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                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549
                            ------------------------

                                   FORM 10-K

                       FOR ANNUAL AND TRANSITION REPORTS
                    PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

(MARK ONE)
[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

                                       OR

[ ]   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 000-25943

                               MEDIA METRIX, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                               <C>
                   DELAWARE                                         11-3374729
(STATE OR OTHER JURISDICTION OF INCORPORATION          (I.R.S. EMPLOYER IDENTIFICATION NO.)
               OR ORGANIZATION)

       250 PARK AVENUE SOUTH, 7TH FLOOR
                 NEW YORK, NY                                         10003
   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                         (ZIP CODE)
</TABLE>

                                 (212) 515-8700
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

<TABLE>
<CAPTION>
                                                                 NAME OF EXCHANGE
             TITLE OF EACH CLASS                               ON WHICH REGISTERED
             -------------------                               -------------------
<S>                                               <C>
</TABLE>

     Securities registered pursuant to Section 12(g) of the Act: Common Stock,
par value $.01 per share

     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 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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or other information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 19,800,644 shares of Common
Stock, $.01 par value, outstanding on March 23, 2000, and the aggregate market
value of the voting stock held by non-affiliates of the registrant is
$547,043,661.

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                                     PART I

ITEM 1.  BUSINESS

INTRODUCTION

     Media Metrix is a leading provider of Internet and Digital Media
measurement products and services. We measure usage of the entire digital
landscape, including its largest segments: the World Wide Web, proprietary
online services like America Online, software, instant messaging applications
and other digital applications. In January 1996, we released the first World
Wide Web Audience Measurement report. Today, we offer a range of Internet
audience, e-commerce, advertising, and technology measurement services to
leading Internet advertisers, advertising agencies, media companies, technology
companies and financial institutions. Our products and services enable the
continued growth and development of the Internet by providing third-party
measurement data that our customers rely on to make critical business decisions.
Our data are used to buy, sell and plan advertising, support marketing and
commerce initiatives, assess partnerships and distribution strategies and
analyze competitors.

     We collect Internet audience data by measuring Internet usage from
representative samples, or panels, of personal computer users with our
proprietary tracking technology. We maintain large panels of randomly selected
individuals, reporting Internet usage at home and at work. Panelists are
randomly recruited to participate in the Media Metrix sample. They are required
to fill out a detailed questionnaire to provide background demographic
information at the individual and household level. Panelists download and
install our tracking software onto their PCs. The tracking software tracks all
PC usage at the individual user level. The tracking software follows the
panelists, page-by-page, minute-by-minute, click-by-click, as they use their
PCs. We collect these usage data from the panelists' personal computers and
transmit them to our data collection center for processing. The data are used to
construct several databases, and they provide the foundation for our products
and services.

     As a result of our acquisition of AdRelevance in October 1999, we offer
Internet advertising measurement products and services. AdRelevance specializes
in the automated retrieval and analysis of online advertising. Using intelligent
agent technology, the AdRelevance system scours the Internet, retrieving
advertisements. Upon retrieval, ads are analyzed, classified and added to the
AdRelevance database, providing advertisers, agencies and publishers with
marketing intelligence, including when, how and how much their competitors are
marketing and advertising on the Internet. AdRelevance operates as a wholly
owned subsidiary of Media Metrix.

     Our principal executive offices are located at 250 Park Avenue South, 7th
Floor, New York, New York 10003, and our telephone number is 212-515-8700.
Inquiries may also be sent via e-mail to investor@mmxi.com.

     Media Metrix(R), MMXI, PC Meter, RelevantKnowledge, e-Trends, The Power of
Relevant Knowledge, MyMetrix, AdRelevance and the Media Metrix logo are
trademarks of Media Metrix. Any other trademark, trade name or service mark of
any other company appearing in this document belongs to its holder.

INDUSTRY BACKGROUND

  Growth of the Internet

     The Internet has emerged as a global medium that allows millions of people
worldwide to obtain information, communicate and conduct business
electronically. International Data Corporation, or IDC, estimates that the
largest segment of the Internet -- the World Wide Web -- will grow from
approximately 142 million users in 1998 to approximately 500 million users by
the end of 2003. The continued growth in Internet usage will be driven by:

     - the large and growing number of personal computers installed in homes and
       offices;

     - easier, faster, more reliable and less expensive access to the Internet;

     - the quality and quantity of content on the Internet;
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     - the increase in commerce activity -- for a wide array of products and
       services -- via the Internet; and

     - improvements in network infrastructures.

  Growth of Internet Advertising and Electronic Commerce

     The unique interactive nature of the Internet has led to its rapid
emergence as a compelling vehicle for advertisers and marketers. The Internet
offers advertisers the ability to target:

     - people with specific sets of interests;

     - users with desirable demographic characteristics; and

     - populations within specific regions, localities or countries.

     The Internet also gives marketers the potential to:

     - establish dialogues and individual relationships with customers;

     - receive direct feedback on their advertising;

     - quickly and cost-effectively adapt their advertising to respond to
       customer feedback; and

     - reach broad, global audiences.

     The growing adoption of the Internet also represents an enormous
opportunity for marketers to conduct business over the Internet. Electronic
commerce, or e-commerce, via the Internet can provide a marketer with a fast,
inexpensive and convenient channel to reach customers. As business and consumer
acceptance of e-commerce grows, advertisers and marketers are increasingly using
the Internet to attract and retain customers, as well as complete transactions
with those customers.

     The growth in Internet advertising spending will ultimately depend on the
ability of advertisers to plan their advertising expenditures by using reliable
data that demonstrate audience size and the value of Internet advertisement
placement. Timely audience and advertising measurement data have emerged as
"must have" information. This information enables the buying and selling of
advertising and sponsorship support. Additionally, reliable Internet audience
measurement data are key drivers of the e-commerce industry because they enable
Internet marketers to analyze consumer behavior and focus their Internet
investments.

  The Need for a Measurement Standard

     Traditional media -- including television, radio and print -- are largely
supported by advertising spending. A principal element that drives the growth of
advertising in all media is the availability of audience measurement data, or
ratings. In each medium, a single standard of audience measurement has emerged.
For over 40 years, Nielsen's estimates of television audience size and
composition have served as the standard for audience measurement of national and
local television advertising in the United States. Arbitron serves as the radio
audience measurement standard, and MRI serves as the magazine readership
measurement standard. These third-party standards provide the uniform basis of
measurement which advertisers, media companies, advertising agencies and the
financial community rely on to make critical business decisions.

     As advertising and e-commerce continue to grow on the Internet, a standard
for Internet audience measurement will emerge which will:

     - measure a large and representative panel of Internet users -- on a global
       basis;

     - provide comprehensive measurement, including the World Wide Web,
       proprietary online services like America Online, T-Online (Germany), and
       NiftyServe (Japan);

     - measure Internet audiences both at home and at work; and

     - be unbiased and independent from advertisers, content providers and
       marketers.

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     As in traditional media, an independent standard of audience measurement
must be adopted by advertisers and marketers on the Internet. In traditional
media, this standard may vary from country to country because goods and services
are generally marketed on a national basis. However, on the Internet, customers
will demand a worldwide standard because the Internet is a truly global
marketplace. A significant business opportunity exists for the company that
provides this standard.

STRATEGY

     Our goal is to become the accepted global standard for Internet audience,
e-commerce and advertising measurement. We intend to achieve this goal through
the following strategies:

     CONTINUE OUR INDUSTRY LEADERSHIP.  We expect to continue our history of
innovation as the pioneer of Internet audience measurement. We plan to continue
to develop our market-leading technology and leverage our panel and audience and
advertising databases to develop broader and more in-depth products and
services. We plan to remain at the forefront of change in the industry by
continuing to work closely with our customers and with key trade associations
and non-profit organizations to establish standards for Internet audience and
advertising measurement.

     RAPID INTERNATIONAL EXPANSION.  We believe there is an opportunity to
establish Media Metrix products and services as the global standard for Digital
Media measurement. Unlike most media, which are delivered to a national or local
market, the Internet is the first medium that is regularly delivered to a
worldwide audience. Over the next five years Internet advertising spending
growth rates worldwide are projected to exceed spending growth rates in the
United States alone. These factors will drive the need for a truly global
Internet audience measurement standard. Media Metrix is responding to the
demands of its customers to provide reliable Internet audience measurement data
in key non-U.S. markets -- providing global measurement for a global medium. We
have expanded our audience measurement operations into the U.K., France,
Germany, Sweden, Australia, Canada and Japan. We intend to leverage our
proprietary panel methodology, technology and brand recognition to become a
supplier of Internet audience measurement services on a worldwide basis. We
intend to continue expanding our presence in the international marketplace,
either directly or through strategic partnerships with leading local panel-based
marketing and media research companies.

     EXPAND AND INCREASE PENETRATION OF OUR CLIENT BASE.  We will continue to
add new customers, build on our successful client retention strategy, and
further expand our existing customer relationships. We have historically
retained substantially all of our client base from year to year. Of our
customers under contract at the end of 1998, over 95% remained customers at the
end of 1999. On average, contracts renewed during 1999 were renewed at a dollar
value 35% greater than that of the prior contract. We anticipate expanding our
client base as Internet advertising spending and e-commerce transactions
increase -- driving increased demand for audience measurement data among the
growing number of Internet related businesses and advertisers.

     DEVELOP PRODUCTS TO ACCELERATE E-COMMERCE GROWTH.  We believe that the
success and growth of e-commerce, like Internet advertising, will be driven
largely by the availability of comprehensive and reliable quantitative and
qualitative data. These data must provide key statistics for evaluation of
e-commerce businesses and business strategies. We have developed, and are
working with clients to continue developing, products that enable clients to
target Internet users most likely to engage in e-commerce by providing
behavioral and demographic data on people who purchase products, actively shop,
or merely click on to a particular e-commerce site. We currently offer a
syndicated Online Shopping Report, as well as custom Shopping Referral and
Buying Reports. Our Q-Metrix Report provides qualitative data about online
shopping behavior, and is linked with actual Internet usage. In addition, the
AdRelevance service increases the depth of Media Metrix' e-commerce product by
offering data on advertising placement and expenditures -- as well as creative
components -- by e-commerce marketers.

     DEVELOP NEW PRODUCTS AND SERVICES.  In addition to e-commerce related
products, we intend to continue to develop new products and services to meet the
growing needs of our customer base by continued leverage of our core audience
measurement database to provide additional products and services. These products
include qualitative reports, local market data, hardware and software reports
and custom products and services. We also intend to continue with the
development of the AdRelevance service, by adding additional data and
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functionality to the service. As of December 31, 1999 we employed 35 people in
research and development. We intend to expend significant additional resources
to expand new product development efforts.

AUDIENCE MEASUREMENT METHODOLOGY

     We collect our data with high quality technologies and methodologies that
have been developed from a strong background in technology and panel recruitment
and management.

     AUDIENCE MEASUREMENT METHODOLOGY.  The Media Metrix panel is a high
quality, representative sample of personal computer users, including at-home and
at-work users. We recruit panelists by random digit dial (RDD) telephone
solicitation. We also use direct mail to reach individuals within the RDD sample
frame. The panel currently consists of over 50,000 individuals under continuous
measurement in the United States and 20,000 individuals under measurement beyond
U.S. borders. In connection with our panel recruitment process, each panelist is
required to fill out a detailed questionnaire, providing background demographic
information including age, gender, household income, geographic location, level
of education, size of household and job classification.

     Our proprietary metering system, or meter, is a software application
installed on a panelist's personal computer. It monitors activity of the
personal computer's operating system and browser. The meter passively records
what users do on their personal computers on a second-by-second basis,
including:

     - the start and stop time of each activity;

     - the application in use;

     - detailed usage activity for proprietary online services; and

     - page-by-page viewing on the Internet.

     We collect the data we need for our products and services without any
agreement or arrangement with operators of Web sites or operators of proprietary
online services like America Online. Because we measure our panelists' computer
usage and not activity at a particular Web site or proprietary service, no
agreements with the operators of Web sites or online services are necessary.

     Once the meter has collected the data from the panelist's personal
computer, data are transmitted to our offices for processing either via disk or
via automatic transfer over the Web. We began introducing a new version of our
metering software in August 1999. The new meter captures additional details of
Internet usage to accurately report audience behavior of emerging media such as
streaming audio and video. This version also provides real time transmission of
data on usage. We have launched our operations in Canada and Australia using the
new meter and began fully converting the U.S. panel to the new meter in the
first quarter of 2000. The latest version of our meter also allows us to
automatically update the software via the Internet, with no action required on
the part of our panelists. We also collect data via questionnaires distributed
through direct mail and over the Web. We utilize our own software to collect
information on hardware configurations and software installations of our
panelists.

     The statistical quality of the information that we collect is a function of
minimizing both sampling error and measurement error. Sampling error is a
function of the size and quality of the sample. Measurement error is a function
of the scope of the universe under measurement and the quality of our meter for
comprehensive data collection. We minimize sampling error by maintaining a large
panel. We minimize measurement error by measuring all Internet usage, including
the Web, proprietary online services like America Online, and all other activity
on our panelists' personal computers.

     DATA ANALYSIS AND REPORT GENERATION AND DELIVERY.  Data retrieved from the
meter are transmitted or downloaded to file servers and then combined with those
of all the other panelists. The data are then used to construct several
databases, which we use to provide our reports. We deliver our reports in one or
more of the following formats: via proprietary Web-based delivery systems;
e-mail; computer disk or hard copy.

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ADVERTISEMENT MEASUREMENT METHODOLOGY

     Media Metrix' AdRelevance technology systematically and continuously
searches commercial Web sites and captures detailed data about advertising
banners, promotions, sponsorships, text links and rich media. AdRelevance's
intelligent agent technology searches over 3,000 Web sites and sub-sites daily
and evaluates 40 million page views per month to provide in-depth advertising
tracking information. Once captured, the data are warehoused, classified and
statistically analyzed.

     By using the AdRelevance technology, our customers can query the
AdRelevance database and generate Web-based reports on demand. This enables
customers to monitor competitors' marketing activities, plan more effective
online campaigns and evaluate campaigns in real time. Customers can gain access
to up-to-date intelligence about their competitors' online marketing
communications programs, enabling them to quickly and easily compare and report
information by a wide range of criteria including advertiser, product, message,
type, industry, location, technology and creative content.

PRODUCTS AND SERVICES

     We offer a broad range of Internet audience, e-commerce, advertising, and
technology measurement services to leading Internet advertisers, advertising
agencies, media companies, technology companies and financial institutions. Our
data are used to buy, sell and plan advertising; support marketing and commerce
initiatives; assess partnerships and distribution strategies and analyze
competitors.

     INTERNET AUDIENCE MEASUREMENT PRODUCTS AND SERVICES.  Our principal
audience measurement products and services are derived from data collected from
our panel and stored in our core databases, which we use to produce the
following:

     - syndicated Internet audience measurement reports and services;

     - custom Internet audience measurement reports and services; and

     - e-commerce measurement reports and services.

Syndicated products.  We provide syndicated Internet audience measurement
products and services as our core business. Our key syndicated products consist
of:

<TABLE>
<CAPTION>
PRODUCT                                                        DESCRIPTION
-------                                ------------------------------------------------------------
<S>                                    <C>
The Web Report.......................  Our flagship syndicated audience measurement product
                                       contains the following two components:
                                       - The Key Measures Report: provides measures for all
                                       reportable Web sites, categorized within major sectors. Key
                                         measures include:
                                       -- unique visitors;
                                       -- the percentage of the total Web audience in a month that
                                       could be reached via each reported Web site, commonly
                                          referred to as reach;
                                       -- average usage days per user;
                                       -- average unique Web pages visited per day and per month;
                                       -- age and gender composition; and
                                       -- demographic composition.
                                       - The Trend Report: provides information on trends within
                                       the sectors in the Key Measures Report for a six-month
                                         period. One section of the Trend Report includes trends
                                         over a three-month period for key measures. Another
                                         section provides an alphabetical listing of over 10,000
                                         measured Web sites and properties and the reach trends for
                                         each during the relevant six-month period.
</TABLE>

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<TABLE>
<CAPTION>
PRODUCT                                                        DESCRIPTION
-------                                ------------------------------------------------------------
<S>                                    <C>
The Digital Media Report.............  Provides measurement of audience usage of proprietary online
                                       services like America Online, instant messaging applications
                                       like ICQ and other proprietary services like Juno, as well
                                       as all information collected in the Web Report. Allows for
                                       the comparison of all Digital Media. Measures reported
                                       include:
                                       -- unique visitors;
                                       -- reach;
                                       -- usage days per person;
                                       -- minutes per usage day and per month; and
                                       -- age and gender composition.
The Local Market Report..............  Tracks national and local market reach, demonstrating how
                                       national and local Web sites perform within each of 38 top
                                       local markets.
Q-Metrix.............................  Provides information linking our "metered" Internet usage
                                       behavior to consumer media habits, product and service
                                       usage, lifestyle characteristics and demographics. Key
                                       subject areas covered include:
                                       -- television, radio and newspaper habits;
                                       -- Internet shopping behavior;
                                       -- banking and credit card activity;
                                       -- electronic products purchased and owned;
                                       -- lifestyle experiences;
                                       -- automotive and travel patterns; and
                                       -- hobbies and sports.
The Ad Network Report................  Details reach, frequency and demographic information across
                                       ad sales networks and other ad-supported networks like
                                       DoubleClick, 24/7 Media, Flycast, LinkExchange and AdSmart.
                                       The measures reported include the full network reach and
                                       reach of those Web pages where ads have been served.
Weekly Flash.........................  Provides weekly audience data, indicating average daily
                                       unique visitors over the course of the week.
</TABLE>

Customized services, reports and analyses.  We leverage our vast database of
information on Internet usage and technology usage to provide clients with a
broad range of special services, reports and analyses, including the following:

<TABLE>
<CAPTION>
PRODUCT                                                        DESCRIPTION
-------                                ------------------------------------------------------------
<S>                                    <C>
Vertical MarketReports...............  Report in-depth information on Web site performance within a
                                       specific industry sector or vertical market.
Retention Analyses...................  Report the percentage of audience that visits a Web site
                                       during a particular month and returns during following
                                       months.
Usage Reports........................  Segment Web and Web site traffic into heavy, medium and
                                       light usage groups and compare behavior, usage pattern and
                                       demographics.
Site Content Reports.................  Analyze specific user-defined content areas, or channels,
                                       within a Web site and report on all items in the Key
                                       Measures Report.
Personal ClickStream Reports.........  Report actual click-by-click, page level behavior of a
                                       sample of users within a particular Web site as well as
                                       their behavior across the entire Web.
Traffic Referral Reports.............  Report a summary of Web sites that users visit just prior to
                                       visiting a particular Web site and indicate where they go
                                       after exiting the site.
Site Interaction Reports.............  Quantify the degree to which a Web site shares audience with
                                       other Web sites and properties, detailing exclusive and
                                       duplicated audience share.
</TABLE>

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E-commerce measurement services.  We derive e-commerce measurement products and
services using the same database we use for our audience measurement products
and services. Our key products consist of:

<TABLE>
<CAPTION>
PRODUCT                                                        DESCRIPTION
-------                                ------------------------------------------------------------
<S>                                    <C>
The Online Shopping Report...........  Tracks online shopping activities across more than 500
                                       Internet sites within 18 categories, as well as the AOL
                                       Shopping Channel. Key measures include:
                                       -- engaged shoppers, defined in general as users who spend
                                       more than three minutes on a Web site;
                                       -- engaged shoppers relative to each Web site's unique
                                          visitor count;
                                       -- share of engaged shoppers by Web site;
                                       -- repeat shop count; and
                                       -- site-specific demographic profiles by key shopping
                                          measures.
Shopper Referral Reports.............  Custom reports on the sites that are delivering engaged
                                       shopper site traffic to other sites.
</TABLE>

     ADVERTISING MEASUREMENT PRODUCTS.  We offer advertising measurement
products and services through our AdRelevance subsidiary. AdRelevance tracks
competitive online advertising and advertiser data for eight broadly defined
categories including automotive, computer hardware, computer software,
telecommunications, financial services, travel, eRetailing and ePublishing. We
currently report on over 100,000 unique advertisements and 5,000 advertisers.
The data are reported via a Web-based computer interface system featuring the
following data points:

     - Report data by:

          - advertiser: company, product, class or customizable group;

          - Web location: genre, Web site, sub-site or customizable group;

          - creative: message type (brand, promotion, price, etc.), technology
            or size; and

          - time period: most recent week, month or customizable time period.

     - Measures:

          - impressions;

          - spending (based on rate card); and

          - unique advertisements.

     TECHNOLOGY USAGE MEASUREMENT REPORTS.  Our meter captures data on all
software applications used each time a panelist logs onto his or her computer.
The meter also captures data on all hardware configurations and software
availability on the user's computer. We use these data to compile reports on
technology usage for companies that develop and market hardware and software
applications and for Web sites that seek to understand the technical
specifications of their visitors' computer systems.

<TABLE>
<CAPTION>
PRODUCT                                          DESCRIPTION
-------                  ------------------------------------------------------------
<S>                      <C>
HardScan Report          HardScan, SoftScan and SoftUsage Reports provide details on
SoftScan Report          hardware ownership, peripheral ownership, branding
SoftUsage Report         information, installed applications and system software,
Linkage Reports          including Internet browsers, and use of software
US Consumer PC Report    applications. The analyses in the Linkage Reports and the US
                         Consumer PC Report provide a unique look at the
                         relationships between hardware, software, media, ownership
                         and usage.
</TABLE>

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INTERNATIONAL OPERATIONS

     We believe that the ability to offer Internet audience measurement data for
non-U.S. markets will be a critical element in the Internet audience measurement
market. Having established our business model in the United States, we have
begun our international expansion efforts. In September 1999, we entered into a
joint venture with two of the leading European media research and marketing
information services companies, GfK AG (based in Germany) and Ipsos S.A. (based
in France), to form MMXI Europe B.V. In connection with our acquisition of MMXI
Nordic in March 2000, SIFO Group AB (based in Sweden) became a shareholder in
MMXI Europe, owning 8.0%. We now own 50.1%, GfK owns 19.9% and Ipsos owns 22.0%
of MMXI Europe. Under the umbrella of MMXI Europe, we formed subsidiaries in
each of the United Kingdom, France and Germany. In conjunction with our joint
venture partners, we have begun to recruit panelists in each of these countries.
As of December 31, 1999, we had approximately 8,500 people under measurement in
these three countries. We began collecting audience data on Internet usage in
each of these markets in June 1999 and have released syndicated data since
October 1999. We have entered into a technology agreement under which we have
contributed our technology to MMXI Europe for use in Europe, excluding Sweden,
Denmark, Norway and Finland. Along with GfK and Ipsos, we will also provide
certain management services to MMXI Europe and each subsidiary of MMXI Europe.

     In December 1999, we formed Media Metrix Japan, to implement a service in
Japan using the Kanji version of our meter. We have hired a chief executive
officer to lead the business in Japan and began recruiting a panel in the first
quarter of 2000.

     In January 2000, we entered into a joint venture with ComQUEST Research,
Inc., to launch Media Metrix Canada. ComQUEST is a wholly owned subsidiary of
BBM Bureau of Measurement, an industry co-operative owned by Canadian
broadcasters, advertisers and advertising agencies. We own 90% of Media Metrix
Canada and ComQUEST owns 10%. Panel recruitment has begun, and as of December
31, 1999, we had approximately 2,000 people under measurement in English
speaking Canadian provinces.

     In March 2000, we completed the acquisition of the Internet audience
measurement business operated by SIFO Group AB in Sweden. The business has been
operated pursuant to a license between us and SIFO entered into in 1998 covering
Sweden, Norway and Finland. The new company, MMXI Nordic, measures Internet
audiences in Sweden and Denmark as a wholly-owned subsidiary of Media Metrix.
MMXI Nordic has approximately 5,100 people under measurement. As a part of this
acquisition, we also acquired the site-centric measurement business operated by
SIFO, known as NetCheck. We have granted MMXI Europe an option to purchase MMXI
Nordic from us at a future time.

     In March 2000, we entered into a joint venture with AMR Interactive Pty.
Ltd., a leading new media market research firm based in Australia, to create
Media Metrix in Australia and New Zealand. The joint venture will provide the
first third-party, meter-based Internet and Digital Media audience measurement
products and services for Australia and New Zealand. We own 51% of Media Metrix
in Australia, and AMR Interactive owns 49%. As of December 31, 1999, Media
Metrix in Australia had approximately 1,800 people under measurement. We have
released monthly data covering Australia since December 1999.

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CUSTOMERS

     We ended 1999 with 619 customers who use our data for planning, buying and
selling advertising; developing e-commerce strategies; understanding consumer
behavior; gaining competitive market intelligence; and analyzing investment
decisions. Our customers are typically leaders in their respective fields, and
include the following:

<TABLE>
<CAPTION>
CLIENT SECTOR                                         TYPICAL CLIENTS
-------------                   ------------------------------------------------------------
<S>                             <C>
Media Organizations...........  All of the top 20 Internet properties, including America
                                Online, Buena Vista/Disney, Excite@Home, Infoseek, Lycos,
                                Time Warner, ZDNet, CNET, AltaVista, XOOM.com, About.com and
                                Yahoo!/GeoCities
Advertising Agencies..........  Interpublic Group, J. Walter Thompson, Modem Media, Poppe
                                Tyson, Omnicom and Young & Rubicam
Advertisers and Marketers.....  Amazon.com, CDnow, eBay, British Airways, Nabisco, Bristol
                                Myers, Squibb and General Motors
Technology Companies..........  AT&T, Compaq, GTE, Hewlett-Packard, IBM and Microsoft
Financial Community...........  Fidelity, Goldman Sachs and Morgan Stanley Dean Witter
</TABLE>

     We typically enter into 12-month or longer subscription contracts with our
customers, some of whom are covered by multi-client master contracts with parent
corporations, like Time Warner and Buena Vista/Disney, to provide standard,
syndicated products and services or customized reports and analyses. It is
typical for our customers to initially purchase one of our standard products and
to upgrade over time. Of our customers under contract at the end of 1998, over
95% remained customers at the end of 1999. On average, contracts renewed during
1999 were renewed at a dollar value over 35% greater than that of the prior
contract. No customers accounted for greater than 10% of our revenues in 1999
and 1998. One customer accounted for 19% of our revenues in 1997.

SALES AND MARKETING

     We sell and market our products through our direct sales force, which was
comprised of 38 sales representatives in the United States as of December 31,
1999. A portion of the sales force is focused on new sales, developing
relationships with new customers. The balance of the sales force is dedicated to
servicing and maintaining existing accounts, and introducing new Media Metrix
products and services to our current customers. The U.S. sales force operates
out of our New York, San Francisco, Seattle and Atlanta offices. We also
maintain international sales offices in London, Paris, Nurnberg, Sydney,
Toronto, Tokyo and Stockholm. Sales representatives receive a base salary and
are eligible for commissions based on sales and revenue goals.

     We support our sales efforts through marketing and brand building
activities. We use public relations, user group seminars, trade shows and
speaking engagements to create publicity. In addition, through targeted
relationships with key media outlets, Media Metrix data are cited regularly in
the national and international press, supporting press reports of Internet
activity, and creating valuable exposure for our products and services.

OPERATIONS AND TECHNOLOGY

     We have built our primary data collection, retrieval and processing system
based on systems and software developed by The NPD Group, Inc. Our system has
been designed around industry standard data architectures. Backup procedures are
built into the processing environment in order to reduce downtime in the event
of outages or catastrophic occurrences. Our hardware systems are hosted at our
Uniondale, New York facility, our Seattle, Washington facility, and at three
offsite professionally-managed computer centers in New York, New York and Santa
Clara, California.

     As of December 31, 1999, we had 35 employees dedicated to research and
development. We incurred research and development expenses of $865,000 in 1997,
$1.4 million in 1998 and $5.0 million in 1999. The increase in expenses in 1999
was due primarily to increases in research and development personnel and to
expenditures relating to our new real-time meter, data warehouse and client
interface systems. We anticipate

                                        9
<PAGE>   11

that we will continue to devote significant resources to product development and
the development of delivery technology in the future as we add new reports and
databases.

INTELLECTUAL PROPERTY

     We regard the protection of our patents, copyrights, service marks,
trademarks and trade secrets as important to our future success and rely on a
combination of patent, copyright, trademark, service mark and trade secret laws
and contractual restrictions to establish and protect our proprietary rights. We
require all employees and contractors to enter into confidentiality and
invention assignment agreements, and we enter into nondisclosure agreements with
third parties with whom we do business in order to limit access to and
disclosure of our proprietary information. We cannot assure you that these
contractual arrangements or the other steps we have taken or will take in the
future will be sufficient to protect our technology from infringement or
misappropriation or to deter independent development of similar or superior
technologies by others.

     We seek to obtain the issuance of patents and the registration of our
trademarks and service marks in the United States and in selected other
countries. Effective patent, trademark, service mark, copyright and trade secret
protection may not be available in every country in which our products and
services are or will be made available. We also expect to license proprietary
rights such as patents, trademarks or copyrighted material to strategic partners
in the course of our planned international expansion. While we will attempt to
ensure that the quality of our service is maintained by such licensees, we
cannot assure you that such licensees will not take actions that might
materially adversely affect the value of our proprietary rights or reputation,
which could have a material adverse effect on our business, results of
operations and financial condition.

     We also rely on certain technologies that we license from third parties. We
cannot assure you that these third-party technology licenses will not infringe
the proprietary rights of others or will continue to be available to us on
commercially reasonable terms, if at all. The loss of such technology could
require us to obtain substitute technology of lower quality or performance
standards or at greater cost, which could materially adversely affect our
business, results of operations and financial condition.

     We have been issued a patent in the United States with regard to our meter
methodology (U.S. Patent No. 5,675,510). We also have patent applications
pending in the European Patent office and in Australia, Brazil, Canada, Japan,
Mexico, Norway and the United States.

     We have also applied for a patent in the United States and other foreign
jurisdictions on the methodology for monitoring of remote data access on a
public computer network which comprises the former RelevantKnowledge meter. This
application is currently pending.

     Our use of the brand name "Media Metrix" in Europe has been challenged by
Mediametrie, S.A., a French company which measures audiences of various media.
Rather than engage in a protracted dispute, we have elected to have our European
joint venture conduct business under the name "MMXI Europe." Mediametrie has
also challenged our use of the domain name "mediametrix.com."

     To date, we have not been notified that our technologies infringe the
proprietary rights of third parties. We cannot assure you that others will not
claim that we have infringed proprietary rights with respect to past, current or
future technologies. We expect that the number of infringement claims in our
market will increase as the number of services and competitors in our industry
grows. Any of those claims, whether meritorious or not, could be time-consuming,
result in costly litigation or require us to enter into royalty or licensing
agreements. Royalty or licensing agreements might not be available on terms we
find acceptable or at all. As a result, any such claim could have a material
adverse effect upon our business, results of operations and financial condition.

COMPETITION

     The market for measurement services for Internet technologies is new,
rapidly evolving and competitive. We expect that competition will intensify in
the future. We compete with other providers of Internet audience measurement
services, which are considered either consumer-centric measurement services or
site-centric
                                       10
<PAGE>   12

measurement services. Consumer-centric services track usage among a sample of
users to provide an account of overall Internet usage behavior. Site-centric
services measure activity at a single Web site and provide measurement of
activity at a particular Web site. We are a consumer-centric service and compete
directly with other consumer-centric measurement services and indirectly with
operators of site-centric measurement systems.

     In March 1999, NetRatings and Nielsen Media Research introduced a new Web
site ratings service, Nielsen//NetRatings, that competes directly with many
aspects of our services. Nielsen Media Research is the leading provider of
television audience measurement services in the United States and Canada. In
September 1999, NetRatings also entered into a joint venture with ACNielsen
Corp. to develop and maintain audience measurement panels and to market
Nielsen//NetRatings' products and services in international markets. ACNielsen
is a leading provider of market research, information and analysis to consumer
products and services industries and is a provider of television audience
measurement services outside the United States and Canada. According to publicly
available information, in November 1999, NetRatings completed its initial public
offering, and in December 1999, Nielsen Media Research exercised warrants to
become a 54% shareholder in NetRatings. Both Nielsen Media Research and
ACNielsen have significantly more financial and other resources than do we. In
light of these events, Nielsen//NetRatings has become a significant competitor.
Other potential competitors include PC Data, a marketing research firm that
provides research on personal computer software and hardware sales, and @Plan, a
consumer-centric, qualitative measurement service.

     We face competition internationally from NetValue, a French company which
has begun providing audience measurement services in Europe and has announced
its intention to provide such services in the United States. In January 2000,
NetValue completed its initial public offering in France.

     In addition, we may face competition from individual Web sites that may
develop new and independent methods of measuring their own audience. We also
face competition from other companies that develop alternative audience
measurement technologies to those already provided by us or our current
competitors. Competitive pressures created by any one of these companies, or by
our competitors collectively, could have a material adverse effect on our
business, results of operations and financial condition.

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

     - create high-quality, timely and reliable consumer and business panels of
       a sufficient size and representative nature to provide the necessary
       data;

     - provide measurement services of proprietary online services and
       Internet-related activity as well as measuring Web activity;

     - provide measurement services globally that are based on a consistent
       standard methodology;

     - provide accurate measurement of advertising on the Internet and other
       Digital Media; and

     - establish credibility and provide a trusted independent source of data.

     Some of our competitors and potential competitors have longer operating
histories, larger customer bases and greater brand recognition in other
businesses and significantly greater financial, marketing, technical and other
resources than we do. We also face competition in the area of development of
representative consumer and business panels to provide data. In addition, other
measurement services may be acquired by, receive investments from or enter into
other commercial relationships with larger, well-established and well-financed
companies as use of the Internet increases. Therefore, certain competitors with
other revenue sources may be able to devote greater resources to marketing and
promotional campaigns, adopt more aggressive pricing policies and devote
substantially more resources to technology and systems development than we can.
Increased competition may result in reduced operating margins, loss of market
share and diminished value in our services. We cannot assure you that we will be
able to compete successfully against current and future competitors. Further, as
a strategic response to changes in the competitive environment, we may, from
time to time, make certain pricing, service or marketing decisions or
acquisitions that could have a material adverse effect on our business, results
of operations and financial condition. New technologies and the expansion of
existing technologies may also increase the competitive pressures on us by
enabling our competitors to offer a lower-cost service.

                                       11
<PAGE>   13

EMPLOYEES

     As of December 31, 1999, we had 176 full-time employees worldwide, with:

     - 35 in research and development;

     - 38 in operations;

     - 86 in sales, marketing and client service; and

     - 17 in management, administration and finance.

     Our employees are not covered by a collective bargaining agreement. We have
never experienced an employment-related work stoppage and consider our employee
relations to be good.

ITEM 2.  PROPERTIES

     Currently, we lease office space in Atlanta, Georgia, San Francisco,
California, Seattle, Washington and New York, New York. We also sublease
additional office space at another location in New York, New York. In addition,
our operations and research and development facility is located in Uniondale,
New York, which is leased to us by NPD under the terms of a management services
agreement.

ITEM 3.  LEGAL PROCEEDINGS

     We are not a party to any material legal proceedings.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     No matters were submitted to a vote of security holders in the fourth
quarter of 1999.

                                       12
<PAGE>   14

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     Our common stock has been listed on the Nasdaq National Market since May 7,
1999 under the symbol "MMXI." The following table sets forth the high and low
closing sale prices on the Nasdaq National Market for our common stock for the
calendar periods indicated.

<TABLE>
<CAPTION>
                                                                 PRICE RANGE
                                                               OF COMMON STOCK
                                                              ------------------
                                                               HIGH        LOW
                                                              -------    -------
<S>                                                           <C>        <C>
YEAR ENDING DECEMBER 31, 1999:
  Second Quarter (from May 7, 1999).........................  $56.625    $32.000
  Third Quarter.............................................  $69.875    $34.250
  Fourth Quarter............................................  $65.875    $32.500
</TABLE>

     As of December 31, 1999, there were 211 holders of record of our common
stock.

DIVIDEND POLICY

     We have never declared nor paid any cash dividends on our common stock. We
currently anticipate that we will retain any future earnings for the development
and operations of our business. Accordingly, we do not anticipate paying cash
dividends on our capital stock in the foreseeable future.

CHANGES IN SECURITIES AND USE OF PROCEEDS

     The effective date of our first registration statement, filed on Form S-1
under the Securities Act of 1933 (No. 333-72883) relating to the initial public
offering of our Common Stock, was May 6, 1999. A total of 3,250,000 shares of
our common stock were sold at a price of $17.00 per share to an underwriting
syndicate led by Donaldson, Lufkin & Jenrette Securities Corporation, BancBoston
Robertson Stephens Inc. and Thomas Weisel Partners LLC. The offering commenced
on May 7, 1999, and closed on May 12, 1999. An additional 200,000 shares of
common stock were sold on behalf selling stockholders as part of the same
offering. The initial public offering resulted in gross proceeds of $55.3
million, $3.9 million of which was applied toward the underwriting discount.
Expenses related to the offering totaled approximately $2.0 million. Net
proceeds to us and the selling stockholders were $49.4 million and $3.2 million,
respectively. From the time of receipt through December 31, 1999, proceeds were
applied as follows:

     - $4.8 million towards the redemption of our redeemable preferred stock
       from The NPD Group, Inc.;

     - $7.0 million for working capital purposes including our international
       operations; and

     - the remainder has been invested in short term, investment grade
       securities.

     From October 1, 1999 through December 31, 1999, we issued 697,664 shares of
our common stock to the shareholders of AdRelevance in connection with our
acquisition of AdRelevance in October 1999.

     No underwriters were engaged in connection with the issuance of the shares
to the AdRelevance shareholders. The issuance of the shares was made in reliance
upon the exemption from registration set forth in Section 4(2) of the Securities
Act of 1933.

                                       13
<PAGE>   15

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA.

     The financial data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and with the Company's Consolidated Financial Statements and notes
thereto included elsewhere in this Form 10-K. The financial statements for the
period from inception through December 31, 1995 are based on operations of PC
Meter, our predecessor, while it was still a division of NPD. The financial
statements for the year ended December 31, 1996 are those of PC Meter and
include three months of operations during which PC Meter was a division of NPD.

<TABLE>
<CAPTION>
                                               PERIOD FROM
                                                INCEPTION
                                                 THROUGH             YEAR ENDED DECEMBER 31,
                                               DECEMBER 31,   --------------------------------------
                                                   1995        1996      1997      1998       1999
                                               ------------   -------   -------   -------   --------
                                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                            <C>            <C>       <C>       <C>       <C>
STATEMENT OF OPERATIONS DATA:
Revenues.....................................     $   --      $ 1,033   $ 3,188   $ 6,331   $ 20,500
Cost of revenues.............................        140        1,744     3,463     4,121     10,291
                                                  ------      -------   -------   -------   --------
Gross profit (loss)..........................       (140)        (711)     (275)    2,210     10,209
Operating expenses:
  Research and development...................         86          588       866     1,382      5,044
  Sales and marketing........................         45          929     2,022     2,888      9,117
  General and administrative.................        101        1,148     1,516     2,715      6,756
  Amortization of deferred compensation and
     other stock-based compensation..........         --           --        --       369      1,060
  Amortization of intangibles................         --           --        --       479      7,312
  Acquired in-process research and
     development.............................         --           --        --     1,600      6,800
                                                  ------      -------   -------   -------   --------
Total operating expenses.....................        232        2,665     4,404     9,433     36,089
                                                  ------      -------   -------   -------   --------
Loss from operations.........................       (372)      (3,376)   (4,679)   (7,223)   (25,880)
Minority interests...........................         --           --        --        --      1,689
Interest and other income, net...............         --           --        95        65      2,283
                                                  ------      -------   -------   -------   --------
Net loss.....................................       (372)      (3,376)   (4,584)   (7,158)   (21,908)
Preferred stock dividends....................         --           --      (290)     (314)      (109)
                                                  ------      -------   -------   -------   --------
Net loss applicable to common stockholders...     $ (372)     $(3,376)  $(4,874)  $(7,472)  $(22,017)
                                                  ======      =======   =======   =======   ========
Basic and diluted net loss per common share
  applicable to common stockholders..........     $ (.06)     $  (.52)  $  (.75)  $  (.98)  $  (1.34)
                                                  ------      -------   -------   -------   --------
Shares used in the calculation of basic and
  diluted net loss per share applicable to
  common stockholders........................      6,523        6,523     6,523     7,619     16,445
</TABLE>

<TABLE>
<CAPTION>
                                                                      AT DECEMBER 31,
                                                           --------------------------------------
                                                            1996      1997      1998       1999
                                                           -------   -------   -------   --------
<S>                                                        <C>       <C>       <C>       <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities.........  $   583   $ 1,869   $ 8,012   $112,241
Working capital (deficit)................................   (2,478)      (47)    1,057    102,806
Total assets.............................................    1,213     2,787    16,060    178,844
Due to NPD...............................................    2,782     1,284     4,706        444
Preferred stocks.........................................       --     8,366     4,680         --
Total stockholders' equity (deficit).....................   (2,478)   (8,274)    2,622    162,789
</TABLE>

                                       14
<PAGE>   16

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     You should read the following discussion of our financial condition and
results of operations with the financial statements and the notes to the
financial statements included elsewhere in this Annual Report on Form 10-K. This
discussion contains forward-looking statements based on our current
expectations, assumptions, estimates and projections. These forward-looking
statements involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, as more fully described in the "Risk Factors" section
and elsewhere in this Annual Report on Form 10-K. We undertake no obligation to
update publicly any forward-looking statements for any reason, even if new
information becomes available or other events occur in the future.

OVERVIEW

     We provide Internet audience measurement products and services to leading
Internet advertisers, advertising agencies, media companies, technology
companies and financial institutions. We have been at the forefront of the
development and coordination of technology and standards needed to facilitate
advertising and transactions between companies doing business over the Internet.
The quality and depth of our customer base and our customer renewal rate of over
95% reflect our position as a widely accepted Internet audience measurement
service. As a result of our acquisition of AdRelevance in October 1999, we now
offer advertising measurement products and services to our customers.

     Our business was originally conducted as a division within NPD, a leading
marketing research firm. Prior to March 1996, we were engaged primarily in
product research and development. In March 1996, PC Meter, L.P., was formed to
further commercialize our Internet audience measurement business in an entity
separate from NPD, although NPD continued to provide PC Meter with
administrative and support services and technology licenses. By July 1996, we
increased the size of our panel to over 10,000 individuals and significantly
increased our product offerings. In April 1997, PC Meter was merged into Media
Metrix, and we raised approximately $4.0 million in a private placement to fund
the expansion of our business. The assets and liabilities and related revenues
and expenses of PC Meter have been reflected in our financial statements at
their historical book values.

     In November 1998, we merged with RelevantKnowledge, at the time our leading
competitor. In the merger, the former stockholders of RelevantKnowledge were
issued 3,890,825 shares of Media Metrix common stock. Following the merger, we
increased our panel size and began to integrate the best technological features
from RelevantKnowledge into our systems and processes. Due to the combination,
in the fourth quarter of 1998 we had considerable expenses due to costs incurred
by operating two distinct panels, production systems and administrative
infrastructures. In connection with the merger, we acquired $6.4 million of
intangibles, which are being amortized over periods varying from one to three
years.

     In October 1999, we acquired AdRelevance. The acquisition was structured as
a stock-for-stock transaction valued at approximately $59.4 million. In
addition, we may issue additional shares of our common stock and options and
warrants having a value of approximately $6.6 million, based on the closing
price of our common stock on October 4, 1999, if AdRelevance achieves certain
post-closing goals. In connection with our acquisition of AdRelevance, we
recognized $54.3 million of intangibles, which are being amortized over a
three-year period. Also, a non-recurring in-process research and development
cost of $6.8 million was expensed at the time of the acquisition.

     In connection with the formation of our European joint venture, MMXI Europe
B.V., we granted to each of GfK and Ipsos an option, subject to certain
conditions, to exchange their shares of MMXI Europe for shares of our common
stock at any time commencing on May 7, 2000 through May 7, 2005. The aggregate
maximum number of shares of our common stock that we may be required to issue in
exchange for the shares of MMXI Europe will equal the then U.S. dollar
equivalent of E3,825,000 divided by $21.25. On March 23, 2000, E3,825,000
equaled approximately $3.7 million. If GfK or Ipsos exercises its option to
convert its shares in MMXI Europe into shares of our common stock, we will need
to record additional goodwill in an amount equal to the difference between the
then fair market value of the shares of our common stock multiplied by the
number of shares we issue and the net book value of MMXI Europe attributable to
GfK and Ipsos.
                                       15
<PAGE>   17

     Our revenues are derived from our measurement products and services. Our
product offerings include both syndicated products and customized products. We
sell our syndicated products on an annual subscription basis. We typically bill
our syndicated clients, in advance, for up to the next twelve months of
products. Since 1997, syndicated products have accounted for approximately 90%
of our revenues, while customized products and services have accounted for
approximately 10%. Our combined customer base increased from approximately 100
customers at the end of 1997 to more than 600 as of December 31, 1999. Of the
303 customers subscribing under annual contracts for our syndicated products and
services at the end of 1998, over 95% remained customers at the end of 1999.
With this high customer retention rate, we have a growing base of recurring
revenues from our syndicated products and services. In addition, of the
contracts renewed in 1999, we experienced an average increase in contract dollar
value of over 35%.

     We recognize revenues for the syndicated products and services over the
term of the related contract as services are provided. Revenues for customized
products and services are recognized in the period in which the product or
service is delivered.

     Our business model is based on creating multiple products and services from
our core panel-based market research, technologies and databases. The core U.S.
panel of 50,000 individuals under continuous measurement has been established
over the past three years. We recruit individuals to become members of our panel
through random digit dial (RDD) telephone solicitation. We also use direct mail
to reach individuals identified within the RDD sample. We incur costs in
connection with recruiting and retaining members of our panel. These costs are
expensed in the year incurred. Our rate of expense growth, other than panel and
production, is primarily driven by increases in headcount and sales and
marketing expenditures.

     We have incurred significant losses from operations since our inception. We
incurred losses from operations of $25.9 million in 1999, $7.2 million in 1998
and $4.7 million in 1997. If the merger with RelevantKnowledge had taken place
on January 1, 1998 and the acquisition of AdRelevance had occurred on October
12, 1998, its date of inception, our pro forma loss from operations for 1998
would have been $26.7 million. This pro forma loss from operations includes $6.6
million of amortization of intangibles and $8.4 million of acquired in-process
research and development. If our acquisition of AdRelevance had taken place on
January 1, 1999, our pro forma loss from operations for 1999 would have been
$42.3 million. As of December 31, 1999, we had an accumulated deficit of $38.1
million. As of December 31, 1998, we had an outstanding payable to NPD for $4.7
million under a management services agreement, $4.1 million of which was paid in
January 1999. As of December 31, 1999, we had an outstanding payable to NPD for
$444,000. Charges from NPD have decreased in 1999 as we have taken on the direct
management of our own payroll and computer systems.

     We expect that we will incur significant expenses in the future associated
with our ongoing international expansion, particularly costs associated with
recruiting and maintaining panels in a number of countries. We plan on
continuing to hire personnel to manage our current and anticipated international
operations and on entering into joint ventures with local partners. In addition,
we intend to invest heavily in further development and enhancement of our
technologies, products and services.

                                       16
<PAGE>   18

RESULTS OF OPERATIONS

     The following table sets forth our results of operations expressed as a
percentage of revenues:

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                                              --------------------------
                                                               1999      1998      1997
                                                              ------    ------    ------
<S>                                                           <C>       <C>       <C>
Revenues....................................................   100.0%    100.0%    100.0%
Cost of revenues............................................    50.2      65.1     108.6
                                                              ------    ------    ------
Gross profit (loss).........................................    49.8      34.9      (8.6)
Operating expenses:
  Research and development..................................    24.6      21.8      27.2
  Sales and marketing.......................................    44.5      45.6      63.4
  General and administrative................................    33.0      42.9      47.6
  Amortization of deferred compensation and other
     stock-based compensation...............................     5.1       5.8        --
  Amortization of intangibles...............................    35.7       7.6        --
  Acquired in-process research and development..............    33.1      25.3        --
                                                              ------    ------    ------
Total operating expenses....................................   176.0     149.0     138.2
                                                              ------    ------    ------
Loss from operations........................................  (126.2)   (114.1)   (146.8)
Minority interests..........................................     8.2        --        --
Interest and other income, net..............................    11.1       1.0       3.0
                                                              ------    ------    ------
Net loss....................................................  (106.9)%  (113.1)%  (143.8)%
                                                              ======    ======    ======
</TABLE>

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

     Revenues.  Revenues increased 223.8% to $20.5 million for the year ended
December 31, 1999 from $6.3 million for the year ended December 31, 1998. Sales
of syndicated audience measurement products and services accounted for
approximately 90% of revenues for each of the years ended December 31, 1999 and
1998. Sales of customized products and services accounted for the remaining
revenues. The increase in revenues was due primarily to a substantial increase
in the number of our customers, including customers acquired in connection with
the RelevantKnowledge merger, and an increase in the amount of products and
services sold to our customers. No single customer accounted for more than 10%
of revenues during either of the years ended December 31, 1999 or 1998.

     Costs of Revenues.  Costs of revenues consist primarily of costs associated
with the recruitment and maintenance of the panel, data collection and
production costs. Panel and data collection costs include costs associated with
mailing and printing, incentives, help desk and associated personnel. Production
costs include computer usage charges, printing, report distribution costs and
personnel costs. Gross profit was $10.2 million for the year ended December 31,
1999, or 49.8% of revenues. Gross profit was $2.2 million for the year ended
December 31, 1998, or 34.9% of revenues. The increase in gross profit as a
percentage of revenues for the year ended December 31, 1999 over the prior
period was due to an increase in revenues, without a commensurate increase in
costs.

     In the year ended December 31, 1999, we invested approximately $2.5 million
in recruiting panels and other start up costs in connection with its
international operations in the U.K., France, Germany, Canada and Australia.
However, we have not realized any significant revenues to offset against these
costs, which has resulted in a lower overall gross margin for the period
compared to the gross margin applicable to the U.S. operations alone for the
same period.

     Research and Development.  Research and development costs consist primarily
of personnel and other related costs attributable to the development of new
products and services. All research and development costs have been expensed as
incurred. Research and development costs were $5.0 million for the year ended
December 31, 1999, or 24.6% of revenues. Research and development costs were
$1.4 million for the year

                                       17
<PAGE>   19

ended December 31, 1998, or 21.8% of revenues. The increase in research and
development costs as a percentage of revenues for the year ended December 31,
1999 was due primarily to increases in research and development personnel and
consulting costs, including certain costs relating to our new real time meter,
data warehouse and client interface systems which will be introduced in the
second quarter of 2000.

     Sales and Marketing.  Sales and marketing costs consist of personnel,
commissions, travel and entertainment expenses, public relations costs, trade
show expenses, seminars and marketing materials. Sales and marketing costs were
$9.1 million for the year ended December 31, 1999, or 44.5% of revenues. Sales
and marketing costs were $2.9 million for the year ended December 31, 1998, or
45.6% of revenues. The increase in absolute dollars was due primarily to the
increase in sales and marketing personnel, including the addition of personnel
in connection with the RelevantKnowledge merger, our acquisition of AdRelevance
and our international expansion, as well as additional marketing costs. The
decrease in sales and marketing costs as a percentage of revenues was due
primarily to revenues increasing at a greater rate.

     General and Administrative.  General and administrative costs consist
primarily of personnel, lease payments for our facilities, telephone and
utilities and professional services fees. General and administrative costs were
$6.8 million for the year ended December 31, 1999, or 33.0% of revenues. General
and administrative costs were $2.7 million for the year ended December 31, 1998,
or 42.9% of revenues. The increase in absolute dollars was due to the expenses
associated with becoming a public company, our international expansion and
increased personnel and expansion of our office facilities, including the
addition of personnel and office facilities in connection with the
RelevantKnowledge merger and our acquisition of AdRelevance. The decrease in
general and administrative costs as a percentage of revenues was due primarily
to revenues increasing at a greater rate.

     Amortization of Deferred Compensation and Other Stock-based
Compensation.  Amortization of deferred compensation and other stock-based
compensation of $1.1 million for the year ended December 31, 1999 and $369,000
for the year ended December 31, 1998 represents a non-cash compensation expense
recorded in connection with stock options granted in 1999 and 1998 and the
acceleration of the vesting provisions of certain stock options resulting in a
new measurement date in 1999.

     Amortization of Intangibles.  Amortization charges of $7.3 million for the
year ended December 31, 1999 represent the amortization of RelevantKnowledge's
panel and amortization of other intangibles acquired in our merger with
RelevantKnowledge, as well as amortization of intangibles acquired in our
acquisition of AdRelevance. Amortization charges of $479,000 for the year ended
December 31, 1998 represent the amortization of RelevantKnowledge's panel and
other intangibles acquired in the merger.

     Acquired In-Process Research and Development.  In connection with the
acquisition of AdRelevance, we expensed $6.8 million of acquired in-process
research and development for the year ended December 31, 1999. In connection
with the acquisition of RelevantKnowledge, we expensed $1.6 million for the year
ended December 31, 1998. Acquired in-process research and development represents
the value attributed to the technologies in development at the time of the
acquisition.

     Loss from Operations.  Our loss from operations was $25.9 million for the
year ended December 31, 1999, or 126.2% of revenues. Loss from operations was
$7.2 million for the year ended December 31, 1998, or 114.1% of revenues. Loss
from operations in terms of absolute dollars was higher in the year ended
December 31, 1999 due to the continued expansion of our business in the United
States and internationally, the merger with RelevantKnowledge, the acquisition
of AdRelevance and amortization of intangibles. The increase in loss from
operations as a percentage of revenues was due to a full year of amortization of
intangibles from the RelevantKnowledge merger and the write-off of acquired
in-process research and development from the AdRelevance acquisition for the
year ended December 31, 1999 offset by an increase in revenues relative to the
increases in costs of revenues and operating costs.

     Interest and Other Income, net.  Interest and other income, net of interest
expense was $2.3 million, or 11.1% of revenues, for the year ended December 31,
1999 as compared to $65,000 for the year ended December 31, 1998, or 1.0% of
revenues,. The increase in interest and other income was due to the investment
of the proceeds of our initial and secondary public offerings.

                                       18
<PAGE>   20

     Minority Interests.  Minority interests consist of the loss related to our
partners' interests in our foreign subsidiaries.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

     Revenues.  Revenues increased 98.6% to $6.3 million for the year ended
December 31, 1998 from $3.2 million for the year ended December 31, 1997. Sales
of syndicated audience measurement products and services accounted for
approximately 90% of revenues for each of the years ended December 31, 1998 and
1997. Sales of customized products and services accounted for the remaining
revenues. The increase in revenues was due primarily to a substantial increase
in the number of our customers and an increase in the amount of products and
services sold to our customers, and, to a lesser extent, the revenues associated
with RelevantKnowledge's business for the period from November 5, 1998 to the
end of the year. No single customer accounted for more than 10% of revenues
during the year ended December 31, 1998. One customer accounted for
approximately 19% of revenues for the year ended December 31, 1997.

     Costs of Revenues.  Gross profit was $2.2 million for the year ended
December 31, 1998, or 34.9% of revenues. Gross loss was $275,000 for the year
ended December 31, 1997, or 8.6% of revenues. The increase in gross profit for
the year ended December 31, 1998 over the prior period was due to an increase in
sales, including sales attributable to RelevantKnowledge's business for the
period from November 5, 1998 to the end of the year, without a commensurate
increase in costs. The increase in gross profit was partially offset by the
costs associated with operating two panels following the RelevantKnowledge
merger.

     Research and Development.  Research and development costs were $1.4 million
for the year ended December 31, 1998, or 21.8% of revenues. Research and
development costs were $866,000 for the year ended December 31, 1997, or 27.2%
of revenues. The increase in absolute dollars was due primarily to increases in
research and development personnel, including the addition of personnel in
connection with the RelevantKnowledge merger. The decrease in research and
development costs as a percentage of revenues was due to revenues increasing at
a greater rate.

     Sales and Marketing.  Sales and marketing costs were $2.9 million for the
year ended December 31, 1998, or 45.6% of revenues. Sales and marketing costs
were $2.0 million for the year ended December 31, 1997, or 63.4% of revenues.
The increase in absolute dollars was due primarily to the increase in sales and
marketing personnel, including the addition of personnel in connection with the
RelevantKnowledge merger. The decrease in sales and marketing costs as a
percentage of revenues was due primarily to revenues increasing at a greater
rate.

     General and Administrative.  General and administrative costs were $2.7
million for the year ended December 31, 1998, or 42.9% of revenues. General and
administrative costs were $1.5 million for the year ended December 31, 1997, or
47.6% of revenues. The increase in absolute dollars was due to the expenses
associated with increased personnel, expansion of our office facilities and
expenses incurred after the merger with RelevantKnowledge. The decrease in
general and administrative costs as a percentage of revenues was due primarily
to revenues increasing at a greater rate.

     Amortization of Deferred Compensation and Other Stock-based
Compensation.  Deferred compensation of $369,000 for the year ended December 31,
1998 represents a non-cash compensation expense recorded in connection with
stock options granted in December 1998.

     Amortization of Intangibles.  Amortization charges of $479,000 represent
two months of the amortization of RelevantKnowledge's panel, which is being
amortized over 12 months, and other intangibles acquired in our merger with
RelevantKnowledge which are being amortized over three years.

     Acquired In-Process Research and Development.  In connection with our
merger with RelevantKnowledge, we expensed $1.6 million of acquired in-process
research and development for the year ended December 31, 1998. Acquired
in-process research and development represents the value attributed to three
technologies in development at the time of the merger.

                                       19
<PAGE>   21

     Loss from Operations.  Our loss from operations was $7.2 million for the
year ended December 31, 1998, or 114.1% of revenues. Loss from operations was
$4.7 million for the year ended December 31, 1997, or 146.8% of revenues. Loss
from operations was higher in 1998 due to the continued expansion of our
business, the inclusion of two months of RelevantKnowledge losses and
amortization of acquired intangibles. Loss from operations in 1998 included a
$1.6 million write-off of acquired in-process research and development. The
decrease in loss from operations as a percentage of revenues was due primarily
to an increase in sales relative to the increases in costs of revenues and
operating costs.

QUARTERLY RESULTS OF OPERATIONS

     The following is a summary of our unaudited quarterly results of operations
for the years ended December 31, 1999 and 1998. You should read these quarterly
data in conjunction with our audited financial statements. You should not view
the results of operations for any period as an indication of the results of
operations for any future period.

<TABLE>
<CAPTION>
                                                                               QUARTER ENDED
                                          ---------------------------------------------------------------------------------------
                                          MAR. 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MAR. 31,   JUNE 30,   SEPT. 30,   DEC. 31,
                                            1998       1998       1998        1998       1999       1999       1999        1999
                                          --------   --------   ---------   --------   --------   --------   ---------   --------
                                                                              (IN THOUSANDS)
<S>                                       <C>        <C>        <C>         <C>        <C>        <C>        <C>         <C>
Revenues................................   $1,160     $1,345     $ 1,493    $ 2,333    $ 3,178    $ 4,257     $ 5,496    $  7,569
Gross profit............................      360        544         608        698      1,458      2,139       2,535       4,077
Loss from operations....................     (897)      (839)       (963)    (4,524)    (2,464)    (2,898)     (4,044)    (16,474)
Net loss applicable to common
  stockholders..........................     (928)      (913)     (1,035)    (4,596)    (2,466)    (2,594)     (2,629)    (14,327)
Basic and diluted net loss per share
  applicable to common stockholders.....   $(0.14)    $(0.14)    $ (0.16)   $ (0.43)   $ (0.19)   $ (0.16)    $ (0.15)   $  (0.75)
</TABLE>

<TABLE>
<CAPTION>
                                                                               QUARTER ENDED
                                          ---------------------------------------------------------------------------------------
                                          MAR. 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MAR. 31,   JUNE 30,   SEPT. 30,   DEC. 31,
                                            1998       1998       1998        1998       1999       1999       1999        1999
                                          --------   --------   ---------   --------   --------   --------   ---------   --------
<S>                                       <C>        <C>        <C>         <C>        <C>        <C>        <C>         <C>
Revenues................................   100.0%     100.0%      100.0%      100.0%    100.0%     100.0%      100.0%      100.0%
Gross profit............................    31.0       40.4        40.7        29.9      45.9       50.2        46.1        53.9
Loss from operations....................   (77.4)     (62.4)      (64.5)     (193.9)    (77.5)     (68.1)      (73.6)     (217.7)
Net loss applicable to common
  stockholders..........................   (80.1)%    (67.9)%     (69.3)%    (197.0)%   (77.6)%    (60.9)%     (47.8)%    (189.3)%
</TABLE>

     Our revenues have increased in all periods presented as a result of the
continuous expansion of our customer base, the sale of additional products and
services to our existing customers and the release of new products and services.
The quarterly results reflect the merger with RelevantKnowledge and acquisition
of AdRelevance and, therefore, are not comparable to prior periods. The results
for those periods include amortization of intangibles and the write-off of
acquired in-process research and development in association with the merger and
acquisition, a non-cash compensation expense recorded in connection with stock
options, and expenses due to costs incurred by operating two distinct panels,
production systems and infrastructures.

     Our results of operations may fluctuate significantly in the future as a
result of a variety of factors, many of which are beyond our control.

LIQUIDITY AND CAPITAL RESOURCES

     Since our inception, we have financed our operations primarily through an
initial investment and loan by NPD, the private placement of equity securities,
RelevantKnowledge's cash on hand at the time of the merger, cash from operations
and the proceeds of public offerings. On May 12, 1999, we completed the initial
public offering of 3,250,000 shares of our common stock for gross proceeds of
$55.3 million, and net proceeds of $49.4 million. On October 29, 1999, we
completed a secondary offering of 3,000,000 shares of our common stock. Of the
shares offered, Media Metrix sold 1,500,000 shares and 1,500,000 shares were
sold by existing

                                       20
<PAGE>   22

stockholders. Gross proceeds to Media Metrix were $75.8 million, and net
proceeds to Media Metrix were $71.1 million.

     Net cash used in operating activities was $6.0 million for the year ended
December 31, 1999, $411,000 for the year ended December 31, 1998, and $4.8
million for the year ended December 31, 1997. For the years ended December 31,
1999, 1998 and 1997, net cash used in operating activities was substantially
impacted by the amount owed to NPD. The variance for 1999 compared to 1998 was
primarily due to the net repayment of $4.3 million to NPD for services preformed
under a management agreement, in addition to a higher net loss for the year,
offset by increased non-cash charges.

     Net cash provided by (used in) investing activities was $(18.5) million for
the year ended December 31, 1999, $3.1 million for the year ended December 31,
1998, and $(135,000) for the year ended December 31, 1997. For the year ended
December 31, 1999, cash used in investing activities was primarily attributable
to the purchase of investment securities with the proceeds from our public
offerings of common stock pending the use of these proceeds for working capital
purposes along with an increase in our fixed asset purchases. Cash provided by
investing activities for the year ended December 31, 1998 resulted primarily
from the acquisition of $3.2 million of cash in the RelevantKnowledge
transaction.

     Net cash provided by financing activities was $114.8 million for the year
ended December 31, 1999, $3.5 million for the year ended December 31, 1998 and
$6.2 million for the year ended December 31, 1997. Cash provided by financing
activities for the year ended December 31, 1999 resulted from the receipt of
$120.5 million from proceeds of our public offerings, plus $1.3 million in
proceeds received from the exercise of warrants and stock options, offset by the
redemption of our redeemable preferred stock for $4.8 million and repayment of
long-term debt of $2.3 million. Cash provided by financing activities for the
year ended December 31, 1998 resulted from the $1.5 million proceeds from the
exercise of the warrants and the receipt of $2.0 million on December 31, 1998
relating to the sale of common stock in January 1999.

     As of December 31, 1999, we had $97.4 million of cash and cash equivalents
and $14.9 million of marketable securities. As of December 31, 1999, our
principal commitments consisted of accrued obligations under our agreements with
NPD in the amount of $444,000. We expect to invest at least an additional $20
million over the next year in our international operations and in improvements
in our technology and data delivery systems.

     Although we have no material commitments for capital expenditures,
management anticipates that we will experience an increase in our capital
expenditures and lease commitments consistent with our anticipated growth in
operations, infrastructure and personnel, including in connection with the
ongoing separation of our systems from those of NPD. We currently anticipate
that we will continue to experience growth in our operating expenses for the
foreseeable future and that operating expenses will be a material use of our
cash resources.

IMPACT OF YEAR 2000

     In prior years, we discussed the nature and progress of our plans to become
ready for the Year 2000. In late 1999, we completed the remediation and testing
of our systems. As a result of those planning and implementation efforts, we did
not experience any significant disruptions in our essential information
technology and non-information technology systems. We believe that our systems
successfully responded to the Year 2000 date change. We are not aware of any
material problems resulting from Year 2000 issues, either with our products, our
internal systems or the products and services of third parties. We will continue
to monitor our essential computer systems and applications and those of our
suppliers and licensors throughout the Year 2000 to ensure that any latent Year
2000 matters that may arise are addressed promptly.

RISK FACTORS

WE DO NOT HAVE A LONG OPERATING HISTORY.

     We began our operations as a division of NPD in October 1995. We have only
operated as an entity independent of NPD since March 31, 1996. Our operating
history is therefore limited.

                                       21
<PAGE>   23

     You must consider the risks and difficulties frequently encountered by
early-stage companies in new and rapidly evolving markets. Some of these risks
and uncertainties relate to our ability to:

     - anticipate and adapt to our evolving market;

     - implement sales and marketing initiatives;

     - enhance the Media Metrix brand;

     - attract, retain and motivate qualified personnel;

     - respond to actions taken by our competitors;

     - effectively manage our growth by building a solid base of operations and
       technology; and

     - integrate acquired businesses, consumer panels, technologies and
       services.

     We cannot assure you that we will be successful in addressing these risks
and uncertainties. Our failure to do so could have a material adverse effect on
our business, results of operations and financial condition.

WE HAVE A HISTORY OF OPERATING LOSSES AND NEGATIVE CASH FLOW.

     Our ability to generate significant revenues is uncertain. Although our
revenues have continued to grow, we are not yet profitable. We incurred losses
from operations of $4.7 million in 1997, $7.2 million in 1998 and $25.9 million
in 1999. We expect our operating and net losses to continue. If the merger with
RelevantKnowledge had taken place on January 1, 1998 and our acquisition of
AdRelevance had taken place on its date of inception, October 12, 1998, our pro
forma loss from operations for 1998 would have been $26.7 million. If our
acquisition of AdRelevance had taken place on January 1, 1999, our pro forma
loss from operations for the year ended December 31, 1999 would have been $42.3
million. Our ability to generate profits in the future will depend on a number
of factors, including:

     - maintaining and enhancing our position as the leading Internet audience
       measurement service;

     - keeping our costs in line with our budget;

     - retaining our existing customers;

     - increasing our sales to existing customers;

     - obtaining new customers;

     - increasing business and consumer acceptance of the Internet as a source
       of information and as a place to buy and sell goods and services;

     - the growth of advertising and e-commerce on the Internet;

     - regulation of the Internet by Federal or local governments;

     - the health of the general economy; and

     - economic conditions that uniquely affect the Internet.

     We intend to invest heavily in our technologies, additional products and
services and international expansion. As a result, we will need to achieve
significant revenue increases to achieve and maintain profitability. Although
our revenues and the number of our clients have continued to increase, we may
not be able to continue to grow and to expand our business. The number of
clients or the number of products and services for which our clients subscribe
may grow more slowly than we anticipate or may decrease in the future. Even if
we become profitable, we may not sustain or increase our profits on a quarterly
or annual basis in the future.

                                       22
<PAGE>   24

THE INTERNET AUDIENCE MEASUREMENT INDUSTRY IS NEW AND RAPIDLY EVOLVING.

     To date, no Internet audience measurement service has been adopted as the
universally accepted standard. Our existing and potential customers may
challenge or refuse to accept our audience measurement reports. Our customers
may be dissatisfied with our methodology for measuring Internet audiences or may
feel that our panel is not representative of Internet users. Furthermore,
another Internet audience measurement service may be adopted as the industry
standard. As a result, our customers may turn to alternative services provided
by current or potential competitors.

WE DEPEND ON CONTINUED GROWTH IN USE OF THE INTERNET.

     Our business would be adversely affected if Internet usage for the exchange
of information and for commerce does not continue to grow rapidly. Internet
usage may be inhibited for a number of reasons, including:

     - inadequate network infrastructure;

     - security concerns;

     - inconsistent quality of service; or

     - lack of availability of cost-effective, high-speed service.

     Even if Internet usage grows, the Internet infrastructure may not be able
to support the demands placed on it by this growth. As a result, its performance
and reliability may decline. In addition, Web sites and proprietary online
services have experienced interruptions in their service as a result of outages
and other delays occurring throughout their infrastructure. If these outages or
delays frequently occur in the future, Internet usage as a medium for the
exchange of information and for commerce could grow more slowly or decline.

THE ACCEPTANCE AND EFFECTIVENESS OF INTERNET ADVERTISING IS UNPROVEN.

     Our future success will depend on an increase in the use of the Internet as
an advertising medium. The Internet advertising market is new and rapidly
evolving. It cannot yet be compared with the traditional advertising market to
gauge its effectiveness. As a result, there is significant uncertainty about the
demand and market acceptance for Internet advertising. Many of our current or
potential customers have little or no experience using the Internet for
advertising purposes. 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 for promoting their products and
services as compared to traditional advertising. In addition, most current and
potential Web publisher customers have little or no experience in generating
revenues from the sale of advertising space on their Web sites. We cannot assure
you that the market for Internet advertising will continue to emerge or will
become sustainable. If the market for Internet advertising fails to develop or
develops more slowly than we expect, then our business, results of operations
and financial condition could be materially and adversely affected.

OUR OPERATING RESULTS MAY FLUCTUATE FROM QUARTER TO QUARTER.

     Our operating results have varied from quarter to quarter. Our operating
results may continue to vary as a result of a variety of factors. These factors
include:

     - our ability to retain our current clients;

     - our ability to sell additional products and services to current clients;

     - our ability to attract new clients;

     - our ability to maintain customer satisfaction;

     - the announcement or introduction of new products and services by us or
       our competitors;
                                       23
<PAGE>   25

     - price competition;

     - our ability to upgrade and to develop our systems and infrastructure to
       accommodate our growth;

     - our ability to attract new personnel;

     - the timing, cost and availability of advertising in traditional media;

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

     - technical difficulties or service interruptions;

     - the amount and timing of costs relating to changes in the size or
       composition of our panel; and

     - the amount and timing of operating costs and capital expenditures
       relating to expansion of our business, including our planned
       international expansion.

     Many of these factors are beyond our control. We cannot assure you that our
revenues will increase in proportion to the increase in advertising on the
Internet, or at all. In addition, we cannot assure you that advertising on the
Internet will continue to grow at forecasted levels, or at all. A substantial
portion of our current and future costs are fixed. If our revenues fall short of
expectations, we may not be able to adjust our fixed expenses to compensate for
this shortfall on a timely basis. Further, as a strategy for remaining
competitive, we may have to make certain pricing, service or marketing decisions
that could have a material adverse effect on our business, results of operations
and financial condition.

     Due to these factors, period-to-period comparisons of our revenues and
operating results are not necessarily meaningful. Therefore, you should not rely
on these comparisons as indicators of our future performance. We also cannot
assure you that we will be able to:

     - sustain the rates of revenue growth we have experienced in the past;

     - improve our operating results; or

     - sustain our profitability on a quarterly basis.

     In addition, our operating results in future periods may be below the
expectations of securities analysts and investors. If that occurs, the market
price of our common stock could be materially and adversely affected.

WE OPERATE IN HIGHLY COMPETITIVE MARKETS.

     The market for Internet audience measurement services is new and rapidly
evolving. We expect competition in this market to intensify in the future. In
March 1999, NetRatings and Nielsen Media Research introduced a new Web site
ratings service, Nielsen//NetRatings, that competes directly with many aspects
of our services. Nielsen Media Research is the leading provider of television
audience measurement services in the United States and Canada. In September
1999, NetRatings also entered into a joint venture with ACNielsen Corp. to
develop and maintain audience measurement panels and to market
Nielsen//NetRatings' products and services in international markets. ACNielsen
is a leading provider of market research, information and analysis to consumer
products and services industries and is a provider of television audience
measurement services outside the United States and Canada. Both Nielsen Media
Research and ACNielsen have significantly more financial and other resources
than do we. In light of these events, Nielsen//NetRatings has become a
significant competitor. According to publicly available information, in December
1999, NetRatings completed its initial public offering.

     We face competition internationally from NetValue, a French company which
has begun providing audience measurement services in Europe and has announced
that it will soon begin providing such services in the United States. In January
2000, NetValue completed its initial public offering.

     We also compete indirectly with operators of site-centric and other
consumer-centric measurement systems. Site-centric measurement systems measure
audience visits at a specific Web site by monitoring the

                                       24
<PAGE>   26

Web site's server. Consumer-centric systems measure the market either in a
manner similar to us or qualitatively through online and telephonic interviews.

     In addition, we may face competition from individual Web sites that develop
an independent method of measuring their own audience or from other companies
that develop alternative audience measurement technologies to those already
provided by us.

     Competitive pressures could have a material adverse effect on our business,
results of operations and financial condition. We believe that the principal
competitive factors in our market are:

     - creating representative consumer and business panels; and

     - providing audience measurement services for the entire Internet,
       including the Web and proprietary online services.

     Some of our competitors have:

     - longer operating histories;

     - larger customer bases;

     - greater brand recognition in similar businesses; and

     - significantly greater financial, marketing, technical and other
       resources.

     In addition, some of our competitors may be able to:

     - devote greater resources to marketing and promotional campaigns;

     - adopt more aggressive pricing policies; and

     - devote substantially more resources to technology and systems
       development.

     Increased competition may result in reduced operating margins, loss of
market share and diminished value in our services, as well as different pricing,
service or marketing decisions. We cannot assure you that we will be able to
compete successfully against current and future competitors.

WE FACE MANY CHALLENGES IN CONNECTION WITH OUR PLANNED INTERNATIONAL EXPANSION.

     Our current strategy includes further expansion of our services to measure
Internet audiences outside of the United States. Our expansion into
international markets requires management attention and resources. The
international markets for audience measurement services have historically been
extremely localized and difficult to penetrate. The costs of establishing and
maintaining panels in foreign countries has been and will continue to be
substantial. We cannot assure you that we will be able to develop new products
and services based on data obtained in those markets. We cannot assure you that
we will be successful in marketing our products and services to clients in
markets outside the United States. In addition, our international operations
will be subject to a number of inherent risks, including:

     - the impact of recessions in economies outside the United States;

     - changes in regulatory requirements;

     - reduced protection for intellectual property rights in some countries;

     - potentially adverse tax consequences;

     - economic and political instability; and

     - fluctuations in currency exchange rates.

     These risks may have a material adverse effect on our business, results of
operations or financial condition.

                                       25
<PAGE>   27

WE WILL DEPEND ON STRATEGIC RELATIONSHIPS IN INTERNATIONAL MARKETS.

     The success of our international expansion will depend on our ability to:

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

     - control costs and effectively manage foreign operations; and

     - effectively market and sell any new products or services.

     These challenges require skills and expertise in foreign countries that we
are currently developing. We believe that our success in penetrating markets
outside of the United States will depend on our continued ability to develop and
to maintain strategic relationships with local audience measurement or marketing
research companies. This may become increasingly difficult as competition in the
international markets increases. If we do not succeed in attracting or retaining
strategic partners in markets outside the United States, our business, financial
condition and results of operations could be materially adversely affected.

OUR MARKET IS SUBJECT TO RAPID CHANGE.

     Our market is characterized by:

     - rapidly changing technology;

     - evolving industry standards;

     - introductions and enhancements of competitive products and services; and

     - changing customer demands.

     Accordingly, our future success depends on our ability to:

     - adapt to rapidly changing technologies;

     - adapt our services to evolving industry standards; and

     - improve the features, reliability and timeliness of our product and
       service offerings in response to competitive product and service
       offerings and evolving demands of the marketplace.

     We cannot assure you that we will succeed in addressing these issues. In
addition, the widespread adoption of new Internet networking technologies or
other technological changes could require us to expend substantial amounts of
capital to change our services or infrastructure. These changes may also involve
new technologies that may not be measurable by our current methods.

OUR COSTS MAY INCREASE IF THE SIZE OR COMPOSITION OF OUR PANEL CHANGES.

     A significant portion of our costs consists of the expense of recruiting
and maintaining our panel and collecting and processing data generated by the
panel. We may, in the future, need to change the size or composition of our
panel. As a result, our expenses for recruiting and maintaining our panel may
increase. Our international expansion will also increase our panel related
costs. This could have a material adverse effect on our business, results of
operations and financial condition.

WE MAY NOT BE ABLE TO EFFECTIVELY MANAGE OUR INTERNAL GROWTH.

     We are currently experiencing a period of rapid expansion. We anticipate
that future expansion will be necessary in order to accommodate our needs and to
take advantage of new opportunities in the market for audience measurement
services on the Internet. In order to succeed, we will need to attract and hire
additional technical and management personnel. As a result, we expect to add key
personnel in the near future to manage our expected growth. We also will need to
expand our technical, finance, administrative and operations staff. We cannot
assure you that current and planned personnel, systems, procedures and controls
will be adequate to support our future operations. We may not be able to hire
new and retain our current personnel. We also may not be able to exploit
existing and potential strategic relationships and market opportunities. If we
fail to

                                       26
<PAGE>   28

effectively manage our internal growth, our business, results of operations and
financial condition could be materially adversely affected.

WE DEPEND ON RENEWALS OF OUR SUBSCRIPTION BASED SERVICES.

     We have historically derived substantially all of our revenues from
subscriptions for our syndicated products. In our limited history, high renewal
rates have formed a foundation for our revenue growth. However, we cannot assure
you we will continue to experience high renewal rates. Our subscription renewal
rates may also decline as a result of a consolidation in our customer base or if
a significant number of our customers cease operations. If our renewal rate
percentage declines, it could have a material adverse effect on our business,
results of operations and financial condition.

WE MUST FURTHER DEVELOP OUR BRAND NAME.

     We believe that maintaining and strengthening the Media Metrix brand is an
important aspect of our business. Our brand name is critical in our efforts to
attract clients. We believe that the importance of brand recognition will
increase due to the increasing number of competitors entering the market for
Internet audience measurement. Our ability to promote and position the Media
Metrix brand depends largely on:

     - the success of our marketing efforts;

     - our ability to provide our customers with high quality products; and

     - our ability to secure rights to our brand name in the major markets in
       which we will be active.

     To promote the Media Metrix brand in response to competitive pressures, we
may find it necessary to increase our marketing budget or otherwise increase our
financial commitment to creating and maintaining brand loyalty among our
clients. Our use of the brand name "Media Metrix" in Europe has been challenged
by Mediametrie, S.A., a French company which measures audiences of various
media. Rather than engage in a protracted dispute, we have elected to have our
European joint venture conduct business under the name "MMXI Europe."
Mediametrie has also challenged our use of the domain name "mediametrix.com." If
we fail to promote and maintain our brand, or incur excessive expenses
attempting to promote and maintain our brand, our business, results of
operations and financial condition will be materially adversely affected.

WE MAY ENCOUNTER RISKS ASSOCIATED WITH NEW PRODUCT DEVELOPMENT.

     Our future success depends in part on our ability to offer new products and
services on a timely and cost-effective basis. In order to gain market
acceptance, our new products and services must address:

     - specific industries and businesses;

     - changes in client requirements; and

     - changes in technologies.

     The process of developing and launching new products or services is
inherently risky and costly. Moreover, we cannot assure you that once launched,
our products and services will be accepted by our customers.

OUR SYSTEMS MAY FAIL.

     Our success depends on the efficient and uninterrupted operation of our
computer and communications systems. Some servers and portions of our network
are provided to us by NPD under a management services agreement. NPD also
provides us with the use of mini-computers that we use to process data received
from panelists. We have begun to migrate our systems to our own independent
network. We expect to complete this process by the second quarter of 2000. Any
failure of the current or the new networks could impede the processing of data,
customer orders and day-to-day management of our business. This could have a
material adverse effect on our business, results of operations and financial
condition.

                                       27
<PAGE>   29

     Our systems and operations are vulnerable to damage or interruption from:

     - telecommunication failures;

     - power loss;

     - fires;

     - floods;

     - physical and electronic break-ins;

     - sabotage; and

     - intentional acts of vandalism and similar events.

     We do not presently have fully redundant systems. Despite any precautions
we take, a natural disaster or other unanticipated problems which lead to the
corruption or loss of data at the NPD facility or our own facilities could
result in interruptions in the services we provide. In addition, our databases
are growing rapidly, and the systems currently in place may not be sufficient to
handle any further expansion. This could lead to systems failure or to a
corruption of our data and could have a material adverse effect on our business,
results of operations and financial condition.

WE DEPEND ON OUR KEY PERSONNEL.

     Our future success depends on the continued services and on the performance
of our senior management and other key employees, in particular the services of
Tod Johnson, our Chief Executive Officer. Mr. Johnson also serves as the Chief
Executive Officer of NPD. Mr. Johnson has spent a substantial portion of his
time on our matters and we anticipate that he will continue to do so. However,
he will not be able to devote all of his time to our affairs. As a result, Mr.
Johnson's other responsibilities could divert his attention from our affairs.

     Our performance depends on our ability to retain and to motivate our key
employees. The loss of the services of any of our key employees could have a
material adverse effect on our business, results of operations and financial
condition. We do not have long-term employment agreements with any of our key
personnel. We do not maintain any "key person" life insurance policies. In
addition, we are likely to need to recruit additional senior management
personnel as our business grows, particularly in the international arena. Our
future success depends on our ability to hire and to retain highly skilled
personnel. Competition for these candidates is intense. We cannot assure you
that we will be able to successfully attract, integrate or retain sufficiently
qualified personnel. Our inability to retain and attract the necessary personnel
could have a material adverse effect on our business, results of operations and
financial condition.

ADRELEVANCE'S SERVICES MAY NOT BE SUCCESSFUL.

     We recently acquired AdRelevance. AdRelevance only began operations in late
1998. AdRelevance's services were first commercially launched in September 1999.
Our future success in the advertising tracking business depends on the
acceptance of these services. We cannot be sure that these services will be
widely accepted in the marketplace. In addition, AdRelevance relies on public
Internet sites to gather advertising data. Those sites might cease to be
available or may charge licensing or other fees for access. We may not be able
to obtain an alternative or cost-effective source for these data.

WE MAY FAIL TO INTEGRATE ACQUISITIONS.

     If appropriate opportunities present themselves, we intend to acquire other
complementary businesses, technologies, services or products. We currently have
no understandings or agreements relating to any acquisition. We cannot assure
you that we will be able to complete future acquisitions successfully or to
integrate an acquired entity with our current business. An acquisition may
result in unforeseen operating difficulties and expenditures. They may also
require significant management attention that would otherwise be

                                       28
<PAGE>   30

available for ongoing development of our business. Moreover, we cannot assure
you that the anticipated benefits of any acquisition will be realized. We may:

     - issue additional equity securities which would dilute stockholders;

     - incur debt;

     - incur contingent liabilities; and

     - incur amortization expenses related to goodwill and other intangible
       assets.

WE DEPEND ON THE NPD GROUP, INC.

     We were originally formed as a division of NPD. Throughout our development,
we have relied on services and financing provided to us by NPD. When we became
an independent operating entity, we entered into a management services
agreement, license agreement and services agreement with NPD. These agreements
allow us to continue to use some of NPD's software and services on an as-needed
basis. Under the management services agreement, NPD provides us with managerial
services. Under the license agreement, we license some of NPD's technologies
necessary for the operation of our services. The services agreement provides for
payment of a license fee by NPD for access to information collected from our
panel.

     NPD may be able to exert influence over our business and affairs due to
these arrangements. Also, the loss of the services provided by NPD under the
management services agreement or the loss of the license of computer software
under the license agreement could have a material adverse effect on our
business, financial condition and results of operations.

WE MAY NOT BE ABLE TO PROTECT AND ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS.

     We regard the protection of our patents, copyrights, service marks,
trademarks and trade secrets as important to our future success. We rely on a
combination of patent, copyright, trademark, service mark and trade secret laws
and contractual restrictions to establish and protect our proprietary rights. We
have entered into confidentiality and invention assignment agreements with our
employees and contractors, and nondisclosure agreements with parties we do
business with in order to limit access to and disclosure of our proprietary
information. We cannot assure you that these contractual arrangements or the
other steps we have taken will be sufficient to protect our intellectual
property from infringement or misappropriation. Moreover, others may
independently develop similar or superior technologies.

     We seek to obtain the issuance of patents and the registration of our
trademarks and service marks in the United States and in selected other
countries. We cannot assure you that patents or trademark registrations will be
issued with respect to pending or future applications or that our patents and
trademarks will be upheld as valid. Effective patent, trademark, service mark,
copyright and trade secret protection may not be available in every country in
which our services are offered.

     Third parties may claim that our technologies infringe upon their
proprietary rights. We expect that the number of infringement claims in our
market will increase as the number of services and competitors in our industry
grows. These claims, whether meritorious or not, could:

     - be time-consuming;

     - result in costly litigation; or

     - require us to enter into royalty or licensing agreements.

     Royalty or licensing agreements might not be available on terms we find
acceptable or at all. As a result, any such claim could have a material adverse
effect upon our business, results of operations and financial condition.

     Our use of the brand name "Media Metrix" in Europe has been challenged by
Mediametrie, S.A., a French company which measures audiences of various media.
Mediametrie has also challenged our use of the domain name "mediametrix.com." We
cannot be sure that we will not continue to have disputes with
                                       29
<PAGE>   31

Mediametrie, S.A. or others regarding the use of our name internationally. We
cannot assure you that we will be successful in reaching a settlement on terms
acceptable to us nor can we predict the outcome of the dispute.

WE RELY ON TECHNOLOGY LICENSED FROM OTHERS.

     We rely on technologies that we license from third parties We cannot assure
you that these licenses will not infringe on the proprietary rights of others.
We also cannot assure you that these third-party technology licenses will
continue to be available to us on commercially reasonable terms, if at all. As a
result, we may need to obtain substitute technology of lower quality or
performance standards or at greater cost. This could materially adversely affect
our business, results of operations and financial condition.

WE MAY BE EXPOSED TO POSSIBLE LIABILITY FOR SUPPLYING INACCURATE INFORMATION TO
OUR CUSTOMERS.

     We may face liability for information that we supply to customers if the
information is inaccurate. 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
would have a material adverse effect on our ability to attract new customers and
retain existing customers. 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 our contract provisions
provide sufficient protection. Any liabilities which we may incur because of
irregularities or inaccuracies in the data we supply to our customers could
materially adversely affect our business, results of operations and financial
condition.

OUR PROPRIETARY RIGHTS MAY BE ADVERSELY AFFECTED BY OUR STRATEGIC PARTNERS.

     We expect to license some of our proprietary rights to strategic partners
in the course of our planned international expansion. While we will attempt to
ensure that the quality of our service is maintained by our strategic partners,
we cannot assure you that they will not take actions that might materially
adversely affect the value of our proprietary rights or reputation. This could
have a material adverse effect on our business, results of operations and
financial condition.

WE FACE RISKS RELATED TO STORAGE OF PERSONAL INFORMATION ABOUT OUR PANELISTS.

     We do not attempt to capture information regarding our panelists' banking,
credit card or password data. This information, however, may come into our
possession. Our panel data are released only in an aggregated format or in a
form not identifiable on an individual basis. However, if someone penetrates our
network security or otherwise misappropriates sensitive data about our
panelists, we could be subject to liability. These liabilities could include
claims for unauthorized purchases with credit card information, impersonation or
other similar fraud claims. They could also include claims for other misuses of
personal information, like for unauthorized marketing purposes. These claims
could result in litigation and could have a material adverse effect on our
business, results of operations and financial condition.

WE FACE RISKS OF INDUSTRY INITIATIVES.

     Several key industry organizations, including the Internet Advertising
Bureau, the Media Ratings Council, the Advertising Research Foundation and FAST
Forward, have begun initiatives focusing on appropriate standards for Internet
audience measurement. Our products and services may ultimately not comply with
recommended industry guidelines if we determine that compliance would not be
economically feasible or otherwise not consistent with our business strategy. To
the extent that our measurement approach diverges from the course of action
recommended by some or all of these trade groups, our business, results of
operations and financial condition could be materially and adversely affected.

                                       30
<PAGE>   32

WE FACE RISKS ASSOCIATED WITH POTENTIAL GOVERNMENTAL REGULATION.

     We are currently not subject to direct federal, state or local regulation
or laws or regulations applicable to the Internet, other than regulations
applicable to businesses generally. However, due to the increasing popularity
and use of the Internet, it is possible that a number of laws and regulations
may be adopted covering:

     - user privacy;

     - freedom of expression;

     - pricing;

     - content;

     - quality of products and services;

     - taxation;

     - advertising;

     - intellectual property rights; and

     - information security.

     The nature and effect of any proposed legislation or regulation cannot be
fully determined. These could have a material adverse effect on our business,
results of operations and financial condition.

     The adoption of any such legislation could also dampen the growth in use of
the Internet generally and decrease its acceptance as a communications,
commercial and advertising medium. Any legislation which could have any adverse
effect on the growth of the Internet could decrease the demand for our services
and could have a material adverse effect on our business, results of operations
and financial condition.

THERE MAY BE LIMITS IMPOSED ON USES OF PERSONAL INFORMATION GATHERED USING THE
INTERNET.

     Several states have proposed legislation that would limit the uses of
personal user information gathered using the Internet. These regulations have
required proprietary online service and Web site owners to establish privacy
policies. The Federal Trade Commission has also recently settled a proceeding
with one online service regarding the manner in which personal information is
collected from users and provided to third parties. Also, the European Union has
enacted its own privacy regulations that may result in limits on the collection
and use of user information. Because all of our panelists consent to the
retrieval of their personal data, to date these regulations and proceedings have
not impacted our operations. However, we may become subject to claims arising
from the information collected or used by AdRelevance in generating data for
advertising tracking services.

     Changes to existing laws or the passage of new laws intended to address
these issues could, among other effects:

     - create uncertainty in the marketplace that could reduce demand for our
       services;

     - limit our ability to collect and to use data from our panels;

     - increase the cost of doing business as a result of litigation costs or
       increased service delivery costs;

     - decrease the efficacy of Internet advertising; or

     - in some other manner have a material adverse effect on our business,
       results of operations and financial condition.

                                       31
<PAGE>   33

WE FACE UNCERTAINTY ABOUT ADDITIONAL FINANCING FOR OUR FUTURE CAPITAL NEEDS.

     If we are unable to increase our revenues as anticipated, we will need to
raise additional funds. We may need additional financing sooner if we:

     - decide to expand faster than planned;

     - develop new or enhanced services or products ahead of schedule;

     - need to respond to competitive pressures; or

     - need to acquire for cash complementary products, businesses or
       technologies.

     If we raise additional funds through the sale of equity or convertible debt
securities, the value of the stock outstanding may be diluted. We may have to
issue securities that may have rights, preferences and privileges senior to our
common stock. We cannot assure you that we will be able to raise additional
funds on terms favorable to us or at all. If future financing is not available
or is not available on acceptable terms, we may not be able to fund our future
needs. This could have a material adverse effect on our business, results of
operations and financial condition.

WE MAY SUFFER AN INTERRUPTION IN OUR BUSINESS.

     Our business interruption insurance may not be adequate to compensate us
fully for losses that may occur as a result of an interruption in our business.
Our business, results of operations and financial condition could be materially
and adversely affected if we are unable to conduct our business for an extended
period of time for any reason.

OUR PRINCIPAL STOCKHOLDERS, EXECUTIVE OFFICERS AND DIRECTORS HAVE SUBSTANTIAL
CONTROL OVER OUR AFFAIRS.

     Our executive officers and directors and entities affiliated with them, in
the aggregate, beneficially own approximately 30% of our common stock. In
particular, NPD, which is controlled by Tod Johnson, our Chairman and Chief
Executive Officer, owns approximately 21.0% of our outstanding common stock.
These stockholders acting together will have the ability to exert substantial
influence over all matters requiring approval by our stockholders. These matters
include the election and removal of directors and any merger, consolidation or
sale of all or substantially all of our assets. In addition, they may dictate
the management of our business and affairs. This concentration of ownership
could have the effect of delaying, deferring or preventing a change in control,
or impeding a merger or consolidation, takeover or other business combination.

THERE MAY BE AN ADVERSE EFFECT ON THE MARKET PRICE OF OUR STOCK AS A RESULT OF
SHARES BEING AVAILABLE FOR SALE IN THE FUTURE.

     Sales of a substantial amount of our common stock in the public market, or
the perception that these sales may occur, could adversely affect the market
price of our common stock prevailing from time to time. This could also impair
our ability to raise additional capital through the sale of our equity
securities. We expect to file a shelf registration statement to register the
sale of approximately 800,000 shares of our common stock, pursuant to our
obligations under two registration rights agreements with our current
stockholders. These shares will be available for sale into the public market
upon the effectiveness of the shelf registration statement, which is anticipated
to occur in the second quarter.

THERE MAY BE VOLATILITY IN OUR STOCK PRICE.

     Our common stock, which is quoted on the Nasdaq National Market, has
experienced significant price and volume fluctuations. These fluctuations are
likely to continue in the future. The market prices of the securities of
Internet-related companies have been especially volatile. Some companies that
have had volatile market prices for their securities have been subject to
securities class action suits filed against them. If a suit were to be filed
against us, regardless of the outcome, it could result in substantial costs and
a diversion of our management's attention and resources. This could have a
material adverse effect on our business, results of operations and financial
condition.
                                       32
<PAGE>   34

EFFECTS OF ANTI-TAKEOVER PROVISIONS COULD INHIBIT THE ACQUISITION OF MEDIA
METRIX.

     Some of the provisions of our certificate of incorporation, bylaws and
Delaware law could, together or separately:

     - discourage potential acquisitions proposals;

     - delay or prevent a change in control; and

     - limit the price that investors might be willing to pay in the future for
       shares of our common stock.

     In particular, our board of directors may issue up to 5,000,000 shares of
preferred stock with rights and privileges that might be senior to our common
stock, without the consent of the holders of the common stock. Our certificate
of incorporation and bylaws provide, among other things, that our board of
directors is divided into three classes which serve staggered three year terms,
that stockholders may not take actions by written consent and that special
meetings of stockholders may only be called by our board of directors or our
Chairman. We are also subject to Section 203 of the Delaware General Corporation
Law which generally prohibits a Delaware corporation from engaging in any of a
broad range of business combinations with any interested stockholder for a
period of three years following the date on which the stockholder became an
interested stockholder.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     The carrying values of financial instruments including cash and cash
equivalents, accounts receivable, accounts payable and notes payable,
approximate fair value because of the short maturity of these instruments.

     We have historically had very low exposure to changes in foreign currency
exchange rates, therefore we have not used derivative financial instruments to
manage foreign currency fluctuation risk. We conduct business on a worldwide
basis through our international subsidiaries. As we continue to expand globally,
the risk of foreign currency exchange rate fluctuation may increase. Therefore,
in the future, we may consider utilizing derivative instruments to mitigate such
risks. Currently, we manage our level of exposure by denominating international
sales and payment of related expense in the foreign subsidiaries' local
currency.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The information required by this item is incorporated by reference to the
consolidated financial statements listed in Item 14(a) of Part IV of this Form
10-K.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

     None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The information regarding directors and executive officers required by Item
10 is incorporated by reference from our definitive proxy statement for our
annual stockholders' meeting to be held on May 23, 2000.

ITEM 11.  EXECUTIVE COMPENSATION.

     The information required by Item 11 is incorporated by reference from our
definitive proxy statement for our annual stockholder's meeting to be held on
May 23, 2000.

                                       33
<PAGE>   35

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The information required by Item 12 is incorporated by reference from our
definitive proxy statement for our annual stockholders' meeting to be held on
May 23, 2000.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information required by Item 13 is incorporated by reference from our
definitive proxy statement for our annual stockholders' meeting to be held on
May 23, 2000.

                                       34
<PAGE>   36

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K

     (a) LIST OF DOCUMENTS FILED AS A PART OF THIS ANNUAL REPORT

<TABLE>
        <S>  <C>                                                           <C>
        (1)  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
             Report of Independent Auditors..............................  F-1
             Consolidated Balance Sheets at December 31, 1999 and 1998...  F-2
             Consolidated Statements of Operations for the years ended     F-3
               December 31, 1999, 1998 and 1997..........................
             Consolidated Statements of Stockholders' Equity for the       F-4
               years ended December 31, 1999, 1998 and 1997..............
             Consolidated Statements of Cash Flows for the years ended     F-5
               December 31, 1999, 1998 and 1997..........................
             Notes to Consolidated Financial Statements..................  F-6
        (2)  INDEX TO FINANCIAL STATEMENT SCHEDULES
             Schedule II -- Valuation and Qualifying Accounts............  S-1
</TABLE>

     All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and therefore have
been omitted.

     (b) REPORTS ON FORM 8-K.

          Current Report on Form 8-K, filed with the Commission on October 20,
     1999, relating to the acquisition of AdRelevance, Inc.

     (c)  LIST OF EXHIBITS

<TABLE>
<CAPTION>
 NO.                            DESCRIPTION
 ---                            -----------
<S>     <C>                                                           <C>
 2.1    Plan of Merger and Reorganization between Media Metrix, Inc.
        and RelevantKnowledge dated as of September 30, 1998**......
 2.2    Plan of Merger between Media Metrix and PC Meter L.P. dated
        as of March 31, 1996**......................................
 2.3    Agreement and Plan of Merger dated as of October 6, 1999, by
        and among Media Metrix, AdRelevance, Merger Sub and the
        stockholders of AdRelevance named therein*..................
 2.4    Share Purchase Agreement dated February 8, 2000 among SIFO
        Group AB, Osprey Research BV and Media Metrix, Inc.****.....
 3.1    Amended and Restated Certificate of Incorporation**.........
 3.2    Certificate of Amendment to Amended and Restated Certificate
        of Incorporation**..........................................
 3.3    Amended and Restated Bylaws**...............................
 4.1    Registration Rights Agreement dated as of November 5, 1998,
        by and among Media Metrix and the Stockholders listed on
        Schedule I thereto**........................................
 4.2    Stockholder's Agreement dated as of November 5, 1998, by and
        among Media Metrix and the Stockholders listed on Schedule I
        thereto**...................................................
 4.3    Co-Sale Agreement dated as of November 5, 1998, by and among
        Media Metrix and the Stockholders listed on Schedule I
        thereto**...................................................
 4.4    Form of Warrant issued to former RelevantKnowledge warrant
        holders**...................................................
 4.5    Form of Warrant issued to former Media Metrix warrant
        holders**...................................................
 4.6    Form of Warrant issued to former RelevantKnowledge warrant
        holders**...................................................
 4.7    Specimen Stock Certificate**................................
 4.8    Registration Rights Agreement by and among Media Metrix, GfK
        AG and Ipsos S.A. made as of September 1, 1999***...........
 4.9    Registration Rights Agreement dated October 8, 1999 by and
        among Media Metrix and the security holders of Media Metrix
        set forth on Schedule I thereto*............................
</TABLE>

                                       35
<PAGE>   37

<TABLE>
<CAPTION>
 NO.                            DESCRIPTION
 ---                            -----------
<S>     <C>                                                           <C>
 4.10   Stock Option Agreement by and between Media Metrix and GfK
        made as of September 1, 1999***.............................
 4.11   Stock Option Agreement by and between Media Metrix and Ipsos
        made as of September 1, 1999***.............................
 4.12   Warrant to purchase common stock held by Silicon Valley
        Bank***.....................................................
 4.13   Registration Rights Agreement dated March 6, 2000 between
        Osprey Research BV and Media Metrix, Inc.****...............
 4.14   Participation Agreement dated March 6, 2000 among Osprey
        Research BV, SIFO Group AB and MMXI Europe, BV****..........
 4.15   Amendment to Shareholders' Agreement dated March 6, 2000
        among GfK AG, Ipsos SA, Osprey Research BV MMXI Europe BV
        and Media Metrix, Inc.****..................................
 4.16   Media Metrix, Inc. Stock Option Agreement dated March 6,
        2000 between Osprey Research BV and Media Metrix,
        Inc.****....................................................
 4.17   Amendment to Registration Rights Agreement dated March 6,
        2000 among GfK AG, Ipsos SA, Osprey Research BV and Media
        Metrix, Inc.**** ...........................................
10.1    Management Services Agreement dated as of September 30, 1998
        by and between Media Metrix, The NPD Group, Inc. and Tod
        Johnson**...................................................
10.2    Services Agreement dated as of September 30, 1998 by and
        between Media Metrix and The NPD Group, Inc.**..............
10.3    License Agreement dated as of November 5, 1998 by and
        between Media Metrix and The NPD Group, Inc.**..............
10.4    Stock Purchase Agreement dated as of December 23, 1998 by
        and between Media Metrix and Investment A.B. Bure**.........
10.5.1  Building Lease between Eagle Insurance Company and The NPD
        Group, Inc. dated as of August 18, 1997**...................
10.5.2  Lease Agreement between Carriage House Associates Limited
        Partnership and RelevantKnowledge, Inc. dated as of May 16,
        1997**......................................................
10.6    Form of Indemnification Agreement**.........................
10.7    Form of Non-Disclosure Agreement and Confidential
        Information and Invention Assignment Agreement**............
10.8    Form of Non-Disclosure Agreement and Confidential
        Information and Invention Assignment Agreement**............
10.9    Employment Agreement by and between Media Metrix and Jeffrey
        C. Levy, dated as of November 5, 1998**.....................
10.10   Amended and Restated Management Services Agreement by and
        between Media Metrix, The NPD Group, Inc. and Tod
        Johnson**...................................................
10.11   Media Metrix Stock Option Plan**............................
10.12   1998 Equity Incentive Plan**................................
10.13   1998 AdRelevance Stock Option Plan***.......................
10.14   1999 AdRelevance Stock Option Plan***.......................
21.1    Subsidiaries of Media Metrix***.............................
27      Financial Data Schedule
</TABLE>

---------------
*    Incorporated by reference to the Company's Current Report on Form 8-K filed
     with the Commission on October 20, 1999.

**   Incorporated by reference to the Company's Registration Statement on Form
     S-1 (File No. 333-81079), as amended.

***  Incorporated by reference to the Company's Registration Statement on Form
     S-1 (File No. 333-88751), as amended.

**** Incorporated by reference to the Company's Current Report on Form 8-K filed
     with the Commission on March 20, 2000.

                                       36
<PAGE>   38

                                   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.

                                          MEDIA METRIX, INC.

                                                    /s/ TOD JOHNSON
                                          --------------------------------------
                                          By: Tod Johnson
                                          Title: Chairman and Chief Executive
                                          Officer

Date: March 28, 2000

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated.

<TABLE>
<C>                                                  <S>

                  /s/ TOD JOHNSON                    Chairman and Chief Executive Officer (Principal
---------------------------------------------------    Executive Officer)
                    Tod Johnson

                /s/ THOMAS A. LYNCH                  Chief Financial Officer and Treasurer (Principal
---------------------------------------------------    Financial and Accounting Officer)
                  Thomas A. Lynch

               /s/ MICHAEL C. BROOKS                 Director
---------------------------------------------------
                 Michael C. Brooks

               /s/ WILLIAM W. HELMAN                 Director
---------------------------------------------------
                 William W. Helman

                   /s/ STIG KRY                      Director
---------------------------------------------------
                     Stig Kry

                /s/ JEFFREY C. LEVY                  Director
---------------------------------------------------
                  Jeffrey C. Levy

                /s/ JAMES MORTENSEN                  Director
---------------------------------------------------
                  James Mortensen
</TABLE>

                                       37
<PAGE>   39

                         REPORT OF INDEPENDENT AUDITORS

Stockholders and Board of Directors
Media Metrix, Inc.

     We have audited the accompanying consolidated balance sheets of Media
Metrix, Inc. and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1999. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Media Metrix, Inc. and subsidiaries at December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

                                          Ernst & Young LLP

New York, New York
January 28, 2000, except for the
last three paragraphs of Note 15,
as to which the date is March 8, 2000

                                       F-1
<PAGE>   40

                      MEDIA METRIX, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                      DECEMBER 31,
                                                              ----------------------------
                                                                  1999            1998
                                                              ------------    ------------
<S>                                                           <C>             <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................  $ 97,363,634    $  8,012,020
  Marketable securities.....................................    14,877,222              --
  Receivables:
     Trade, less allowance for doubtful accounts of $500,000
       in 1999 and $220,000 in 1998.........................     5,473,299       1,119,905
     Expenditures billable to clients.......................       520,084         250,432
                                                              ------------    ------------
  Total receivables.........................................     5,993,383       1,370,337
  Prepaid expenses and other current assets.................       454,072         207,333
                                                              ------------    ------------
Total current assets........................................   118,688,311       9,589,690
Property and equipment, at cost, net of accumulated
  depreciation and amortization of $560,817 in 1999 and
  $75,930 in 1998...........................................     5,307,667         649,790
Intangibles acquired, net of accumulated amortization of
  $7,791,505 in 1999 and $479,000 in 1998...................    52,948,261       5,736,766
Due from minority interests in consolidated subsidiaries....     1,617,384              --
Other assets................................................       282,801          83,774
                                                              ------------    ------------
Total assets................................................  $178,844,424    $ 16,060,020
                                                              ============    ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued liabilities..................  $ 10,115,492    $  2,308,323
  Due to The NPD Group, Inc.................................       444,495       4,705,825
  Advance billings to clients...............................     5,125,613       1,391,275
  Current portion of long-term debt.........................       196,268         127,179
                                                              ------------    ------------
Total current liabilities...................................    15,881,868       8,532,602
Long-term debt..............................................       173,387         225,353
Redeemable Preferred Stock -- $1 par value; 41,446 shares
  issued and outstanding in 1998............................            --       4,679,760
Commitments and contingencies
Stockholders' equity:
  Preferred stock, $.01 par value -- shares authorized:
     5,000,000 in 1999 and 4,958,554 in 1998, none issued
     and outstanding........................................            --              --
  Common stock, $.01 par value -- 60,000,000 shares
     authorized; shares issued and outstanding -- 19,681,999
     in 1999 and 13,098,808 in 1998.........................       196,820         130,988
  Additional paid-in capital................................   202,031,538      18,149,203
  Common stock issuable.....................................            --       1,999,831
  Accumulated other comprehensive loss......................       (82,424)             --
  Accumulated deficit.......................................   (38,110,438)    (16,093,242)
  Deferred compensation.....................................    (1,246,327)     (1,564,475)
                                                              ------------    ------------
Total stockholders' equity..................................   162,789,169       2,622,305
                                                              ------------    ------------
Total liabilities and stockholders' equity..................  $178,844,424    $ 16,060,020
                                                              ============    ============
</TABLE>

                            See accompanying notes.
                                       F-2
<PAGE>   41

                      MEDIA METRIX, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                     ------------------------------------------
                                                         1999           1998           1997
                                                     ------------    -----------    -----------
<S>                                                  <C>             <C>            <C>
Revenues...........................................  $ 20,500,127    $ 6,330,485    $ 3,187,653
Costs of revenues..................................    10,291,392      4,120,569      3,463,058
                                                     ------------    -----------    -----------
Gross profit (loss)................................    10,208,735      2,209,916       (275,405)
Operating expenses:
  Research and development.........................     5,044,068      1,382,375        865,498
  Sales and marketing..............................     9,116,727      2,888,195      2,021,409
  General and administrative.......................     6,755,220      2,715,705      1,516,396
  Amortization of deferred compensation and other
     stock-based compensation......................     1,060,108        368,550             --
  Amortization of intangibles......................     7,312,505        479,000             --
  Acquired in-process research and development.....     6,800,000      1,600,000             --
                                                     ------------    -----------    -----------
Total operating expenses...........................    36,088,628      9,433,825      4,403,303
                                                     ------------    -----------    -----------
Loss from operations...............................   (25,879,893)    (7,223,909)    (4,678,708)
Minority interests.................................     1,688,542             --             --
Interest and other income, net of interest expense
  of $74,660 in 1999 and $11,374 in 1998...........     2,283,350         65,211         94,760
                                                     ------------    -----------    -----------
Net loss...........................................   (21,908,001)    (7,158,698)    (4,583,948)
Preferred stock dividends..........................      (109,195)      (313,738)      (289,564)
                                                     ------------    -----------    -----------
Net loss applicable to common stockholders.........  $(22,017,196)   $(7,472,436)   $(4,873,512)
                                                     ============    ===========    ===========
Basic and diluted net loss per share applicable to
  common stockholders..............................  $      (1.34)   $     (0.98)   $     (0.75)
                                                     ============    ===========    ===========
Shares used in the calculation of basic and diluted
  net loss per share applicable to common
  stockholders.....................................    16,445,295      7,618,511      6,523,330
                                                     ============    ===========    ===========
</TABLE>

                            See accompanying notes.
                                       F-3
<PAGE>   42

                      MEDIA METRIX, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                      YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                     -------------------------------------------------------------------------------
                                                                                                        ACCUMULATED
                                      OWNER'S/        COMMON STOCK         ADDITIONAL      COMMON          OTHER
                                     PARTNERS'    ---------------------     PAID-IN         STOCK      COMPREHENSIVE
                                      CAPITAL       SHARES      AMOUNT      CAPITAL       ISSUABLE         LOSS
                                     ----------   ----------   --------   ------------   -----------   -------------
<S>                                  <C>          <C>          <C>        <C>            <C>           <C>
Balance at January 1, 1997.........  $1,269,600           --   $     --   $         --   $        --     $     --
Purchase of partnership interest...   3,200,000           --         --             --            --           --
Exchange of partners' interest for
  6,522,893 shares of common stock
  and 41,446 shares of Redeemable
  Preferred Stock..................  (4,469,600)   6,522,893     65,229        259,771            --           --
Contribution of amounts owed to The
  NPD Group, Inc. .................          --           --         --        380,977            --           --
Sale of common stock...............          --          437          4             96            --           --
Costs incurred in connection with
  issuance of Series A Convertible
  Preferred Stock..................          --           --         --       (359,188)           --           --
Payment of Redeemable Preferred
  Stock dividends..................          --           --         --             --            --           --
Accrual of Redeemable Preferred
  Stock dividends..................          --           --         --             --            --           --
Net loss...........................          --           --         --             --            --           --
                                     ----------   ----------   --------   ------------   -----------     --------
Balance at December 31, 1997.......          --    6,523,330     65,233        281,656            --           --
Conversion of Series A Convertible
  Preferred Stock..................          --    2,155,176     21,552      3,978,439            --           --
Conversion of Series B Convertible
  Preferred Stock..................          --      520,590      5,206      1,494,794            --           --
Issuance of common stock in
  connection with acquisition......          --    3,890,825     38,908     10,461,092            --           --
Exercise of warrants...............          --        8,887         89            197            --           --
Sale of common stock -- 194,380
  shares issuable..................          --           --         --             --     1,999,831           --
Employee stock options.............          --           --         --      1,933,025            --           --
Amortization of deferred
  compensation.....................          --           --         --             --            --           --
Accrual of Redeemable Preferred
  Stock dividends..................          --           --         --             --            --           --
Net loss...........................          --           --         --             --            --           --
                                     ----------   ----------   --------   ------------   -----------     --------
Balance at December 31, 1998.......          --   13,098,808    130,988     18,149,203     1,999,831           --
Comprehensive loss:
  Net loss.........................          --           --         --             --            --           --
  Unrealized losses on marketable
    securities.....................          --           --         --             --            --      (64,134)
  Foreign currency translation.....          --           --         --             --            --      (18,290)
Total comprehensive loss...........
Issuance of common stock
  issuable.........................          --      194,380      1,944      1,997,887    (1,999,831)          --
Initial and secondary public
  offering net of $6,727,500 of
  related costs and expenses.......          --    4,750,000     47,500    120,430,000            --           --
Issuance of common stock in
  connection with acquisition......          --      697,664      6,977     59,393,023            --           --
Exercise of warrants and stock
  options..........................          --      941,147      9,411      1,319,465            --           --
Employee stock options.............          --           --         --        325,000            --           --
Amortization of deferred
  compensation.....................          --           --         --             --            --           --
Reversal of deferred compensation
  of options forfeited.............          --           --         --        (98,231)           --           --
Acceleration of vesting on
  options..........................          --           --         --        515,191            --           --
Accrual of Redeemable Preferred
  Stock dividends..................          --           --         --             --            --           --
                                     ----------   ----------   --------   ------------   -----------     --------
Balance at December 31, 1999.......  $       --   19,681,999   $196,820   $202,031,538   $        --     $(82,424)
                                     ==========   ==========   ========   ============   ===========     ========

<CAPTION>
                                      YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                     ----------------------------------------------

                                                                        TOTAL
                                     ACCUMULATED      DEFERRED      STOCKHOLDERS'
                                       DEFICIT      COMPENSATION   (DEFICIT) EQUITY
                                     ------------   ------------   ----------------
<S>                                  <C>            <C>            <C>
Balance at January 1, 1997.........  $ (3,747,294)  $        --      $ (2,477,694)
Purchase of partnership interest...            --            --         3,200,000
Exchange of partners' interest for
  6,522,893 shares of common stock
  and 41,446 shares of Redeemable
  Preferred Stock..................            --            --        (4,144,600)
Contribution of amounts owed to The
  NPD Group, Inc. .................            --            --           380,977
Sale of common stock...............            --            --               100
Costs incurred in connection with
  issuance of Series A Convertible
  Preferred Stock..................            --            --          (359,188)
Payment of Redeemable Preferred
  Stock dividends..................       (68,142)           --           (68,142)
Accrual of Redeemable Preferred
  Stock dividends..................      (221,422)           --          (221,422)
Net loss...........................    (4,583,948)           --        (4,583,948)
                                     ------------   -----------      ------------
Balance at December 31, 1997.......    (8,620,806)           --        (8,273,917)
Conversion of Series A Convertible
  Preferred Stock..................            --            --         3,999,991
Conversion of Series B Convertible
  Preferred Stock..................            --            --         1,500,000
Issuance of common stock in
  connection with acquisition......            --            --        10,500,000
Exercise of warrants...............            --            --               286
Sale of common stock -- 194,380
  shares issuable..................            --            --         1,999,831
Employee stock options.............            --    (1,933,025)               --
Amortization of deferred
  compensation.....................            --       368,550           368,550
Accrual of Redeemable Preferred
  Stock dividends..................      (313,738)           --          (313,738)
Net loss...........................    (7,158,698)           --        (7,158,698)
                                     ------------   -----------      ------------
Balance at December 31, 1998.......   (16,093,242)   (1,564,475)        2,622,305
Comprehensive loss:
  Net loss.........................   (21,908,001)           --       (21,908,001)
  Unrealized losses on marketable
    securities.....................            --            --           (64,134)
  Foreign currency translation.....            --            --           (18,290)
                                                                     ------------
Total comprehensive loss...........                                   (21,990,425)
Issuance of common stock
  issuable.........................            --            --                --
Initial and secondary public
  offering net of $6,727,500 of
  related costs and expenses.......            --            --       120,477,500
Issuance of common stock in
  connection with acquisition......            --            --        59,400,000
Exercise of warrants and stock
  options..........................            --            --         1,328,876
Employee stock options.............            --      (325,000)               --
Amortization of deferred
  compensation.....................            --       544,917           544,917
Reversal of deferred compensation
  of options forfeited.............            --        98,231                --
Acceleration of vesting on
  options..........................            --            --           515,191
Accrual of Redeemable Preferred
  Stock dividends..................      (109,195)           --          (109,195)
                                     ------------   -----------      ------------
Balance at December 31, 1999.......  $(38,110,438)  $(1,246,327)     $162,789,169
                                     ============   ===========      ============
</TABLE>

                            See accompanying notes.

                                       F-4
<PAGE>   43

                      MEDIA METRIX, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                          ------------------------------------------
                                                              1999           1998           1997
                                                          ------------    -----------    -----------
<S>                                                       <C>             <C>            <C>
OPERATING ACTIVITIES
Net loss................................................  $(21,908,001)   $(7,158,698)   $(4,583,948)
Adjustments to reconcile net loss to net cash used in
  operating activities:
  Charge for acquired in-process research and
    development.........................................     6,800,000      1,600,000             --
  Loss on disposal of equipment.........................        43,123         13,174             --
  Provision for bad debts...............................       387,000        160,600        100,000
  Depreciation and amortization of property and
    equipment...........................................       515,912         65,969         17,991
  Amortization of deferred compensation and other
    stock-based compensation............................       544,917        368,550             --
  Acceleration of vesting on options....................       515,191             --             --
  Amortization of intangibles...........................     7,312,505        479,000             --
  Minority interests....................................    (1,688,542)            --             --
  Changes in operating assets and liabilities:
    Receivables.........................................    (5,000,046)      (427,652)      (211,059)
    Prepaid expenses and other current assets...........       (44,631)       (13,625)       (38,063)
    Other assets........................................        16,653         28,976        (22,280)
    Accounts payable and accrued liabilities............     7,008,832        657,737        793,140
    Advance billings to clients.........................     3,727,671        393,581        309,200
    Due to The NPD Group, Inc. .........................    (4,261,330)     3,421,510     (1,117,059)
                                                          ------------    -----------    -----------
Net cash used in operating activities...................    (6,030,746)      (410,878)    (4,752,078)
                                                          ------------    -----------    -----------
INVESTING ACTIVITIES
Purchase of marketable securities.......................   (14,941,356)            --             --
Cash acquired, net of acquisition costs.................       500,511      3,185,112             --
Additions to property and equipment.....................    (4,733,977)      (117,489)      (134,825)
Proceeds from the sale of fixed assets..................            --          5,300             --
Security deposits.......................................      (191,336)            --             --
                                                          ------------    -----------    -----------
Net cash (used in) provided by investing activities.....   (19,366,158)     3,072,923       (134,825)
                                                          ------------    -----------    -----------
FINANCING ACTIVITIES
Repayments on long-term debt............................    (2,321,771)       (19,155)            --
Proceeds from exercise of warrants and stock options....     1,328,876      1,500,286             --
Net proceeds from initial and secondary public
  offering..............................................   120,477,500             --             --
Redemption of redeemable preferred stock................    (4,788,955)            --             --
Contributions from minority interest....................        71,158             --             --
Proceeds from sale of Series A Convertible Preferred
  Stock, net of related costs...........................            --             --      3,640,803
Partner contributions...................................            --             --      3,200,000
Repayment of loan payable to affiliate..................            --             --       (600,000)
Payment of dividend.....................................            --             --        (68,142)
Sale of common stock....................................            --      1,999,831            100
                                                          ------------    -----------    -----------
Net cash provided by financing activities...............   114,766,808      3,480,962      6,172,761
                                                          ------------    -----------    -----------
Effect of exchange rate changes on cash.................       (18,290)            --             --
                                                          ------------    -----------    -----------
Net increase in cash and cash equivalents...............    89,351,614      6,143,007      1,285,858
Cash and cash equivalents at beginning of year..........     8,012,020      1,869,013        583,155
                                                          ------------    -----------    -----------
Cash and cash equivalents at end of year................  $ 97,363,634    $ 8,012,020    $ 1,869,013
                                                          ============    ===========    ===========
SUPPLEMENTAL INFORMATION
Interest paid...........................................  $     74,660    $    11,374    $        --
                                                          ============    ===========    ===========
</TABLE>

                            See accompanying notes.
                                       F-5
<PAGE>   44

                      MEDIA METRIX, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 1999

1. DESCRIPTION OF BUSINESS AND ORGANIZATION

  Description of Business

     Media Metrix, Inc., a Delaware Corporation, provides Internet audience
measurement products and services to customers including media companies,
Internet advertisers and advertising agencies, technology companies and
financial institutions.

  Organization

     The accompanying consolidated financial statements include the accounts of
Media Metrix, Inc., its wholly owned subsidiaries AdRelevance, Inc. and Media
Metrix Japan KK, its 90% owned subsidiary Media Metrix Canada Co., its 51% owned
subsidiary Media Metrix Pty. Ltd. and its 54.46% owned subsidiary MMXI Europe,
B.V., a Dutch company. MMXI Europe, in turn, is consolidated with its wholly
owned subsidiaries, MMXI Europe UK Limited, MMXI Europe E.U.R.L. and MMXI
(Deutschland) GmbH.

     Media Metrix' business was originally conducted as a division within The
NPD Group, Inc. until March 1996, when PC Meter, L.P., a Delaware limited
partnership (Media Metrix' predecessor), was formed to conduct Media Metrix'
business.

     On April 14, 1997, PC Meter was merged into Media Metrix. NPD originally
held 100,000 Class A Limited Partnership Units and 79,000 Class B Limited
Partnership Units of PC Meter. Two family trusts previously established for the
benefit of heirs to the sole shareholder of NPD (the "Family Trusts") each held
19,323.5 Class B Limited Partnership Units. In addition, PC Meter was indebted
to NPD in the amount of $3,951,029. On April 14, 1997, PC Meter was merged with
and into Media Metrix. Immediately prior to the merger, NPD purchased additional
Class A Limited Partnership Units for a purchase price of $3,200,000. Pursuant
to the terms of the Agreement and Plan of Merger between Media Metrix and PC
Meter, the Class A Limited Partnership Units were exchanged for a total of
41,446 shares of Media Metrix Redeemable Preferred Stock. The Class B Limited
Partnership Units were exchanged for a total of 6,522,893 shares of Media Metrix
common stock. Post-merger, Media Metrix repaid the amounts owed to NPD by PC
Meter. Of the amounts owed NPD, $3,570,052 was paid in cash and $380,977 was
forgiven.

     The above transactions were accounted for in a manner similar to that of a
"pooling of interests" in that the assets and liabilities and related revenues
and expenses of PC Meter have been reflected in the accompanying financial
statements at their historical book values.

2. SIGNIFICANT ACCOUNTING POLICIES

  Principles of Consolidation

     Media Metrix' consolidated financial statements include the assets,
liabilities and results of operations of its majority-owned subsidiaries. The
ownership of the other interest holders is reflected as minority interests. All
significant intercompany accounts and transactions have been eliminated.

  Accounting Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the consolidated financial statements and accompanying
notes. Actual results could differ from those estimates.

  Revenue Recognition

     Syndicated (recurring) products and services are sold on a subscription
basis. Revenues for such products and services are recognized over the term of
the related contract as products or services are provided. Buyers
                                       F-6
<PAGE>   45
                      MEDIA METRIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of syndicated products and services typically are billed in advance for up to
the next twelve months. Billings rendered in advance of products or services
being provided are recorded as "Advance billings to clients" in the accompanying
consolidated balance sheet.

     Revenues for customized (nonrecurring) products and services are recognized
in the period in which the products or services are provided.

  Panel Costs

     Costs of establishing and maintaining a panel (a group of consumers who
furnish marketing data) are expensed in the year incurred and are included in
costs of revenues.

  Research and Development Costs

     Research and development costs primarily consist of costs attributable to
the development of new products and are expensed as incurred.

  Cash and Cash Equivalents

     Cash equivalents consist of highly liquid investments with a maturity date
of three months or less when purchased. Substantially all cash and cash
equivalents are held with three financial institutions at December 31, 1999 and
in one financial institution at December 31, 1998. Media Metrix' cash is exposed
to risk to the extent the balance of the cash accounts exceeds federally insured
limits.

  Marketable Securities

     Media Metrix accounts for its investments in accordance with Statement of
Financial Accounting Standard No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." All investments have been classified as
available-for-sale securities as of December 31, 1999. Available-for-sale
securities are stated at fair value, with the unrealized gains and losses
reported in accumulated other comprehensive income (loss). Realized gains and
losses and declines other-than-temporary on available-for-sale securities are
included in interest and other income. The cost of securities sold is based on
the specific identification method. Interest and dividends on securities
classified as available-for-sale are included in interest and other income.

  Concentrations of Credit Risk

     Media Metrix' policy is to review a customer's financial condition prior to
extending credit and, generally, collateral is not required. Credit losses are
provided for in the financial statements and have been within management's
expectations. Under the terms of certain contracts with its customers, Media
Metrix receives partial payments as the services are provided. No customer
accounted for greater than 10% of our revenues in 1999 and 1998. One customer
accounted for approximately 19% of revenues for the year ended December 31,
1997.

  Property and Equipment

     Property and equipment are recorded at cost and depreciated or amortized
using the straight-line method over their estimated useful lives. Direct
external and internal computer software development costs subsequent to the
preliminary stages of development are capitalized. Leasehold improvements are
amortized over the shorter of their estimated useful lives or the remaining term
of the related lease.

                                       F-7
<PAGE>   46
                      MEDIA METRIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  Intangible Assets

     Intangibles acquired are being amortized by the straight-line method over
one to three years from the date of acquisition (see Note 4).

  Long-Lived Assets

     Media Metrix periodically reviews the carrying value of its long-lived
assets in determining the ultimate recoverability of their unamortized values
using future undiscounted cash flow analyses. Such a review has been performed
by management and does not indicate an impairment of such assets.

  Stock-Based Compensation

     Media Metrix accounts for its stock-based employee compensation agreements
in accordance with the provisions of Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees and complies with the disclosure
provisions of Statement of Financial Accounting Standards No. 123, Accounting
for Stock Based Compensation ("SFAS 123").

  Foreign Currency Translation

     Local currencies are generally considered to be the functional currency for
operations outside the United States. The translation from the applicable
foreign currencies to U.S. dollars is performed for balance sheet accounts using
current exchange rates in effect at the balance sheet date and for revenue and
expenses accounts using a weighted average exchange rate during the year. The
resulting translation adjustments are recorded as a component of stockholders'
equity. Gains or losses resulting from foreign currency transactions are
included in other income.

  Comprehensive Income (Loss)

     Media Metrix adopted Statement of Financial Accounting Standards No. 130
("FAS 130"), "Reporting Comprehensive Income," in the first quarter of fiscal
1999. As required by FAS 130, the Company displays the accumulated balance of
other comprehensive income or loss separately in the equity section of the
consolidated balance sheets. Total comprehensive loss, which is comprised of net
loss and accumulated other comprehensive income (loss), amounted to
approximately $21,990,000 for the year ended December 31, 1999. As of December
31, 1999, accumulated other comprehensive losses consisted of $64,134 and
$18,290 for the change in unrealized loss on securities and foreign currency
translations, respectively. No other comprehensive income (loss) existed during
1997 or 1998.

3. BASIC AND DILUTED NET LOSS PER SHARE

     Media Metrix computes net loss per share in accordance with the provisions
of Statement of Financial Accounting Standards No. 128, Earnings per Share
("SFAS 128") and SEC Staff Accounting Bulletin No. 98 ("SAB 98"). Under the
provisions of SFAS 128 and SAB 98, basic and diluted net loss per share is
computed by dividing the net loss available to common stockholders for the
period by the weighted average number of common shares outstanding for the
period. The calculation of diluted net loss per share excludes shares of common
stock issuable upon exercise of employee stock options and warrants (see Note
12), and the conversion of preferred stock (see Note 10) as the effect of such
exercises would be antidilutive.

                                       F-8
<PAGE>   47
                      MEDIA METRIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. BASIC AND DILUTED NET LOSS PER SHARE (CONTINUED)
     The following sets forth the computation of basic and diluted net loss per
share:

<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                             ------------------------------------------
                                                 1999           1998           1997
                                             ------------    -----------    -----------
<S>                                          <C>             <C>            <C>
Numerator:
  Net loss.................................  $(21,908,001)   $(7,158,698)   $(4,583,948)
  Preferred stock dividends................      (109,195)      (313,738)      (289,564)
                                             ------------    -----------    -----------
  Net loss applicable to common
     stockholders..........................  $(22,017,196)   $(7,472,436)   $(4,873,512)
                                             ============    ===========    ===========
Denominator for basic and diluted loss per
  share -- weighted average shares.........    16,445,295      7,618,511      6,523,330
                                             ============    ===========    ===========
Basic and diluted loss per share applicable
  to common stockholders...................  $      (1.34)   $     (0.98)   $     (0.75)
                                             ============    ===========    ===========
</TABLE>

4. ACQUISITIONS

     On October 8, 1999, Media Metrix acquired all the outstanding shares of
preferred and common stock of AdRelevance and outstanding options and warrants
to purchase shares of AdRelevance common stock in exchange for 697,664 shares of
Media Metrix common stock and 222,164 options and warrants to purchase shares of
Media Metrix common stock valued at approximately $59.4 million. Additional
consideration is payable upon AdRelevance achieving certain post-closing goals.

     The purchase price was allocated as follows: (i) net operating assets
acquired of $1,434,000, including cash of $1,320,000, (ii) acquired in-process
research and development of $6,800,000, (iii) debt of $ 2,339,000, and (iv)
intangibles of $54,324,000, including related costs and expenses of
approximately $819,000. Acquired in-process research and development represents
the value attributed to eight technologies in development using the discounted
value (using a 32% discount rate) of the expected cash flow streams attributed
to those items. Adjustments were made to the expected cash flow streams to
incorporate obsolescence of the technologies, the risk of similar technologies
emerging in the marketplace, and other factors that may reduce the value
realized from the in-process technologies. The technologies relate to tracking
non-banner advertising (valued at $4,911,000), reporting advertising in certain
sections of advertising (valued at $555,000), reporting and comparing
advertising activity among different industries (valued at $551,000), reporting
details of advertising activities of Web media networks (valued at $443,000) and
four other technologies to help enhance tracking, recognition, analysis and/or
reporting of advertising (valued at $340,000). As of the acquisition date, the
aforementioned technologies were 20% to 64% complete and are expected to be
completed soon after the acquisition date through June 2000.

     On November 5, 1998, Media Metrix and an unrelated entity,
RelevantKnowledge, Inc. ("RKI") entered into an agreement and plan of
reorganization whereby RKI was merged into Media Metrix. The stockholders of RKI
exchanged all outstanding preferred and common stock of RKI for 3,890,825 newly
issued shares of common stock in Media Metrix. The fair value of the Media
Metrix common stock issued to the previous stockholders and option and warrant
holders of RKI is approximately $10,500,000. The purchase price was allocated as
follows: (i) net operating assets acquired -- $3,182,000, including cash of
$3,185,000, (ii) acquired in-process research and development -- $1,600,000,
(iii) debt -- $372,000, and (iv) intangibles -- $6,416,000, including related
costs and expenses of approximately $326,000.

     RKI had issued warrants to acquire shares of its common stock in connection
with prior sales of preferred and common stock and convertible secured
promissory notes. Such warrants were exchanged for warrants to purchase 360,907
shares of Media Metrix stock and are immediately exercisable as follows: 266,635
at $0.03 per share (8,887 of which were exercised in 1998 and 14,748 in 1999),
67,097 at $6.43 per share, 12,055 at $0.19 per share, 7,778 at $2.57 per share
and 7,342 at $5.14 per share. The warrants expire between April 2002

                                       F-9
<PAGE>   48
                      MEDIA METRIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. ACQUISITIONS (CONTINUED)
and May 2008. In addition, RKI had issued options to purchase shares of its
common stock to its employees pursuant to a stock option plan. Such options were
exchanged for options to purchase 46,775 shares of Media Metrix common stock at
an exercise price of $2.39 per share. All options are immediately exercisable
and expire from 2006 to 2008.

     Acquired in-process research and development represents the value
attributed to three technologies in development using the discounted value
(using a 40% discount rate) of the expected cash flow streams attributed to
those items. Adjustments, were made to the expected cash flow streams to
incorporate obsolescence of the technologies, the risk of similar technologies
emerging in the marketplace, and other factors that may reduce the value
realized from the in-process technologies. The three technologies relate to a
data warehousing application (valued at $800,000), a panel management tool
(valued at $770,000), and an automated tracking system (valued at $30,000). As
of the acquisition date, the aforementioned technologies were 25% to 50%
complete and were completed in 1999.

     The estimates used by Media Metrix in valuing in-process research and
development were based on assumptions management believes to be reasonable but
which are inherently uncertain and unpredictable. Media Metrix' assumptions may
be incomplete or inaccurate, and no assurance can be given that unanticipated
events and circumstances will not occur. Accordingly, actual results may vary
from projected results.

     The above acquisitions have been accounted for using the purchase method of
accounting and the operations of AdRelevance and RKI have been included in the
accompanying consolidated financial statements from the respective dates of
acquisition.

     The following table reflects unaudited pro forma results of operations of
Media Metrix and RKI on the basis that the acquisitions had taken place as of
January 1, 1997 and as of January 1, 1998, and AdRelevance on the basis that the
acquisition had taken place as of October 12, 1998 (its date of inception) and
as of January 1, 1999:

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31
                                                   --------------------------------------------
                                                       1999            1998            1997
                                                   ------------    ------------    ------------
<S>                                                <C>             <C>             <C>
Revenues from sales of services..................  $ 20,503,000    $  8,145,000    $  3,883,000
                                                   ============    ============    ============
Net loss.........................................  $(38,342,000)   $(26,535,000)   $(14,397,000)
                                                   ============    ============    ============
Net loss applicable to common stockholders.......  $(38,451,000)   $(26,849,000)   $(14,686,000)
                                                   ============    ============    ============
Basic and diluted net loss per share applicable
  to common stockholders.........................  $      (2.27)   $      (2.44)   $      (1.41)
                                                   ============    ============    ============
Shares used in the calculation of basic and
  diluted net loss per share applicable to common
  stockholders...................................  $ 16,973,232      11,006,256      10,414,204
                                                   ============    ============    ============
</TABLE>

     In management's opinion, the unaudited pro forma results of operations are
not indicative of the actual results that would have occurred had the RKI
acquisition been consummated on January 1, 1997 or on January 1, 1998 and the
AdRelevance acquisition on October 12, 1998 or on January 1, 1999, or of future
operations of the combined companies under the management of Media Metrix.

                                      F-10
<PAGE>   49
                      MEDIA METRIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. MARKETABLE SECURITIES

     At December 31, 1999, marketable securities consisted of the following:

<TABLE>
<CAPTION>
                                                              UNREALIZED         FAIR
                                                COST        GAINS/(LOSSES)       VALUE
                                             -----------    --------------    -----------
<S>                                          <C>            <C>               <C>
Available for sale securities:
  Corporate bonds..........................  $ 4,244,057      $  (9,015)      $ 4,235,042
  Government securities....................    2,894,240         11,604         2,905,844
  Asset-backed securities..................    6,805,975       (100,170)        6,705,805
  Certificates of deposits.................      997,084         33,447         1,030,531
                                             -----------      ---------       -----------
                                             $14,941,356      $ (64,134)      $14,877,222
                                             ===========      =========       ===========
</TABLE>

     There were no material realized gains or losses from sales of securities
during the year ended December 31, 1999.

6. PROPERTY AND EQUIPMENT

     Property and equipment consisted of the following:

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              ----------------------
                                                                 1999         1998
                                                              ----------    --------
<S>                                                           <C>           <C>
Furniture and fixtures......................................  $  475,902    $134,843
Computer equipment..........................................   3,307,868     585,152
Computer software...........................................   1,475,527       5,725
Leasehold improvements......................................     609,187          --
                                                              ----------    --------
                                                               5,868,484     725,720
Less accumulated depreciation and amortization..............     560,817      75,930
                                                              ----------    --------
                                                              $5,307,667    $649,790
                                                              ==========    ========
</TABLE>

7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

     Accounts payable and accrued liabilities consist of:

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                             -------------------------
                                                                1999           1998
                                                             -----------    ----------
<S>                                                          <C>            <C>
Trade accounts payable.....................................  $ 3,318,000    $1,079,000
Payroll and other related costs............................    2,183,000       660,000
Panel costs................................................    1,296,000        57,000
Amounts due to minority interests for reimbursements of
  expenses.................................................    1,282,000            --
Other......................................................    2,036,000       512,000
                                                             -----------    ----------
                                                             $10,115,000    $2,308,000
                                                             ===========    ==========
</TABLE>

8. RELATED PARTY TRANSACTIONS

     Effective April 1, 1996 and as amended on September 30, 1998, NPD and Media
Metrix entered into a management services agreement whereby NPD, among other
services, provides Media Metrix with computer processing capacity and certain
administrative functions. As compensation for the services, Media Metrix pays
NPD, on a monthly basis, an amount equal to (a) all expenses reasonably incurred
by NPD in performance of

                                      F-11
<PAGE>   50
                      MEDIA METRIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. RELATED PARTY TRANSACTIONS (CONTINUED)
its duties under this agreement and (b) 105% of NPD's overhead allocable to
Media Metrix, as defined. The agreement may be terminated by either party upon
90 days notice, provided NPD may not terminate prior to March 31, 2002. Such
charges pursuant to this agreement during the years ended December 31, 1999,
1998 and 1997 amounted to approximately $2,703,000, $6,023,000 and $5,831,000,
respectively. At December 31, 1999 and 1998, Media Metrix owed approximately
$444,000 and $4,706,000 , respectively, to NPD for such services. Such amounts
are non-interest bearing.

     Media Metrix has entered into a Services Agreement with NPD as of September
30, 1998. Media Metrix has granted NPD access to its databases for any business
purpose of NPD which is not in direct competition with that of Media Metrix.
Media Metrix has also granted NPD a non-exclusive license to use certain
computer software owned by Media Metrix. Under the terms of the Services
Agreement, Media Metrix will receive a monthly fee of $2,500 plus expenses. The
Services Agreement is terminable by either party with 120 days notice.

     Media Metrix has entered into a License Agreement with NPD dated as of
November 5, 1998. NPD has granted to Media Metrix an exclusive, non-transferable
worldwide license to use certain NPD software. The fee is $11,000 per month
payable quarterly.

9. LONG-TERM DEBT

     During July 1999, Media Metrix financed the premium due on its directors
and officers liability insurance at a rate of 6% per annum. Such debt is payable
in monthly principal and interest payments of $17,850, and matures in November
2001. The annual maturities amount to approximately $196,000 and $173,000 for
2000 and 2001, respectively.

     In connection with the AdRelevance acquisition (see Note 4), Media Metrix
assumed $2.3 million of debt related to bank borrowings and a third party
promissory note. This debt was repaid prior to December 31, 1999.

     In connection with the RKI acquisition (see Note 4), Media Metrix assumed
bank borrowings of approximately $372,000. The credit agreement provided for
borrowings up to $1,000,000. The agreement was terminated upon the payment of
all outstanding amounts due. There is no outstanding balance as of December 31,
1999. The balance outstanding at December 31, 1998 was $352,532.

10. PREFERRED STOCKS

     On April 14, 1997, Media Metrix issued: (i) 495,603 shares of its Series A
Convertible Preferred Stock ("Series A") and (ii) warrants to purchase 159,640
shares of its Series B Convertible Preferred Stock ("Series B") at an exercise
price of $12.53 per share through October 14, 1999, for proceeds of $3,999,991
pursuant to a private placement to three investors. Media Metrix incurred
approximately $359,000 of costs related to this private placement and issued an
investment advisor warrants to purchase 377,642 shares of Media Metrix' common
stock at an exercise price of $2.88 per share through October 14, 1999. The
value of such warrants was nominal. The investment advisor exercised warrants to
purchase 245,501 shares of common stock on March 31, 1999.

     Immediately prior to the RKI acquisition (see Note 4), the holders of the
Series A converted all issued and outstanding shares into 2,155,176 shares of
Media Metrix common stock. In addition, the holders of warrants to purchase
119,714 shares of Series B, exercised such warrants and immediately converted
the underlying Series B into 520,590 shares of Media Metrix common stock. The
remaining 39,926 warrants to purchase Series B were canceled and exchanged for
warrants to purchase 173,629 shares of Media Metrix common stock at an exercise
price of $2.88 per share. Such warrants were exercised on March 31, 1999.

                                      F-12
<PAGE>   51
                      MEDIA METRIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. PREFERRED STOCKS (CONTINUED)
Media Metrix amended and restated its certificate of incorporation to cancel the
Series A and Series B. Accordingly, at December 31, 1998, Media Metrix has
5,000,000 of authorized shares of undesignated preferred stock of which 41,446
has been designated to the Redeemable Preferred Stock.

     At December 31, 1998, NPD owned 41,446 shares or 100% of the authorized,
issued and outstanding shares of Media Metrix' Redeemable Preferred Stock. Media
Metrix repurchased all shares of Redeemable Preferred Stock from NPD and paid
all accrued dividends with a portion of the proceeds from its initial public
offering (see Note 14).

11. INCOME TAXES

     Media Metrix uses the liability method of accounting for income taxes.
Accordingly, deferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Significant components of Media Metrix'
deferred tax assets are as follows:

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                           ---------------------------
                                                               1999           1998
                                                           ------------    -----------
<S>                                                        <C>             <C>
Deferred tax assets:
  Net operating loss carryforwards.......................  $ 12,845,000    $ 6,400,000
  Amounts payable to related party.......................       178,000      1,882,000
  Accounts receivable reserves...........................       200,000         88,000
                                                           ------------    -----------
Total deferred tax assets................................    13,223,000      8,370,000
Valuation allowance for deferred tax assets..............   (13,223,000)    (8,370,000)
                                                           ------------    -----------
Net deferred taxes.......................................  $         --    $        --
                                                           ============    ===========
</TABLE>

     At April 14, 1997, the date when PC Meter was merged into Media Metrix,
Media Metrix had no deferred tax assets or liabilities. RKI and AdRelevance had
deferred tax assets of approximately $4,329,000 and $800,000, respectively, with
equal valuation allowances as of their respective dates of acquisition. As a
result of losses from April 14, 1997 through December 31, 1999, Media Metrix has
available net operating loss carryforwards ("NOLs") of approximately $32,112,000
for Federal income tax purposes that expire in 2012, 2018 and 2019. Included in
such amounts are RKI pre-acquisition NOLs of approximately $11,129,000 and
AdRelevance pre-acquisition NOL's of $1,950,000 which expire through 2019. As a
result of the RKI acquisition, under Section 382 of the Internal Revenue Code,
utilization of such NOLs will be limited to approximately $600,000 per year
through 2013. Future benefits, if any, from the RKI and Ad Relevance NOLs would
first reduce the intangibles acquired and then income tax expense.

     In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the period in
which the NOL can be utilized and the temporary differences become deductible.
Since Media Metrix has incurred losses since inception, Media Metrix has
established full valuation allowances for deferred tax assets. At December 31,
1997, the valuation allowance was $1,371,000.

                                      F-13
<PAGE>   52
                      MEDIA METRIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. STOCK OPTIONS

     In November 1998, Media Metrix adopted the 1998 Equity Incentive Plan (the
"1998 Plan"). Under the 1998 Plan, Media Metrix may award incentive and other
non-statutory stock options, stock appreciation rights, restricted stock and
performance stock units and other stock units which are valued by reference to
the value of the common stock. Media Metrix also maintains the Media Metrix
Stock Option Plan ("Media Metrix Plan") which provides for the award of up to
519,222 shares of common stock in the form of incentive stock options and
non-statutory stock options. In February 1999, the Board of Directors adopted,
and the shareholders subsequently approved in April 1999, an amendment to
increase the number of shares under the 1998 Plan from 732,400 to 1,318,320.

     In October 1998, Media Metrix changed the provisions of all its outstanding
stock options granted prior to such time by removing the requirement of the
occurrence of an initial public offering before such options became exercisable.
This change resulted in a new measurement date. Accordingly, Media Metrix
established, as a separate component of stockholders' equity, deferred
compensation (approximately $724,000) equal to the number of options granted
times the difference in their exercise price and $2.30, the estimated fair value
of the common stock at the time of the new measurement date, and recorded
compensation expense in 1998 of approximately $348,000 representing the portion
of the deferred compensation which vested through December 31, 1998. During
1999, $123,000 of the deferred compensation was amortized.

     On December 3, 1998, Media Metrix issued stock options to employees to
purchase 153,072 shares of common stock at $2.39 per share, which was considered
to be the fair value of the common stock at that time. Soon thereafter, Media
Metrix issued shares at $10.29 per share (see Note 14); accordingly, for
accounting purposes, Media Metrix used such per share value to record an
additional deferred compensation charge of $1,209,000 of which approximately
$361,000 and $20,000 was amortized in the years ended December 31, 1999 and
1998, respectively. In addition, during 1999 Media Metrix recorded an additional
$325,000 of deferred compensation related to stock options of which $61,000 of
the deferred compensation was amortized. Media Metrix also recorded a non-cash
compensation charge of approximately $515,000 relating to the acceleration of
the vesting provisions of certain stock options.

     The following table summarizes activity in stock options:

<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                               --------------------------------------------------------------------------------
                                          1999                        1998                       1997
                               --------------------------   ------------------------   ------------------------
                                SHARES       WEIGHTED-      SHARES      WEIGHTED-      SHARES      WEIGHTED-
                                 UNDER        AVERAGE        UNDER       AVERAGE        UNDER       AVERAGE
                                OPTION     EXERCISE PRICE   OPTION    EXERCISE PRICE   OPTION    EXERCISE PRICE
                               ---------   --------------   -------   --------------   -------   --------------
<S>                            <C>         <C>              <C>       <C>              <C>       <C>
Balance, beginning of year...    696,130       $ 1.26       283,093       $0.17        133,067       $0.11
Grants.......................  1,047,320        32.62       373,219        1.97        150,026        0.23
Exercises....................    (70,519)        1.19            --          --             --          --
Forfeitures..................    (56,279)        2.97        (6,957)       2.30             --          --
Options issued in connection
  with acquisitions..........    222,164         3.77        46,775        2.39             --          --
                               ---------                    -------                    -------
Balance, end of year.........  1,838,816        19.38       696,130        1.26        283,093        0.17
                               =========                    =======                    =======
Exercisable, at end of
  year.......................    354,663       $ 1.17       133,242       $0.39         44,355       $0.11
                               =========                    =======                    =======
Weighted-average fair value
  of options issued during
  the period.................                  $23.07                     $3.42                      $0.06
</TABLE>

                                      F-14
<PAGE>   53
                      MEDIA METRIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. STOCK OPTIONS (CONTINUED)
     The following tables summarize information about stock options outstanding
at December 31, 1999:

<TABLE>
<CAPTION>
                       OPTIONS OUTSTANDING             OPTIONS EXERCISABLE
                ----------------------------------   -----------------------
                                         WEIGHTED-                 WEIGHTED-
                             AVERAGE      AVERAGE                   AVERAGE
   EXERCISE                    LIFE      EXERCISE                  EXERCISE
 PRICE RANGES    OPTIONS    (IN YEARS)     PRICE     EXERCISABLE     PRICE
 ------------   ---------   ----------   ---------   -----------   ---------
<S>             <C>         <C>          <C>         <C>           <C>
$ 0.11 -  0.23    264,393      7.0        $ 0.17       174,381      $ 0.14
  0.35 -  0.56    188,847      9.0          0.43        91,403        0.41
  2.30 -  3.71    323,636      8.8          2.52        83,895        2.68
 11.26 - 17.00    338,046      9.2         11.95            --          --
 25.94 - 36.75     95,784      9.7         33.25         4,984       25.94
 39.25 - 44.56    239,650      9.9         41.09            --          --
 45.00 - 51.80    388,460      9.7         45.36            --          --
                ---------                              -------
                1,838,816      9.0         19.38       354,663        1.17
                =========                              =======
</TABLE>

  Fair Value Disclosures

     Pro forma information regarding net loss and net loss per share is required
by SFAS 123, which also requires that the information be determined as if Media
Metrix has accounted for its stock options under the fair value method of that
statement. The fair value for those options granted prior to Media Metrix's
public offering was estimated using the minimum value method with the following
assumptions: no dividend yield, weighted-average expected life of the option of
5 years, and risk-free interest rates of 6.0%, 5.7% and 6.2% for the years ended
December 31, 1997, 1998 and 1999, respectively.

     For those options granted after Media Metrix became a public entity an
expected volatility factor of 97% was used for the Black-Scholes option pricing
model. The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, the option valuation model requires the
input of highly subjective assumptions including the expected stock price
volatility. Because Media Metrix's stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its stock options.

     For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Media Metrix'
pro forma financial information is as follows:

<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                             ------------------------------------------
                                                 1999           1998           1997
                                             ------------    -----------    -----------
<S>                                          <C>             <C>            <C>
Net loss applicable to common stockholders:
  As reported..............................  $(22,017,196)   $(7,472,436)   $(4,873,512)
                                             ============    ===========    ===========
  Pro forma................................  $(22,973,184)   $(7,487,969)   $(4,875,943)
                                             ============    ===========    ===========
Net loss applicable to common stockholders
  per share:
  As reported..............................  $      (1.34)   $      (.98)   $     (0.75)
                                             ============    ===========    ===========
  Pro forma................................  $      (1.40)   $      (.98)   $     (0.75)
                                             ============    ===========    ===========
</TABLE>

                                      F-15
<PAGE>   54
                      MEDIA METRIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. LEASE COMMITMENTS

     Media Metrix leases certain office space in the United State and other
countries. At December 31, 1999, the future minimum lease payments under
non-cancelable operating leases with initial or remaining lease terms in excess
of one year are as follows:

<TABLE>
<S>                                                           <C>
Year ending December 31:
  2000......................................................  $1,054,000
  2001......................................................     744,000
  2002......................................................     712,000
  2003......................................................     578,000
  2004......................................................     326,000
                                                              ----------
                                                              $3,414,000
                                                              ==========
</TABLE>

     Future minimum lease payments have not been reduced by future minimum
sublease rentals of $410,000 under operating leases. Rent expense approximated
$861,000, $356,000 and $207,000 for the years ended December 31, 1999, 1998 and
1997, respectively.

14. STOCKHOLDERS' EQUITY

     On January 4, 1999, Media Metrix issued to a foreign investor 194,380
shares of common stock at a purchase price per share of $10.29, for an aggregate
purchase price of approximately $2,000,000, pursuant to a stock purchase
agreement. Media Metrix had received the proceeds from this transaction on
December 31, 1998 and has recorded "common stock issuable" in the accompanying
consolidated balance sheet.

     In May 1999, Media Metrix consummated an initial public offering (the
"IPO") of 3,000,000 shares of common stock at a price of $17 per share. The
underwriters in connection with the IPO exercised their over-allotment option to
purchase an additional 250,000 shares from Media Metrix and 200,000 shares from
existing shareholders at a price of $17 per share. The total net proceeds to
Media Metrix amounted to approximately $49,383,000 after deducting the
underwriters' discount and related expenses of $5,867,000.

     In October 1999, Media Metrix consummated a secondary offering of 3,000,000
shares of common stock at a price of $50.50 per share. Of the 3,000,000 shares
sold, 1,500,000 shares were sold by Media Metrix and 1,500,000 shares were sold
by existing stockholders. The net proceeds to Media Metrix were $71,095,000
after deducting the underwriters' discount and related expenses.

     On October 15, 1998, Media Metrix stockholders approved a 2.96873-for-one
split of the outstanding shares of common stock which was effectuated as a stock
dividend, and on November 2, 1998, Media Metrix filed an amended and restated
certificate of incorporation increasing the number of authorized shares of
common stock from 10,000,000 to 15,000,000. On April 22, 1999, the Board of
Directors approved a 1.4648-for-one split of the outstanding shares of common
stock payable to stockholders of record on May 5, 1999. Also on April 22, 1999,
the Board of Directors and the stockholders approved an increase in the number
of authorized shares of common stock to 60,000,000, which became effective May
5, 1999. Retroactive effect has been given to these stock splits. All common
share, option and warrant data has been restated to reflect the stock splits.

     Media Metrix has reserved 1,941,542 shares of common stock for issuance
upon the exercise of all outstanding options and warrants at December 31, 1999.
In addition, Media Metrix has reserved 102,350 shares of common stock for
issuance to the former stockholders of AdRelevance if certain post-closing goals
are met.

                                      F-16
<PAGE>   55
                      MEDIA METRIX, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. INTERNATIONAL OPERATIONS

     In September 1999, Media Metrix entered into an agreement with GfK AG and
Ipsos SA to form MMXI Europe B.V. Pursuant to the terms of the agreement, Media
Metrix owned 54.46%, GfK owned 19.9% and Ipsos owned 25.64% of MMXI Europe. In
December 1999, Media Metrix formed Media Metrix Japan KK, as a wholly owned
subsidiary. The assets and results of MMXI Europe and Media Metrix Japan were
not significant.

     In January 2000, Media Metrix entered into an agreement with ComQUEST
Research Inc. ("ComQUEST") to form Media Metrix Canada Co. Pursuant to the terms
of the agreement, Media Metrix owns 90% and ComQUEST owns 10% of the joint
venture.

     In March 2000, Media Metrix acquired the Internet audience measurement
business operated by SIFO Group AB in Sweden. The new company, MMXI Nordic, is a
wholly owned subsidiary of Media Metrix. Media Metrix acquired all of the
outstanding shares of MMXI Nordic in exchange for $5,691,000 and 52,000 shares
of Media Metrix common stock. In connection with this acquisition, SIFO
purchased 8.0% of MMXI Europe, reducing Media Metrix' ownership to 50.1% and
Ipsos to 22.0%.

     In September 1999, Media Metrix and AMR Interactive Pty. Ltd. ("AMR")
agreed to form Media Metrix Australia. The decuments relating to the joint
venture were finalized in March 2000. Media Metrix owns 51% and AMR owns 49% of
the company.

     In connection with the formation of each of the international joint
ventures, Media Metrix granted each of its joint venture partners an option,
subject to certain conditions, to exchange such partners' shares in the
respective joint ventures for shares of Media Metrix common stock. If any
partner elects to exercise its option to convert its shares into shares of Media
Metrix common stock, Media Metrix will need to record additional goodwill in an
amount equal to the difference between the then fair market value of the shares
of Media Metrix' common stock multiplied by the number of shares issued and the
net book value of the joint venture of which such partner is a shareholder
attributable to such partner.

                                      F-17
<PAGE>   56

                      MEDIA METRIX, INC. AND SUBSIDIARIES

                                  SCHEDULE II

                       VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                                                    ADDITIONS
                                                       BALANCE AT   CHARGED TO                    BALANCE
                                                       BEGINNING    COSTS AND                     AT END
DESCRIPTION                                            OF PERIOD     EXPENSES    DEDUCTIONS(A)   OF PERIOD
-----------                                            ----------   ----------   -------------   ---------
                                                                         (IN THOUSANDS)
<S>                                                    <C>          <C>          <C>             <C>
Reserves and allowances deducted from asset accounts:
ALLOWANCE FOR DOUBTFUL ACCOUNTS
  Year ended December 31, 1999.......................     $220         $387          $107          $500
  Year ended December 31, 1998.......................     $100         $161          $ 41          $220
  Year ended December 31, 1997.......................       --         $100            --          $100
</TABLE>

---------------
(a) Write-offs of amounts against allowance provided.

                                       S-1