			32,972					33,022			32,784

Revenue

We generate revenue from the sale of our Internet audience measurement products and services. We primarily sell these services pursuant to one-year subscription agreements and bill our customers in advance, typically on an annual or quarterly basis. We also derive a portion of our revenue from our joint venture partners. With an annualized contract value of $34.1 million, sales of our information and analytical products and services accounted for substantially all of the revenue for each period.

Revenue increased 56% to $8.7 million for the three-month period ended September 30, 2002, compared to $5.6 million for the corresponding period in 2001. The increase was due to the acquisitions of AdRelevance, @plan, eRatings, and NetValue. For the three-month period ended September 30, 2002, we had a 65% global renewal rate as compared to 40% in the corresponding period in 2001. The increase in our renewal rate was primarily due to the stabilization of the Internet segment following the prior year’s dot.com fall out. During the three-month period ended September 30, 2002 and 2001, no customer accounted for more than 10% of our revenue.

Revenue increased 10% to $20.3 million for the nine-month period ended September 30, 2002, compared to $18.4 million for the corresponding period in 2001. The increase was primarily due to the acquisitions which occurred during the second and third quarters of 2002. The increase was offset by the decrease in amortization of deferred revenue associated with our customer subscriptions, in accordance with our revenue policy, due to the overall decline in contract sales resulting from the continued slowing economy. During the nine-month period ended September 30, 2002 and 2001, no customer accounted for more than 10% of our revenue.

We anticipate current market conditions will continue in future quarters. Over 825 customers worldwide subscribed to Nielsen//NetRatings products and services, including NetValue, as of September 30, 2002.

Cost of Revenue

Cost of revenue consists primarily of expenses related to the recruitment, maintenance, and support of our Internet audience measurement panels, which are expensed as they are incurred, as well as operational costs related to our data center. Accordingly, such expenses are not matched with any revenue or subscriptions generated in a given period and are higher in periods in which we are involved in significant panel development activities. Also included in cost of revenue are the data acquisition costs related to our joint ventures, which are recognized ratably over the term of the customer’s subscription agreement, as the data is provided, and the royalty fees associated with certain data partnering agreements.

Cost of revenue increased 35%, on an absolute basis, to $4.7 million, or 54% of revenue, for the three-month period ended September 30, 2002 from $3.4 million, or 62% of revenue, for the corresponding period in 2001. Cost of revenue increased 11% to $11.2 million, or 55% of revenue, for the nine-month period ended September 30, 2002, compared to $10.1 million, or 55% of revenue, for the corresponding period in 2001. Cost of revenue increased due to the expansion of our data center as a result of the acquisition of AdRelevance, the addition of expenses related to the 3rd party generated surveys associated with the @plan acquisition, and the addition of international panel expenses related to the acquisitions of eRatings and NetValue. The increase was offset by a reduction in strategic partner royalty expenses related to the discontinuation of AdSpectrum and eCommercepulse, as well as a reduction in panel fees associated with both the U.S. home and business panels as recruiting efforts decreased and the panels entered into maintenance cycles.

Operating Expenses

Research and development expenses consist primarily of compensation and related costs for personnel associated with our research and product development activities. These costs are expensed as incurred. Sales and marketing expenses consist primarily of salaries, benefits, and commissions to our salespeople and analysts, as well as costs related to seminars, promotional materials, public relations, advertising, and other sales and marketing programs. General and administrative expenses consist primarily of salaries and related costs for executive management, finance, accounting, human resources, legal, information technology and other administrative personnel, in addition to professional fees and other general corporate expenses.

Research and development expenses increased 58%, on an absolute basis, to $2.7 million, or 31% of revenue, for the three-month period ended September 30, 2002 compared to $1.7 million, or 31% of revenue, for the corresponding period in 2001. The increase was primarily due to an increase in salary-related expenses resulting from the acquisition of AdRelevance and eRatings personnel. The increase was offset by the reduction in workforce, which occurred during the first quarter of 2002. Sales and marketing expenses increased 22%, on an absolute basis, to $4.1 million, or 47% of revenue, for the three- month period ended September 30, 2002 compared to $3.4 million, or 60% of revenue, for the corresponding period in 2001. The increase in sales and marketing expenses was primarily due to an increase in salary-related expenses resulting from the acquisition of AdRelevance, @plan, and eRatings personnel, offset by a reduction in public relations and trade show expenses as well as the impact of the reduction in workforce which occurred during the first quarter of 2002. General and administrative expenses increased 7%, on an absolute basis, to $1.6 million, or 18% of revenue, for the three-month period ended September 30, 2002, compared to $1.5 million, or 27% of revenue, for the corresponding period in 2001. The increase was primarily related to an increase in additional

personnel costs associated with the acquisitions of AdRelevance, @plan, and eRatings, offset by the impact of the reduction in workforce, which occurred during the first quarter of 2002.

Research and development expenses increased 8%, on an absolute basis, to $6.1 million, or 30% of revenue, for the nine-month period ended September 30, 2002, compared to $5.7 million, or 31% of revenue, for the corresponding period in 2001. The increase was primarily due to increased research and development personnel and associated payroll expenses resulting from the acquisitions of AdRelevance, @plan, eRatings and NetValue, offset by the reduction in workforce which occurred during the first quarter of 2002. Sales and marketing expenses decreased 13% to $10.5 million, or 52% of revenue, for the nine-month period ended September 30, 2002, compared to $12.0 million, or 65% of revenue, for the corresponding period in 2001. The decrease in sales and marketing expenses was primarily due to a reduction in public relations and trade show expenses as well as a decrease in commissions paid to sales personnel due to the decrease in customer contracts and the impact of the reduction in workforce which occurred during the first quarter of 2002. The decrease was slightly offset by the increased sales and marketing personnel and associated payroll expenses resulting from the acquisitions of AdRelevance, @plan, and eRatings. General and administrative expenses increased 3%, on an absolute basis, to $4.6 million, or 23% of revenue, for the nine-month period ended September 30, 2002, compared to $4.5 million, or 25% of revenue, for the corresponding period in 2001. The increase was primarily related to an increase in additional personnel costs associated with the acquisitions of AdRelevance, @plan, and eRatings, offset by the reduction in bad debt expenses and non-acquisition related legal expenses.

We anticipate our operating expenses, excluding the one-time charges for restructuring expenses and acquisition costs, will increase in future quarters as a result of the full impact on future quarters of expenses related to our ownership percentage of NetValue.

During the third quarter, we recognized amortization of intangible expenses of $0.8 million, or 9% of revenue, resulting from the amortization of the specifically identified intangibles associated with the acquisitions of AdRelevance, @plan, eRatings, and NetValue and the settlement of the Jupiter Media Metrix patent infringement lawsuit. There was no corresponding amortization in 2001. Stock-based compensation expenses decreased 8% to $2.3 million, or 26% of revenue, for the three-month period ended September 30, 2002 compared to $2.5 million, or 44% of revenue, for the corresponding period in 2001. The decrease was due to the scheduled amortization of our stock-based compensation costs.

During the nine-month period ended September 30, 2002, we recognized restructuring expenses of $7.0 million, or 34% of revenue, which were recorded during the first quarter of 2002, with no corresponding restructuring expense recorded during 2001. See Footnote 6 for further information on restructuring expenses. Acquisition-related expenses of $3.0 million, or 15% of revenue, for the nine-month period ended September 30, 2002 were recorded during the first quarter of 2002 with no corresponding restructuring expense recorded during 2001. These expenses related to the terminated merger between NetRatings and Jupiter Media Metrix. Amortization of intangible assets of $1.4 million, or 7% of revenue, for the nine-month period ended September 30, 2002 resulted from the amortization of the specifically identified intangibles associated with the acquisitions of AdRelevance, @plan, eRatings, and NetValue and the settlement of the Jupiter Media Metrix patent infringement lawsuit. There was no corresponding amortization in 2001. Stock-based compensation expenses decreased 5% to $7.2 million, or 35% of revenue, for the nine-month period ended September 30, 2002, compared to $7.6 million, or 41% of revenue, for the corresponding period in 2001. The decrease was primarily due to the scheduled amortization of our stock-based compensation costs, offset slightly by the expenses associated with the acceleration of vesting for the retiring chairman of the board.

Loss From Joint Ventures

Loss from joint ventures decreased 84% to $0.3 million, or 3% of revenue, for the three-month period ended September 30, 2002, compared to $1.7 million, or 30% of revenue, for the corresponding period in 2001. Loss from joint ventures decreased 45% to $2.4 million, or 12% of revenue, for the nine-month period ended September 30, 2002, compared to $4.3 million, or 24% of revenue, for the corresponding period in 2001. The decrease was primarily due to our acquisition of ACNielsen’s interest in eRatings in May 2002, after which eRatings’ losses have contributed to our consolidated results rather than to the loss from joint ventures. The decrease is furthered by a 50% reduction in the number of countries in which the Nielsen//NetRatings service is offered when compared to the corresponding period in 2001.

Interest Income, Net

Interest income, net, decreased 56% to $1.7 million for the three-month period ended September 30, 2002 compared to $3.8 million for the corresponding period in 2001. Interest income, net, decreased 53% to $5.9 million for the nine-month period ended September 30, 2002, compared to $12.6 million for the corresponding period in 2001. The decrease reflects an overall reduction in interest rates compared to the corresponding period in 2001. Further contributing to the decrease was an overall reduction in the cash and cash equivalents balances during the period resulting from the acquisitions of AdRelevance, @plan, NetValue and selected international assets of Jupiter Media Metrix and related transaction costs, as well as the settlement of the Jupiter Media Metrix patent infringement lawsuit. See Item 3. Quantitative and Qualitative Disclosures About Market Risk. We anticipate interest income to continue to decline as the current market conditions prevail.

Minority Interest

We acquired 52% of NetValue on August 9, 2002. The minority interest in the loss of NetValue was recorded to reflect the interest of the minority shareholders in the operations of NetValue. Acquisition of the remaining 48% interest in NetValue is anticipated prior to December 31, 2002. We expect the minority interest to increase slightly in the fourth quarter, when it will affect results for the full quarter, offset by the decreasing minority interest related to the continued increase in our ownership of NetValue throughout the fourth quarter. There was no corresponding balance in 2001.

Liquidity and Capital Resources

As of September 30, 2002, cash and cash equivalents and short-term investments totaled $250.4 million. Net cash used in operating activities totaled $5.4 million for the nine-month period ended September 30, 2002, primarily due to the continued decrease in interest income and the funding of operations both domestically and internationally. Operating activities provided cash of $1.4 million for the corresponding period in 2001, primarily due to interest income earned on cash and cash equivalents and short-term investments. We expect that cash used in operating activities will increase in future periods due to the additional operating expenses associated with the production of the NetValue service.

Net cash provided by investing activities was $30.3 million for the nine-month period ended September 30, 2002. Sales of marketable securities and other investments during the period, net of proceeds and maturities, were $73.8 million, offset by acquisition and related expenditures of $41.6 million related to the acquisitions of NetValue, net of cash received, AdRelevance, @plan, select assets from Jupiter Media Metrix related to their European Internet audience measurement services, the settlement of the Jupiter Media Metrix patent infringement lawsuit, and eRatings transaction costs. Investment of $1.9 million related to capital expenditures served to further offset the cash provided by investing activities. During the corresponding period in 2001, cash provided by investing activities was $26.1 million, primarily due to net sales of short-term investments of $29.1 million and capital expenditures of $1.3 million. Although we had no material capital expenditure commitments as of September 30, 2002, we anticipate continued investment in capital during the remainder of 2002 as we implement our disaster recovery data center. We expect cash provided by investing activities to be further reduced by our continued investments in joint ventures and other potential strategic investments including the acquisition of the remaining interest in NetValue.

Net cash used in financing activities totaled $18.8 million for the nine-month period ended September 30, 2002. This was primarily related to $20.6 million used to repurchase 1.5 million shares of common stock from two executive officers, offset by the exercise of options, totaling $1.9 million. Net cash provided by financing activities totaled $2.1 million in the corresponding period in 2001 primarily related to the exercise of options and the purchase of stock through the employee stock purchase plan, offset by payments on our capital lease obligations. We expect cash provided by financing activities will remain flat during the next quarter as we have no outstanding debt and anticipate flat proceeds from the exercise of options.

We believe that our existing balances of cash and cash equivalents and short-term investments will be sufficient to meet our cash needs for working capital and capital expenditures for at least the next 12 months, although we could elect to seek additional funding prior to that time. If additional funds were raised through the issuance of equity securities, the percentage ownership of our then-current stockholders would be reduced.

RISK FACTORS THAT MAY AFFECT OUR PERFORMANCE

An investment in our company involves a high degree of risk. You should carefully consider the risks below, together with the other information contained in this report, before you make an investment decision with respect to our company. The risks described below are not the only ones facing our company. Additional risks not presently known to us or that we deem immaterial may also impair our business operations. Any of the following risks (i) could materially adversely affect our business, operating results and financial condition, (ii) could cause the trading price of our common stock to decline, and (iii) could cause you to lose all or part of your investment.

WE HAVE INCURRED LOSSES SINCE INCEPTION AND WE MAY BE UNABLE TO ACHIEVE PROFITABILITY

We have experienced operating losses in each quarter since our inception. We incurred net losses of $17.6 million, for the year ended December 31, 2001, and $27.1 million for the nine-month period ended September 30, 2002, and as of September 30, 2002, our accumulated deficit was $82.6 million. We intend to continue to make significant expenditures related to panel maintenance and operations, restructuring and further development of our technology and infrastructure. As a result, we will need to generate significant revenue to achieve and maintain profitability. We may not be able to achieve significant revenue growth in the future. Our operating results for future periods are subject to numerous uncertainties and we may not achieve sufficient revenue to become profitable.

WE HAVE A LIMITED OPERATING HISTORY IN THE EVOLVING MARKET FOR INTERNET AUDIENCE MEASUREMENT

We were incorporated in July 1997 and did not start generating revenue until the quarter ended June 30, 1998. We introduced our Nielsen//NetRatings Internet Audience Measurement service in the quarter ended June 30, 1999. Accordingly, we are still in the early stages of development and have only a limited operating history upon which to evaluate our business. One should evaluate our likelihood of financial and operational success in light of the risks, uncertainties, expenses, delays and difficulties associated with an early-stage business in an evolving market, many of which may be beyond our control, including:

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the risk that a competing company’s Internet audience measurement service will become the accepted standard for Internet audience measurement;

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the extent of growth, if any, in the Internet audience measurement market;

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our potential inability to successfully manage any significant growth we may achieve in the future;

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our potential inability to successfully integrate any acquired business, technology or service; and

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the risks associated with our international operations, including the necessary investments in our international joint ventures.

OUR QUARTERLY REVENUES MAY SIGNIFICANTLY FLUCTUATE AND BECAUSE OUR EXPENSE LEVELS ARE BASED IN LARGE PART ON OUR ESTIMATES OF FUTURE REVENUES, AN UNEXPECTED SHORTFALL IN REVENUE WOULD SIGNIFICANTLY HARM OUR OPERATING RESULTS AND LEAD TO REDUCED PRICES FOR OUR STOCK

Due to our limited operating history and the evolving nature of the market in which we compete, our future revenue is difficult to forecast. Further, our expense levels are based largely on our investment plans and estimates of future revenue. We may be unable to adjust our spending to compensate for an unexpected shortfall in revenue. Accordingly, any significant shortfall in revenue relative to our planned expenditures in a particular quarter would harm our results of operations and could cause our stock price to fall sharply, particularly following quarters in which our operating results fail to meet expectations.

Factors that may cause fluctuations in our revenues or operating results on a quarterly basis include the following, some of which are beyond our control:

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the amount and timing of operating costs and capital expenditures related to the expansion of our business;

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the amount and timing of costs related to changes in the size or composition of our at-home and at-work panels, particularly as a result of turnover among panel members;

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the impact on our renewal rates caused by the failure of any of our current customers, our customers budgetary

constraints, or a perceived lack of need for our services;

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changes in demand for our products and services due to the announcement or introduction of new products and services or the cancellation of existing products and services by us or our competitors or a continued slowdown in online advertising spending;

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changes in the pricing of our products and services in light of the services and pricing offered by our competitors;

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the impact of possible acquisitions or equity investments both on our operations and on our reported operating results due to associated accounting charges; and

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technical difficulties or service interruptions that significantly harm our ability to deliver our products and services on schedule.

THE CURRENT ECONOMIC DOWNTURN HAS ADVERSELY AFFECTED OUR BUSINESS

General economic conditions, and conditions in the Internet sector in particular, have caused some of our customers to cease operations and others to reduce their spending on the products and services that we supply or to cancel their contracts. In addition, our AdRelevance business derives, and expects to continue to derive for the foreseeable future, a large portion of its revenue from the automated retrieval and delivery of online advertising data. Expenditures by advertisers tend to be cyclical, reflecting overall economic conditions as well as budgeting and buying patterns. The overall market for advertising, including Internet advertising, has been characterized in recent quarters by increasing softness of demand, lower prices for advertisements, the reduction or cancellation of advertising contracts, an increased risk of uncollectible receivables from advertisers and the reduction of marketing and advertising budgets, especially by Internet-related companies. As a result of these reductions, advertising spending across traditional media, as well as the Internet, has decreased.

WE HAVE LIMITED ABILITY TO FORECAST THE RATE AT WHICH SUBSCRIPTIONS FOR OUR SERVICES MAY BE RENEWED, AND WE MAY NOT ACHIEVE SUFFICIENTLY-HIGH RENEWAL RATES TO BECOME PROFITABLE

We derive substantially all of our revenue from annual subscriptions for our services. As our business becomes more established, we expect subscription renewals and sales of additional products and services to existing customers to account for an increasing proportion of our revenue. Any unexpectedly low renewal rates or a reduction in the number of products and services that we are able to sell to existing customers would harm our operating results and could prevent us from becoming profitable. To date, renewals have been an essential element of our revenue growth. We cannot assure you that we will be able to achieve or sustain high renewal rates, particularly during an economic downturn. Additionally, because most Internet-related businesses are still in the early stages of development, consolidations in our customer base or the failure of a significant number of our customers’ businesses could cause a decline in renewal rates for our products and services.

THE ACCEPTANCE AND EFFECTIVENESS OF INTERNET ADVERTISING AND ELECTRONIC COMMERCE IS UNCERTAIN, AND IF THESE MARKETS FAIL TO DEVELOP OR DEVELOP MORE SLOWLY THAN WE EXPECT, OUR BUSINESS WILL SUFFER

Our future success will depend in part on an increase in the use of the Internet as an advertising medium, the proliferation of e-commerce and the use of the Internet as part of multi-channel marketing strategies. These markets and marketing techniques are new and rapidly evolving, and the long term effectiveness of Internet advertising is uncertain. More recently, in the face of a slowing economy overall, there has been increased uncertainty about the demand and market acceptance for Internet advertising and e-commerce.

The adoption of Internet advertising, particularly by entities that have historically relied on traditional media for advertising, requires the acceptance of a new way of conducting business. These companies may find Internet advertising to be less effective than traditional advertising for promoting their products and services. They may also be unwilling to pay premium rates for advertising that is targeted at specific types of users based on demographic profiles or recent Internet behavior. The Internet advertising and e-commerce markets may also be adversely affected by privacy issues surrounding the targeting of this type of advertising or the use of personal information. Providers of goods and services online continue to work toward the establishment of commerce models that are cost effective and unique, and effectively deal with issues such as channel conflict and infrastructure costs. Growth in the use of the Internet for e-commerce may not continue, or the Internet may not be adopted as a medium of commerce by a broad base of customers. In addition, many current and potential publishers of content and commerce merchants on the Internet have little or no experience in generating revenue from the sale of advertising space on their

Internet sites or from conducting on-line commerce transactions. Because of the foregoing factors, among others, the market for Internet advertising and e-commerce may not continue to emerge or become sustainable. If these markets fail to develop or develop more slowly than we expect, our business will suffer.

THE MARKET FOR INTERNET AUDIENCE MEASUREMENT AND ANALYSIS IS HIGHLY COMPETITIVE, AND IF WE CANNOT COMPETE EFFECTIVELY, OUR REVENUES WILL DECLINE

The market for Internet audience measurement and analysis is new, rapidly evolving and highly competitive. We compete with a number of companies in the market for Internet audience measurement services and analytical services, and we expect competition in this market to intensify in the future.

We believe that the principal competitive factors in our market are:

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the development of independent, reliable measurement panels based on a proven high-quality sampling methodology that are representative of the entire target audience;

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the timeliness of reported results;

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the breadth and depth of measurement services offered and their flexibility and ease of use;

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the ability to provide quality analytical services derived from Internet audience measurement information;

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the ability to offer products and services in a comprehensive set of international markets; and

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pricing.

Some of our competitors may be able to:

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devote greater resources to marketing and promotional campaigns;

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adopt more aggressive pricing policies; or

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devote more resources to technology and systems development.

In light of these factors, we may be unable to compete successfully in our market.

WE MAY BE UNABLE TO OBTAIN COMPLETE OWNERSHIP OF NETVALUE, S.A., WHICH COULD RESULT IN INCREASED OPERATING EXPENSES RELATING TO THE OPERATION OF A PUBLIC COMPANY SUBSIDIARY IN FRANCE

On August 9, 2002, we acquired a 52% controlling interest in NetValue, S.A., a publicly traded French company listed on the Nouveau Marché of Euronext Paris S.A. Following the purchase of the controlling interest in NetValue and the purchase of additional shares of NetValue on the open market, we completed a simplified all-cash take-over bid which resulted in the purchase of an additional 2,857,940 shares of NetValue. As a result, we currently own 8,011,463 shares of NetValue representing approximately 86% of the capital and 87.5% of the voting rights of NetValue.

In France, a simple majority ownership position is not, however, sufficient to ensure the complete acquisition of a company, as may occur in the United States through the use of a merger structure. French law provides a mechanism for obtaining complete control of a company but only if we acquire 95% or greater of NetValue’s outstanding stock. Should we not be able to reach the 95% ownership threshold in NetValue, or if the complete acquisition of NetValue were delayed, NetValue would continue to operate as a separate entity in France. Continued operation of a public company subsidiary in France would result in increased operating expenses, including legal, accounting, and other administrative expenses.

ANY ACQUISITIONS OR EQUITY INVESTMENTS THAT WE UNDERTAKE COULD BE DIFFICULT TO CLOSE AND INTEGRATE, MAY DISRUPT OUR BUSINESS AND DILUTE STOCKHOLDER VALUE OR HARM OUR OPERATING RESULTS

We may continue to acquire or make investments in complementary businesses, technologies, services or products if appropriate opportunities arise. Negotiating such acquisitions can be difficult, time consuming, and expensive and our ability to close such transactions may often be subject to approvals, such as governmental regulation, which are beyond our control. Consequently, we can make no assurances that such acquisitions, once undertaken and announced, will close. Further, the process of integrating any acquired business, technology, service or product into our business and operations may result in unforeseen operating difficulties and expenditures. Integration of an acquired company also may consume much of our management’s time and attention that would otherwise be available for ongoing development of our business. Moreover, the anticipated benefits of any acquisition may not be realized. Companies in which we invest may not be successful in executing their business strategies and we may be required to write-off all or part of our investment. We may be unable to identify, negotiate or finance future acquisitions or investments successfully, or to integrate successfully any acquisitions with our current business. Future acquisitions could result in potentially dilutive issuances of equity securities or the incurrence of debt, contingent liabilities or amortization expenses related to goodwill and other intangible assets, any of which could harm our business.

WE ARE DEPENDENT ON NIELSEN MEDIA RESEARCH FOR THE DEVELOPMENT AND MAINTENANCE OF PANELS OF INTERNET USERS IN THE UNITED STATES AND ON ACNIELSEN AND OUR OTHER JOINT VENTURE PARTNERS FOR THE DEVELOPMENT AND MAINTENANCE OF SUCH PANELS IN INTERNATIONAL MARKETS

The data for our audience measurement service is collected from randomly-selected groups of Internet users that are generally referred to as audience measurement panels. Our at-home Internet audience measurement panel in the United States has been developed and is maintained by Nielsen Media Research as part of our strategic relationship with that company. Similarly, our Internet audience measurement panels and other sampling methodologies that we employ in geographic locations outside of the United States, Canada, France and Japan have been developed and maintained by eRatings using ACNielsen’s proprietary sampling methodology and employees made available to eRatings by ACNielsen. As part of the acquisition of eRatings by NetRatings in May 2002, ACNielsen granted NetRatings a license to use ACNielsen’s sampling methodology and the “Nielsen” name outside North America in the Internet audience measurement business, and has entered into a service agreement to provide eRatings, for a period of five years following the acquisition with the services of certain dedicated marketing and panel management personnel who are employed by ACNielsen, as well as certain back office services which were provided to eRatings by ACNielsen prior to the acquisition. Accordingly, for a significant period of time, we expect that our business will be substantially dependent upon these arrangements for the continued maintenance of our international Internet audience measurement panels and for other international business operations. Any failure on the part of Nielsen Media Research, ACNielsen, or our other joint venture partners to devote adequate resources to the development or maintenance of such panels or other sampling methodologies, or to maintain the overall quality of these methodologies, will harm our business. In addition, Nielsen Media Research may terminate its obligations with respect to Internet audience measurement panels in the event it no longer holds at least 5% of our outstanding stock on a fully-diluted basis.

VNU N.V., THROUGH ITS WHOLLY-OWNED SUBSIDIARIES NIELSEN MEDIA RESEARCH AND ACNIELSEN, CONTROLS A MAJORITY OF OUR OUTSTANDING STOCK AND ITS REPRESENTATIVES CONSTITUTE A MAJORITY OF OUR BOARD OF DIRECTORS

VNU, N.V., through its wholly-owned subsidiaries Nielsen Media Research and ACNielsen, has a majority stock ownership position in NetRatings, which enables it to control the direction and policies of NetRatings, including the election of our board of directors, amendment of our certificate of incorporation, and decisions regarding mergers, acquisitions, consolidations, and the sale of all or substantially all of our assets. This control may have the effect of discouraging certain types of transactions involving a change of control, including transactions in which the other holders of our common stock might otherwise receive a premium for their shares over the then-current market price.

In addition, VNU can control or influence the terms of our important commercial transactions, including our strategic relationships with Nielsen Media Research and ACNielsen. VNU’s representatives on our board are expected to recuse themselves from deliberations in which they have a conflict of interest. However, these directors may take actions that favor VNU’s interests over the interests of other stockholders, as a result, for instance, of conflicts of interest that are not apparent at the time of such actions.

OUR BRAND IS DEPENDENT ON THE REPUTATIONS OF THIRD PARTIES OVER WHICH WE HAVE NO CONTROL

The strength of the Nielsen//NetRatings brand is also closely dependent on the reputations of Nielsen Media Research, ACNielsen, and our other joint venture partners and the strength of their brands. Therefore, any negative publicity generated by Nielsen Media Research, ACNielsen, or our other joint venture partners, whether or not directly related to any Nielsen//NetRatings branded products or services, as well as any erosion of the strength of any of their brands, will adversely affect our own brand identity.

OUR COSTS TO DEVELOP AND MAINTAIN ACCURATE INTERNET AUDIENCE MEASUREMENT PANELS ARE SIGNIFICANT AND MAY INCREASE

We believe that the quality, size and scope of our panels is critical to the success of our business. To date, the expense of recruiting and operating our audience measurement panels has made up a very significant portion of the cost of revenue reported on our financial statements and, therefore, any increase in this expense will likely result in a decrease in our gross margin. The costs associated with maintaining the quality, size and scope are dependent on many factors some of which are beyond our control, including the cooperation rate of potential panel members and turnover among existing panel members, and accordingly we cannot necessarily control these costs to match increases or decreases in revenue. To the extent that such additional expenses are not accompanied by increased revenue, our results of operations will be harmed. We have limited experience in developing Internet audience measurement panels, and we could experience lower cooperation rates or higher turnover rates in the future.

OUR INTERNATIONAL OPERATIONS POSE UNIQUE RISKS THAT MAY DIVERT OUR MANAGEMENT’S ATTENTION AND RESOURCES

Through our acquisition of (i) eRatings, (ii) selected international assets of Jupiter Media Metrix, and (iii) majority control of NetValue, we have acquired control of audience measurement data operations in countries that we have previously served only through our minority interest in eRatings. Our international markets will require significant management attention and resources. In addition, there can be no assurance of the continued growth of Internet usage in international markets. The international markets for audience measurement services have historically been localized and difficult to penetrate.

The success of the our international operations will depend on our ability to:

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effectively select the appropriate countries to serve;

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recruit and maintain at-home and at-work panels that are representative of a geographic area;

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control costs and effectively manage foreign operations;

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manage third-party vendors who will likely perform panel operations; and

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effectively develop, market and sell new products and services in new, unfamiliar markets.

Meeting these challenges may be difficult given the circumstances we face at the present time. The operations of eRatings that we have acquired are not supported by an existing independent eRatings infrastructure. Historically, most of the back office services and employees and facilities required by eRatings have been made available to it by ACNielsen under various intercompany service agreements and arrangements. Although ACNielsen no longer owns a direct equity interest in eRatings, ACNielsen has agreed to grant NetRatings a license to use ACNielsen’s proprietary audience sampling methodology and the “Nielsen” trademark outside of North America in the Internet audience measurement business, and has entered into a services agreement to provide eRatings, for a period of five years beginning in May 2002, with the services of certain dedicated marketing and panel management personnel who are employed by ACNielsen, as well as certain back office services currently provided to eRatings by ACNielsen. Accordingly, for a significant period of time we expect that the eRatings business will be substantially dependent upon these arrangements with ACNielsen for its infrastructure, for the continued maintenance of its Internet audience measurement panels and otherwise for the operation of its business. Although ACNielsen may agree to extend the five-year term of the arrangements, there can be no assurance that it would choose to do so.

Even if we are successful in managing our international operations, we will be subject to a number of risks inherent in engaging in international operations, including:

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changes in regulatory requirements;

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deficiencies in the telecommunications infrastructure in some countries;

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reduced protection for intellectual property rights in some countries;

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more rigorous levels of privacy protection in some countries;

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potentially adverse tax consequences;

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economic and political instability; and

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fluctuations in currency exchange rates.

WE MAY NOT BE SUCCESSFUL IN THE DEVELOPMENT OR INTRODUCTION OF NEW PRODUCTS AND SERVICES TO KEEP UP WITH THE PROLIFERATION OF ALTERNATIVE INTERNET ACCESS DEVICES AND TECHNOLOGIES RELATED TO THE EXPECTED CONVERGENCE OF THE INTERNET AND TELEVISION

We believe that an increasing proportion of Internet use will involve alternative Internet access devices such as Web-enabled phones, television set-top boxes and internet enabled gaming consoles and that there will eventually be a convergence of Internet content and television programming. Accordingly, in order to continue to provide information about audience behavior throughout all major segments of the Internet, we will be required to develop new products and services that address these evolving technologies. We may be unsuccessful in identifying new product and service opportunities or in developing or marketing new products and services in a timely or cost-effective manner. In addition, product innovations may not achieve the market penetration or price stability necessary for profitability. Finally, we may not be successful in adapting our data collection software to evolving types of Internet access devices or content. If we are unable to provide audience measurement information regarding any significant segments of Internet use, demand for our product and service offerings may suffer.

WE MAY NOT BE ABLE TO RECRUIT OR RETAIN QUALIFIED PERSONNEL

Our future success depends in large part on our ability to attract, retain and motivate highly skilled employees. We may have difficulties in retaining employees because many of our employees hold options to purchase our stock at prices significantly above the current market price for our stock. Although we provide compensation packages that include competitive salaries, stock options, bonus incentives, and other employee benefits, we may be unable to retain our key employees or to attract, assimilate and retain other highly qualified employees in the future, which would harm our business.

BECAUSE THE INTERNET AUDIENCE MEASUREMENT INDUSTRY IS IN ITS INFANCY, THE PRICING AND ACCEPTANCE OF OUR PRODUCTS AND SERVICES IS UNCERTAIN

We may be forced for competitive or technical reasons to reduce prices for some of our products or services or to offer them free of charge. Such circumstances would reduce our revenue and could harm our business. Additionally, our market is still evolving, and we have little basis to assess demand for different types of products or services or to evaluate whether our products and services will be accepted by the market. If our products and services do not gain broad market acceptance, our business may fail.

THE AUDIENCE MEASUREMENT SERVICES OFFERED BY NIELSEN MEDIA RESEARCH OR ACNIELSEN MAY EVENTUALLY HAVE FEATURES THAT OVERLAP WITH FEATURES OF OUR INTERNET AUDIENCE MEASUREMENT SERVICES AS A RESULT OF CONVERGENCE OF TELEVISION AND THE INTERNET

Nielsen Media Research’s principal business consists of providing television audience measurement services based on audience panels that it develops independent of its strategic relationship with us. ACNielsen also derives a substantial portion of its revenue from television audience measurement services outside of the United States. If television and the Internet converge in the future as expected, any Internet audience information that is reported by television audience measurement services through these VNU subsidiaries may overlap with the audience information that is reported by the Nielsen//NetRatings Internet audience measurement services. In the event of such overlap, VNU’s services could begin competing with our services for the same research budgets among customers in the marketplace, and its offering of such services could conflict with its obligation to develop and maintain our Internet audience panels.

OUR BUSINESS MAY BE HARMED IF WE SUPPLY INACCURATE INFORMATION TO OUR CUSTOMERS

If we furnish inaccurate information to our customers, our brand may be harmed. The information in our databases, like that in any database, may contain inaccuracies that our customers may not accept. Any dissatisfaction by our customers with our

measurement methodologies or databases could have an adverse effect on our ability to attract new customers and retain existing customers and could ultimately harm our brand. Our customer contracts generally provide that each customer must indemnify us for any damages arising from the use of data, reports or analyses by the customer or the performance of any consulting, analytic or other services by us. However, we cannot be certain that our contract provisions provide sufficient protection. Any liability that we incur or any harm to our brand that we suffer because of irregularities or inaccuracies in the data we supply to our customers could harm our business.

SYSTEM FAILURES OR DELAYS MAY HARM OUR BUSINESS, AND OUR FACILITIES AND INTERNAL COMPUTER OPERATIONS ARE VULNERABLE TO NATURAL DISASTERS AND OTHER UNEXPECTED LOSSES

Our success depends on the efficient and uninterrupted operation of our computer and communications systems. A failure of our network or our data gathering procedures could impede the processing of data, customer orders and day-to-day management of our business and could result in the corruption or loss of data.

Our internal computer operations are located in leased facilities in San Jose, California, in an area that is susceptible to earthquakes. We do not have a backup facility to provide redundant network capacity in the event of a system failure. Accordingly, if this location experienced a system failure, our online services would become unavailable to our customers until we were able to bring an alternative facility online, a process which could take several weeks. These systems are also vulnerable to damage from fire, floods, power loss, telecommunications failures, break-ins and similar events.

We intend to develop back-up systems outside of San Jose; however, as we replicate our systems at other locations, we will face a number of technical challenges, particularly with respect to database replications, which we may not be able to address successfully. Although we carry property and business interruption insurance, our coverage may not be adequate to compensate us for all losses that may occur. Our servers may also be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions.

During 2001, the western United States (and California in particular) experienced repeated episodes of diminished electrical power supply. As a result of these episodes, certain of our operations or facilities were subject to “rolling blackouts” or other unscheduled interruptions of electrical power. The prospect of such unscheduled interruptions may continue for the foreseeable future and we are unable to predict either their occurrence, duration or cessation. In addition, due to these power supply shortages, we may be subject to significantly greater power costs which may adversely affect our financial results.

A DELAY OR DISCONTINUATION OF OUR SERVER HOSTING SERVICE COULD HARM OUR BUSINESS

The servers on which we collect panel members’ data are maintained by AboveNet at its facilities located in San Jose, California. We continually monitor our current utilization rate and the extent of our system capacity needs. We believe we are currently operating at utilization levels that do not require additional capacity. Accordingly, our ability to collect Internet audience data in real time is dependent upon the efficient and uninterrupted operation of AboveNet’s computer and communications hardware and software systems. Despite any precautions we may take, the occurrence of a natural disaster or other unanticipated problems at AboveNet’s facility could result in interruptions in the flow of data to our servers. In addition, any failure by AboveNet to provide our required data communications capacity could result in interruptions in our service. In the past, we have experienced occasional minor interruptions in service from AboveNet, although we have never experienced a significant interruption in service due to failures at AboveNet. In the event of a delay in the delivery of data from AboveNet, or if AboveNet should discontinue its services to us, we would be required to transfer our data collection operations to an alternative provider of server hosting services. Such a transfer could result in significant delays in our ability to deliver our products and services to our customers, which could damage our reputation and harm our business. In recent quarters we have noticed a softening in the marketplace for “co-location” services such as those offered by AboveNet and its competitors and a corresponding decrease in the financial stability of many companies offering such services. If this trend continues, we could face potential interruptions or cancellation of our services and could have difficulties in establishing similar services with alternative providers.

WE ARE SUBJECT TO PENDING LEGAL PROCEEDINGS

We are currently subject to a securities class action complaint relating to our initial public offering. The plaintiffs allege that our prospectus was materially false and misleading because it failed to disclose that the underwriters required several investors

who sought large allocations of stock in the offering to pay excessive underwriters’ compensation in the form of increased brokerage commissions on other trades and required investors to agree to buy shares of our stock after the offering was completed at predetermined prices as a precondition to obtaining allocations in the offering. The plaintiffs further allege that because of these purchases, our stock price after its initial public offering was artificially inflated. Similar complaints have been filed against a number of other issuers that had initial public offerings in 1999 and 2000. An adverse outcome could materially affect our results of operations and financial position.

WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS

We regard our intellectual property as critical to our success. We rely on patent, trademark, copyright and trade secret laws to protect our proprietary rights, and we seek to obtain the issuances of patents for our core technology and the registration of our material trademarks and service marks in the United States and in selected other countries. We cannot assure you, however, that the steps we have taken will be sufficient to protect our intellectual property from infringement or misappropriation. Moreover, effective intellectual property protections may not be available in every country in which we offer our products and services to the extent these protections are available in the United States. Our patent applications or trademark registrations may not be approved or, even if approved, could be challenged by others or invalidated through administrative process or litigation. If our patent applications or trademark registrations are not approved because third parties own rights to the technology we are trying to patent or the trademarks we are trying to register, our use of such technology or trademark would be restricted unless we enter into arrangements with the third-party owners, which might not be possible on commercially reasonable terms or at all.

WE MAY FACE INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS THAT WOULD BE COSTLY TO RESOLVE OR MAY REQUIRE US TO MAKE CHANGES TO OUR TECHNOLOGY OR BUSINESS

Third parties may, from time to time, assert claims that we have infringed upon their proprietary rights or claims that our own trademarks, patents or other intellectual property rights are invalid. Such claims could adversely affect our reputation and the value of our own proprietary rights. From time to time we have been, and we may in the future be, subject to such claims in the ordinary course of our business, including claims of alleged infringement of patents, trademarks and other intellectual property rights of third parties. Protection of proprietary rights in Internet-related industries is inherently uncertain due to the rapidly evolving technological environment. As such, there may be numerous patent applications pending, many of which are confidential when filed, that provide for technologies similar to ours.

Any claims of infringement and any resulting litigation, should they occur, could subject us to significant liability for damages, restrict us from using our technology or from operating our business generally, or require us to make changes to our technology. Any claims of this type, with or without merit, could be time-consuming to defend, result in costly litigation, and divert management attention and resources. In addition, such claims could result in limitations on our ability to use the intellectual property subject to these claims unless we are able to enter into royalty, licensing or other similar arrangements with the third parties asserting these claims. Such agreements, if required, may be unavailable on terms acceptable to us, or at all. If we are unable to enter into these types of agreements, we may be required to either cease offering the subject product or change our technology underlying the applicable product. If a successful claim of infringement is brought against us and we fail to develop non-infringing technology or to license the infringed or similar technology on a timely basis, it could materially adversely affect our business, financial condition and results of operations.

ANY MISAPPROPRIATION OF PERSONAL INFORMATION ABOUT OUR PANELISTS THAT IS STORED ON OUR COMPUTERS COULD HARM OUR REPUTATION OR EXPOSE US TO CLAIMS ARISING FROM DAMAGES SUFFERED BY THOSE PANELISTS

Personal information regarding our panelists is included in the data that our software captures from a panelist’s Internet use. Our panel data are released only in an aggregated format or in a form that is not identifiable on an individual basis. However, if a person were to penetrate our network security or otherwise misappropriate sensitive data about our panel members, our reputation could be harmed or we could be subject to claims or litigation arising from damages suffered by panel members as a result of such misappropriation.

LEGISLATIVE ACTIONS, HIGHER INSURANCE COSTS AND POTENTIAL NEW ACCOUNTING PRONOUNCEMENTS ARE LIKELY TO CAUSE OUR GENERAL AND ADMINISTRATIVE EXPENSES TO INCREASE AND IMPACT OUR FUTURE FINANCIAL POSITION AND RESULTS OF OPERATIONS

In order to comply with the newly adopted Sarbanes-Oxley Act of 2002, as well as changes to Nasdaq listing standards and rules adopted by the Securities and Exchange Commission, we may be required to increase our internal controls, hire additional

personnel and additional outside legal, accounting and advisory services, all of which will cause our general and administrative costs to increase. Insurers are also likely to increase premiums as a result of the high claims rates incurred over the past year, and so our premiums for our various insurance policies, including our directors’ and officers’ insurance policies, are likely to increase. Changes in the accounting rules, including legislative and other proposals to account for employee stock options as a compensation expense among others, could materially increase the expenses that we report under generally accepted accounting principles and adversely affect our operating results.

GOVERNMENTAL REGULATION OF THE INTERNET MIGHT HARM OUR BUSINESS

The applicability to the Internet of existing laws governing issues such as property ownership, libel and personal privacy is uncertain. In addition, governmental authorities in various countries may seek to further regulate the Internet with respect to issues such as user privacy, pornography, acceptable content, advertising, e-commerce, taxation, and the pricing, characteristics and quality of products and services. Finally, the global nature of the Internet could subject us to the laws of a foreign jurisdiction in an unpredictable manner. Any new legislation regulating the Internet could inhibit the growth of the Internet and decrease the acceptance of the Internet as a communications and commercial medium, which might harm our business.

A SALE BY VNU OF ITS STAKE IN NETRATINGS COULD ADVERSELY AFFECT OUR STOCK PRICE

There are no contractual restrictions on the ability of VNU, through its Nielsen Media Research or ACNielsen subsidiaries, to sell shares of our common stock, although sales in the public market will be subject to the volume limitations of SEC Rule 144. Pursuant to these volume limitations, a controlling stockholder may sell shares under Rule 144 only if the shares to be sold, together with the shares sold during the past three months, do not exceed the greater of 1% of the issuer’s outstanding shares or the average weekly trading volume of the issuer’s shares during the preceding four calendar weeks. Nielsen Media Research, ACNielsen and several of our other stockholders have the right, under certain circumstances, to require us to register their stock for sale to the public, with the exception of the shares issued to ACNielsen in the acquisition of eRatings. Should VNU decide to sell its stake in NetRatings, it could adversely affect our stock price. Additionally, VNU will have the ability to transfer control of NetRatings, possibly at a premium over the then- current market price. Because VNU will have the ability to effect such a transfer of control unilaterally, other stockholders could be denied an opportunity to participate in the transaction and receive a premium for their shares.

DELAWARE LAW AND OUR CHARTER DOCUMENTS CONTAIN PROVISIONS THAT COULD DISCOURAGE OR PREVENT A POTENTIAL TAKEOVER OF OUR COMPANY THAT MIGHT OTHERWISE RESULT IN OUR STOCKHOLDERS RECEIVING A PREMIUM OVER THE MARKET PRICE OF THEIR SHARES

Provisions of Delaware law and our certificate of incorporation and bylaws could make more difficult the acquisition of us by means of a tender offer, a proxy contest, or otherwise, and the removal of incumbent officers and directors. These provisions include:

•

Section 203 of the Delaware General Corporation Law, which prohibits a merger with a 15%-or-greater stockholder, such as a party that has completed a successful tender offer, until three years after that party became a 15%-or-greater stockholder;

•

the authorization in the certificate of incorporation of undesignated preferred stock, which could be issued without stockholder approval in a manner designed to prevent or discourage a takeover; and

•

provisions in our bylaws eliminating stockholders’ rights to call a special meeting of stockholders and requiring advance notice of any stockholder nominations of director candidates or any stockholder proposal to be presented at an annual meeting, which could make it more difficult for stockholders to wage a proxy contest for control of our board or to vote to repeal any of the anti takeover provisions contained in our certificate of incorporation and bylaws.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of September 30, 2002, we had cash and cash equivalents and short-term investments of $250.4 million consisting of cash and highly liquid, short-term investments. Declines of interest rates over time will reduce our interest income from our cash and cash equivalents and short-term investments and, accordingly, could adversely affect our net income and earnings per share. The primary objective of our investment activities is to preserve capital while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we maintain our portfolio of cash equivalents and short-term investments in a variety of government and corporate obligations and money market funds. As of September 30, 2002, our investments had a weighted-average time to maturity of approximately 191 days.

Our outstanding capital lease obligations are all fixed interest rates and therefore have minimal exposure to interest rate fluctuations. As of September 30, 2002, NetRatings had no capital lease obligations outstanding. NetRatings writes down its equity investments based on its share of the net losses recorded by its joint ventures. The net losses of those entities are impacted by foreign exchange rate fluctuations. A significant fluctuation in foreign exchange rates could materially impact the joint venture losses recorded by NetRatings.

ITEM 4. CONTROLS AND PROCEDURES

(a) Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-14(c) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), within 90 days of the filing date of this report. Based on their evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective.

(b) There have been no significant changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referenced in paragraph (a) above.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

A class action lawsuit was filed on November 6, 2001 in the United States District Court for the Southern District of New York on behalf of purchasers of our common stock alleging violations of federal securities laws. The case is now designated as In re NetRatings, Inc. Initial Public Offering Securities Litigation, related to In re Initial Public Offerings Securities Litigation. The case is brought purportedly on behalf of all persons who purchased the Company’s common stock from December 8, 1999 through December 6, 2000. The complaint names as defendants NetRatings; two of our former officers or directors; and investment banking firms that served as underwriters for our initial public offering in December 1999. The Plaintiffs electronically served an amended complaint on or about April 19, 2002. The amended complaint alleges violations of Section 11 and 15 of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934, on the grounds that the prospectus incorporated in the registration statement for the offering failed to disclose, among other things, that (i) the underwriters had solicited and received excessive and undisclosed commissions from certain investors in exchange for which the underwriters allocated to those investors material portions of the shares of our stock sold in the initial public offering, and (ii) the underwriters had entered into agreements with customers whereby the underwriters agreed to allocate shares of our stock sold in the initial public offering to those customers in exchange for which the customers agreed to purchase additional shares of our stock in the aftermarket at pre-determined prices. The amended complaint also alleges that false analyst reports were issued following the IPO. No specific damages are claimed.

We are aware that similar allegations have been made in lawsuits relating to more than 300 other initial public offerings conducted in 1999 and 2000. Those cases have been consolidated for pretrial purposes before the Honorable Judge Shira A. Scheindlin. On July 15, 2002, we (as well as the other issuer defendants) filed a motion to dismiss the complaint. The motions were heard on November 1, 2002. We believe that the claims against us and our officers and directors are without merit and intend to defend them vigorously. Our management currently believes that the resolution of this matter will not have a material adverse impact on our financial position. However, an adverse outcome could materially affect our results of operations and financial position.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

On August 9, 2002, we issued 266,000 shares of unregistered common stock to certain stockholders of NetValue, in addition to paying $7.1 million in cash, in connection with our acquisition of a 52% controlling interest in NetValue. The value of the shares issued in the transaction, based on the exchange formula provided in the purchase agreement, was $1.9 million. The registration statement on Form S-3 that we filed with respect to the shares purchased from the former stockholders of NetValue was declared effective by the Securities and Exchange Commission on October 25, 2002. The shares issued to the former stockholders of NetValue were deemed exempt from registration under the Securities Act in reliance on Regulation S under the Securities Act of 1933, as amended.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibit Number		Exhibit

10.42		Sub-Sublease dated September 13, 2002.

99.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

On July 15, 2002, we filed a Report on Form 8-K pursuant to Item 7 of such form in order to provide the required financial statements and pro forma financial information relating to our purchase from ACNielsen of the remaining 80.1% interest in eRatings not previously owned by NetRatings.

On September 12, 2002, we filed a Report on Form 8-K pursuant to Item 5 of such form regarding our announcement of our submission of (i) a simplified all-cash take-over bid with the Conseil des Marchés Financiers (“CMF”) in France and (ii) a draft prospectus for the tender offer with the Commission des Opérations de Bourse (“COB”) in France. Both of these

submissions were in connection with our efforts to purchase the remaining outstanding shares of NetValue, following our August 2002 acquisition of a 52% controlling interest in NetValue.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on November 14, 2002.

NETRATINGS, INC.

By:		/s/ TODD SLOAN
		Todd Sloan *Executive Vice President of* *Corporate Development, Chief* *Financial Officer And Secretary* *(Principal Accounting and Financial Officer)*

By:		/s/ WILLIAM PULVER
		William Pulver *President, Chief Executive Officer and Director*

CERTIFICATIONS PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

Certification

I, William Pulver, certify that:

1. I have reviewed this quarterly report on Form 10-Q of NetRatings, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November, 14, 2002


/s/ William Pulver
William Pulver President and Chief Executive Officer

Certification

I, Todd Sloan, certify that:

1. I have reviewed this quarterly report on Form 10-Q of NetRatings, Inc.;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

Date: November 14, 2002


/s/ Todd Sloan
Todd Sloan Executive Vice President of Corporate Development and Chief Financial Officer

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