UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

|(Mark One)                                  |                                                                                         
|------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                           | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|For the fiscal year ended December 31, 2003
|OR                                         
|o                                           | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-27907

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NETRATINGS, INC.(Exact name of Registrant as specified in its charter)

|Delaware(State or other jurisdiction
of incorporation of organization)          |  | 77-0461990(I.R.S. Employer
Identification No.)
|------------------------------------------------------------------------------- |  | ----------------------------------------------
|120 West 45th Street
New York, New York(Address of principal executive offices) |  | 10036(Zip Code)                               

Registrant's
telephone number, including area code:(212) 703-5900

Securities
registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on which registeredNone

None


Securities
registered pursuant to Section 12(g) of the Act:

Common Stock(Title of Class)

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

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 information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. ý

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the
Act). Yes ý    No o

The aggregate market value of the voting stock held by non-affiliates of the Registrant, based on the closing price of the Registrant's Common Stock
as quoted on the Nasdaq National Market on June 30, 2003, was $96,194,383.

The
number of shares of the Registrant's Common Stock outstanding as of February 27, 2004 was 34,062,900.

DOCUMENTS INCORPORATED BY REFERENCE

Parts of the definitive proxy statement for the Registrant's 2004 Annual Meeting of Stockholders, which is to be filed with the Commission pursuant to
Regulation 14A not later than 120 days after the end of the fiscal year covered by this Report, are incorporated by reference into Part III of this Report.



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Some of the statements contained in this Annual Report on Form 10-K (this "Report") are forward-looking statements, including but not limited
to those specifically identified as such, that involve risks and uncertainties. The statements contained in this Report that are not purely historical are forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding our expectations, beliefs,
intentions or strategies regarding the future. All forward-looking statements included in this Report are based on information available to us on the date hereof, and we assume no obligation to update
any such forward-looking statements. These statements are based on current expectations and assumptions and involve known and unknown risks, uncertainties and other factors, which may cause our actual
results to differ materially from those implied by the forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot
guarantee future results, levels of activity, performance or achievements. Important factors that may cause actual results to differ from expectations include those discussed elsewhere in this Report
on Form 10-K under the heading "Risk Factors That May Affect Our Performance."

PART I

ITEM 1. BUSINESS

OVERVIEW

We are a leading provider of Internet audience measurement and analysis in the United States and around the world. All of our products and services are designed
to assist companies in making critical business decisions regarding their Internet strategies and initiatives.

Our
primary products and services include NetView, AdRelevance/LemonAd, @Plan, MegaPanel and SiteCensus. We also offer Custom and Analytical Services to help clients better utilize and
leverage our
products and services to meet their specific media and market research goals and objectives. NetView, which is our original product, provides in-depth measurement of audience behavior for
the World Wide Web and the digital media universe, including proprietary channels, instant messaging, media players and other online applications. AdRelevance and LemonAd offer comprehensive and
accurate information on online advertising expenditures, including where, when, how and how much companies are advertising online. @Plan is a leading resource for demographic, lifestyle, and product
preferences to guide advertisers, agencies, Web publishers and others in their online marketing and media planning strategies. MegaPanel provides increased breadth and depth of Internet behavior and
activity for the market research industry, including detailed e-commerce transaction information. SiteCensus offers extensive Web analytical services based on a Web site's actual traffic
flows and visitor behavior. Our Custom and Analytical Services offer customized research and advisory services from experienced industry experts.

Our
focus over the past two years has been to develop a comprehensive global product portfolio so that we could address all of the key Internet media and market research needs of our
clients. During the second half of 2003, we announced the launch of two new services that will strengthen our Internet market research capabilities. The first service is WebIntercept, a
behavioral-based online survey research tool that provides surveying capabilities based on real-time Internet behavior. The second service is Homescan Online, which is a joint initiative
with ACNielsen that combines ACNielsen's offline consumer retail purchasing data with our in-depth Internet audience measurement data. These two services, together with MegaPanel which
will be available in the United States during the first half of 2004, enable us to offer clients broad Internet market research capabilities. In addition, our acquisition of Red Sheriff allows us to
significantly expand our ability to offer our SiteCensus service around the world.

Our
products and services are currently sold directly in the United States and in numerous countries throughout Europe, Asia Pacific and Latin America. In France, Japan and Brazil, we
have

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partnered
with leading local market research and information services companies to market and sell some of our products and services. We have a highly diversified and global client base, including
large and small companies in the media, technology, advertising, financial services, consumer products, retail and travel industries. As of December 31, 2003, we had approximately 780 clients,
excluding the clients acquired as a result of our acquisition of Red Sheriff.

In
1998 and 1999, we formed strategic relationships with Nielsen Media Research, the leading source of television audience measurement and related services in the United States, and
ACNielsen, a leading global provider of market research information and analysis. We believe that our strategic relationships with Nielsen Media Research and ACNielsen, both of which are subsidiaries
of VNU N.V., provide us with a unique opportunity to leverage their brands, expertise and industry relationships to facilitate the rapid acceptance and deployment of our diverse portfolio of products
and services. VNU N.V., through its subsidiaries, currently owns approximately 64% of our outstanding common stock.

PRODUCTS AND SERVICES

Since our founding until the second quarter of 2002, we primarily focused on selling our NetView service. Commencing in the second quarter of 2002, as a result of
acquisitions and internal product development, we began to offer additional products and services designed to meet specific Internet media and market research needs. These products and services allow
us to offer companies much more detailed and complex solutions and information and to do so in a more timely manner. In addition, the increased amount of data that we collect enables us to expand the
specialized consulting and analytical services that companies are increasingly seeking as Internet usage and commerce continue to grow around the world. We believe that our comprehensive portfolio of
products and services, which are all sold under the Nielsen//NetRatings brand, leaves us well positioned to become the standard for measuring the size, profile, activity and behavior of Internet users
around the world.



Our NetView service, which includes syndicated and custom reports, provides detailed Internet audience information collected from our high-quality,
representative panels of computer and Internet users. We currently operate NetView panels in thirteen locations around the world and track approximately 70% of the global online activity. In addition
to "at-home" panels, which measure Internet activity from the home computer, we also operate "at-work" panels, which collect data on Internet usage at the workplace, and
"combo-panels", which measure both home and work activity and allow us to calculate the audience duplication to accurately report the true combined audience.

In
order to obtain a representative sample of the total Internet user population, our NetView panels are constructed using a process called random digit dialing, or RDD, which involves
recruiting panel members by calling randomly selected telephone numbers. RDD is the cornerstone of the Nielsen methodology, which has been successfully established as the currency for television
audience measurement. Eligible households, namely those with a PC and Internet access, are recruited to participate in the panel. Those that agree to participate are mailed a membership packet that
includes tracking software and installation instructions and are given a small incentive in the form of a savings bond for their participation. Once installed on a panelist's computer, our tracking
software requires virtually no panelist intervention and software updates are automatic. All panelist data is automatically encrypted prior to transmission to help ensure the privacy of panelist data.

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. To assure the statistical quality of our NetView panels, enumeration studies are conducted to
determine the total size

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and
demographic makeup of the Internet user population and are used as the basis for ensuring that sample behaviors are representative of the total audience population. In order to accurately gauge
the size and shape of the rapidly changing Internet user universe, we conduct our independent enumeration studies on a regular basis.

Our
proprietary activity tracking and data collection technology gathers comprehensive and detailed information regarding computer and Internet user behavior, including sites and pages
visited, time spent on each site, advertising exposure and effectiveness, and bandwidth usage data. In addition, the NetView service is designed to offer clients the most complete view of World Wide
Web and digital media usage, including tracking of Web traffic, AOL proprietary channels, instant messaging applications, media players, wireless content systems, Web phones, connected games, weather
applications and shopping assistants. Our technology collects the same data in the same way, regardless of whether the user is accessing the Internet via a PC, a Macintosh platform or other
Java-enabled Internet access device.

NetView
provides customers with a variety of comprehensive weekly and monthly reports on computer and Internet usage behavior. Our reports can be modified by clients, enabling them to
manipulate data easily to meet their specific information requirements. Our easy-to-use interface provides immediate access to various levels of detailed information, allows
users to create and save their own reports, and enables "on-the-fly" custom queries on selected information.

In
the fourth quarter of 2003, we launched our Hispanic Internet audience panel in the United States, the industry's first RDD Internet panel designed to better understand Hispanic
consumer behavior online. The Hispanic panel provides clients with a rich set of panel-based demographic information on Hispanic Internet users, providing critical intelligence for media buyers,
planners, marketers and publishers targeting the Hispanic online audience.



We offer Internet media planning products and services in the United States through our @Plan service, which we acquired in May 2002. The @Plan service
offers advertisers, advertising agencies, Web
publishers and e-commerce marketers detailed demographics, lifestyle, brand and product preferences, and media consumption information to help them plan and implement successful online
marketing and media strategies. @Plan's tools include @Plan Advertising and @Plan eCommerce.

@Plan
Advertising is a comprehensive advertising decision support and planning system providing deep lifestyle, brand and product preferences, and demographic profile information across
a large number of advertising-supported Web sites. Internet advertisers and advertising agencies can query the system on various targets, such as demographic and/or buying behavior groups to better
understand the most efficient and effective ways to reach those groups through the Internet. The system also allows Web publishers to position their sites effectively against competitive sites and to
efficiently drive advertising revenue by demonstrating the value of the site audience to advertisers or marketing partners.

@Plan
eCommerce builds on the capabilities of @Plan Advertising with features and data specifically designed for online retailers and consumer brand marketers. Online retailers and
consumer brand marketers utilize the system to understand and track their competitive strengths and weaknesses overall and against key market segments. Online retailers can also use this information
to develop more effective and cost-efficient customer acquisition and retention strategies by understanding which Web sites deliver the highest concentration of their target audience. By
providing both online and off-line data, the @Plan eCommerce system also allows online retailers and consumer brand marketers to help maximize multi-channel sales efforts by profiling
online, catalog and in-store audiences and understanding where they overlap, thereby informing their advertising strategy in both traditional and online markets.

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We offer advertising measurement products and services in the United States through our AdRelevance service, which we acquired in April 2002, and in
several international markets through our LemonAd service, which we acquired in July 2003.

AdRelevance
tracks competitive online advertising and advertiser data for thirteen broadly defined categories including, but not limited to, automotive, computer hardware, computer
software, telecommunications, financial services, travel, retailing and Web media. The AdRelevance technology systematically and continuously searches commercial Web sites and captures detailed data
about advertising banners, promotions and rich media. AdRelevance's intelligent agent technology sends out approximately six million probes a week and continuously evaluates more than 600,000 unique
Web
pages 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 advertising 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, technology and creative content.

LemonAd
provides online advertising data and information for twelve European markets. The LemonAd technology searches more than 3,300 Web sites throughout each day, providing critical
advertising information in real-time. All reports are available online through an easy-to-use interface, providing users access to information on a wide range of
data, including ranking of top advertisers, the top advertising spenders and the largest number of ad impressions. Clients can also create customized reports to provide the most relevant information
to their businesses, as well as subscribe to LemonAd's daily alert service to obtain information on the latest advertising campaigns as they break. We expect that the LemonAd service will be
introduced into other global markets during 2004.



Our MegaPanel service is currently available in France, Germany and the United Kingdom and will be available for sale in the United States during the first half
of 2004.

Representing
a broad cross-section of home, work and university online users, our MegaPanel service allows us to provide increased breadth and depth of data, integration of online and
off-line datasets and more advanced custom reporting. We believe that our MegaPanel service complements our NetView service in assisting clients in integrating the Internet into their
global marketing strategies.

Our
MegaPanel service is designed to offer a number of key benefits for market researchers seeking in-depth information on online consumer behavior. For example, MegaPanel
delivers detailed information regarding e-commerce transactions, including what people are buying online, what sites people are using for online shopping and the amount shoppers are
spending online. The MegaPanel also is able to provide clients with important analyses relating to smaller Web sites which may not be available in NetView or our other products and services. In
addition, given the size of the panel, MegaPanel also offers survey capabilities to help clients better understand consumer attitudes and behavior. By administering real-time customized
surveys, focusing, for
example, on areas such as brand awareness, online-offline consumption and customer satisfaction, we can provide a robust understanding of the relationship between the online and offline consumer.

Panelists
for our MegaPanel service are recruited through a variety of methods, including online survey and sweepstakes offers as well as through partnerships with leading market
research providers.

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As
with our NetView panels, our tracking software requires virtually no panelist intervention and software updates are automatic. The information we collect, which is linked to demographic profiles of
Internet households, is used to produce comprehensive syndicated and custom reports regarding Internet behavior and activity across the Internet. To enhance the statistical quality of our panels and
the information we collect, our MegaPanel service is weighted to our NetView panels, which are recruited through RDD procedures.



In April 2003, we launched our SiteCensus service, a census-based site measurement service designed to address the emerging business needs of media
companies, Web publishers and other online companies by providing them with comprehensive data and research metrics about their own Web sites or network of Web sites. In December 2003, we
acquired Red Sheriff, a global provider of various Web site measurement services. This acquisition significantly expands our SiteCensus business and our ability to offer SiteCensus in new global
regions.

Panel-based
research, such as our NetView service, has historically been the standard by which demographics, frequency and other measurements are used for the buying and selling of
online media. SiteCensus was designed to complement panel-based research by measuring every visitor and providing a complete census count. For Web sites with smaller audience sizes, SiteCensus
provides focused and detailed research analysis previously unavailable with panel-based research. For larger Web sites, SiteCensus supplements panel-based reporting with different levels of
site-centric analysis, offering clients further insight into their Web audience.

The
service's census-based measurements are provided through a page-tagging system. When encoded in any Web site page, the tag provides an accurate and direct count of every
page view and visitor in real-time. Page-tagging allows a client to track their entire online audience, including traffic from wireless and hand-held devices,
Internet appliances, shared home and office computers and university PCs, as well as public terminals including libraries and Internet cafes. Data captured from the tags are warehoused, classified and
statistically analyzed. A variety of comprehensive reports and metrics are available to clients through a
Web-based interface, which can be customized to meet a client's specific online objectives.

In
order to provide a more in-depth view of the visitors to a Web site, SiteCensus allows for the integration of detailed demographic data through online surveys. The
SiteCensus survey engine allows us to randomly survey a visitor to a Web site, and incorporate their survey responses into demographic composition reports of a Web site's audience. Site panels are
built by randomly selecting a sample of visitors to the client Web site, or groups of Web sites, for the purpose of delivering surveys. The survey engine enforces a strict, random recruitment process
to help ensure that the site panel is representative of the site's audience.



WebRF offers advertisers, advertising agencies and Web publishers a comprehensive reach and frequency tool for planning and evaluating the impact of advertising
on the Internet, using terminology and analysis capabilities comparable to those in traditional media advertising. Through the WebRF software, which was designed in partnership with Interactive Market
Systems (IMS), a provider of media planning and analysis software to the advertising industry, advertisers, advertising agencies and Web publishers can develop the analyses necessary to compare online
advertising reach with delivery of other media, map advertising campaigns for specified target markets and track how effectively advertising budgets are being managed. WebRF is currently available in
the United States and ten countries across Europe and Asia Pacific.

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WebIntercept, which we launched in November 2003, offers clients the ability to survey Internet users based on their real-time behavior as they
navigate the Internet. Linking surveys to real-time Internet usage and behavior allows clients to reach consumers at a specific moment of interest, as WebIntercept enables surveys to be
triggered when a panelist visits a predetermined Web site or exhibits a predetermined behavior. By allowing clients to connect directly with visitors to their own Web site as well as those of their
competitors, WebIntercept provides a unique and efficient way for clients to benchmark performance, measure customer satisfaction across an industry and gain access to critical competitive analysis.
In addition, WebIntercept's global panel of approximately three million potential respondents enables clients to collect the number of completed surveys necessary to ascertain localized behavior
statistics not readily available with smaller panels.



In November 2003, we jointly announced with ACNielsen the launch of Homescan Online, a product designed to improve the effectiveness of online marketing
for the consumer packaged goods (CPG) industry and Web publishers. ACNielsen's Homescan consumer panel records the offline purchasing behavior of thousands of panelists using ACNielsen's proprietary
in-home UPC code scanners. Homescan Online combines the offline and online data from over 14,000 members of ACNielsen's Homescan consumer panel who have also agreed to allow us to track
their Internet activity and behavior. As a result, Homescan Online integrates consumer retail purchasing of up to 12,000 CPG brands and online visitors to more than 1,000 Web sites, enabling CPG
marketers to better understand where their consumers are going online and what effect their online marketing is having on offline retail sales. The service also enables Web publishers to more
effectively market themselves to the CPG industry by helping CPG marketers better target Web site audiences by their specific brand consumption. Custom analysis of Homescan Online is currently
available, with full syndicated reporting of Internet behavioral data and offline purchasing data expected to be available in the middle of 2004.



As we have expanded our product offerings to more completely address the market research needs of our customers, clients have increasingly relied on us to provide
custom research and analytical services. These custom research and analytics services are designed to help clients better utilize and leverage our services with their specific media research and
market research goals and objectives. Our dedicated analytics team provides in-depth specialized advice to clients of our NetView, AdRelevance, @Plan, MegaPanel, WebRF and WebIntercept
products and services. Examples of the types of custom research and analytics projects that we have conducted in recent months include the following:



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STRATEGIC RELATIONSHIP WITH VNU

VNU N.V. is a global leader in market research, providing measurement and analysis of marketplace dynamics, consumer behavior and audience measurement. We believe
that our strategic relationship with VNU and its subsidiaries, particularly Nielsen Media Research and ACNielsen, provides us with a unique opportunity to leverage their brand, industry relationships
and overall expertise in order to expand our products and services around the globe. Since 1999, we have marketed our services under the Nielsen//NetRatings brand. In addition to our strategic
relationships, VNU, through its subsidiaries, also controls a majority of our outstanding voting stock and our Board of Directors.

For
over fifty years, Nielsen Media Research's core business has been to provide high-quality comprehensive audience viewing information on the television industry. The
Nielsen ratings are vital to television program production, distribution and scheduling decision-making, and the currency for transactions between buyers and sellers of television advertising time. In
October 1998, we formed a strategic relationship with Nielsen Media Research to develop and market Internet audience measurement products and services in the United States and Canada using our
technology with Nielsen Media Research's proprietary panel methodology. In March 1999, we launched our NetView service, which constituted an Internet audience panel product based on the Nielsen
Media Research audience sampling methodology.

Under
our agreements with Nielsen Media Research, Nielsen Media Research provides for the development and maintenance of panels in the United States that generate the data for our
NetView service. We are responsible for the management, support and ongoing development of the data collection and reporting system. We pay Nielsen Media Research ongoing fees for the costs of
maintaining the NetView panels and costs associated with the expansion of such panels. These fees are charged at the same rates that Nielsen Media Research charges its own internal divisions, which
are based on Nielsen Media Research's actual costs plus an allocated portion of its overhead costs. During
the second half of 2003, we reached an agreement with Nielsen Media Research to provide us with certain research services in connection with our @Plan service, including telephone recruitment of
survey respondents and the administration of online surveys. In addition, we also agreed to re-locate our main data center facilities in San Jose, California to Nielsen Media Research's
world-class technology center in Oldsmar, Florida, where Nielsen Media Research will be responsible for providing technology-hosting services to support our mission critical computing platforms,
including server, network, storage and security management.

ACNielsen,
which was founded over 75 years ago, is a leading provider of media research services outside North America. It is also a global leader in providing business
information, analysis and insights to consumer-packaged goods companies, their brokers and retail organizations. ACNielsen also provides television audience measurement services outside of the United
States, to customers in over 100 countries. In September 1999, we established ACNielsen eRatings.com, a joint venture with ACNielsen, to develop and maintain audience measurement panels and to
market our products and services in international markets. From the formation of the joint venture until May 2002, we had a 19.9% voting interest in the venture and ACNielsen had an 80.1%
voting interest in the venture. In May 2002, we acquired all of ACNielsen eRatings.com and entered into a services agreement with ACNielsen pursuant to which ACNielsen will provide us with
certain back-office services for a period of five years.

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INTERNATIONAL OPERATIONS

We believe that offering our customers the Nielsen//NetRatings products and services with data from around the world is a critical component in establishing
ourselves as the global standard for Internet audience measurement and analysis. Over the past year, primarily as a result of our acquisitions, we have expanded the geographic scope of our products
and services. We currently offer our NetView service in thirteen locations around the world, our WebRF product is available in eleven countries worldwide and our LemonAd service is available in twelve
European countries. Our MegaPanel service is currently available in France, Germany and the United Kingdom. As a result of the Red Sheriff acquisition, we are able to offer SiteCensus in over 13
countries around the world.

In
France, Japan and Latin America, we have historically offered our NetView service through joint ventures with leading local market research and information services companies. As of
December 31, 2003, we held a 66% ownership interest in Mediametrie NetRatings, our French subsidiary, and the remaining ownership interest was held by Mediametrie. As of December 31,
2003, we held approximately 58% of NetRatings Japan, our Japanese subsidiary, and the remaining ownership interest was held by TransCosmos and other investors. As of December 31, 2003, we held
a 49% ownership interest in Ibope eRatings.com, our Latin American joint venture, and the remaining ownership interest was held by Ibope. In each of these places, we have licensed our proprietary data
collection and reporting technology to these subsidiary or joint venture companies, and each of these companies is responsible for building and maintaining audience measurement panels and selling
select products and services in the specified territory. Revenue is allocated between NetRatings and the subsidiary or joint venture company depending on the location of the customer and the location
of the panel whose data is used in the service.

SALES AND MARKETING

As of December 31, 2003, we had approximately 780 clients, excluding the clients obtained through the acquisition of Red Sheriff. Our global client base is
a diverse group of large and small companies in the media, technology, advertising, financial services, consumer products, retail and travel industries. The users of our products and services at our
client companies hold diverse positions, demonstrating the importance of online media and market research to a company's overall strategy and development. In addition to marketing and business
development executives, our users include chief executive officers and presidents, and operations, strategic planning and information technology executives. No client accounted for more than 10% of
our revenues in 2003.

We
sell our products and services in the United States through a direct sales force. Our direct sales force includes sales representatives employed by Nielsen Media Research who are
dedicated to selling our products and services to specific media clients. Our domestic sales representatives are located at our offices in Milpitas, California and New York, New York, and we also
maintain local representatives in various locations throughout the United States. Internationally, we sell our products and services through a direct sales force as well as through our subsidiary and
joint venture companies in their respective markets. Our sales representatives receive a base salary and are eligible for commissions based on revenue and sales goals.

Our
primary marketing objectives are to cross-market new products and services to our global clients and to leverage and build upon Nielsen//NetRatings' brand awareness throughout our
target audiences. To achieve these goals, we engage in a number of marketing activities, including direct e-mail campaigns, conference presentations, industry tradeshow participation,
involvement with industry organizations such as the Interactive Advertising Bureau, Online Publishers Association, Direct Marketing Association and Advertising Research Foundation and aggressive
public relations. We maintain standing arrangements for the use of our data with key business and trade press including Reuters, The New York Times, USA Today, San Jose Mercury News, Hollywood
Reporter, Boston

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Globe,
Chicago Tribune, Sports Business Journal, American Banker, Media Life, Internet Retailer, Women's Wear Daily and numerous other media outlets. We provide the media with timely insights
regarding current events and identify emerging Internet trends, generating valuable press coverage. Our analysts are regularly featured on television and radio broadcasts, including segments on CNBC,
CNN, CNNfn and NPR.

INTELLECTUAL PROPERTY

We regard the protection of our proprietary technology and information as important to our future success and ability to compete effectively in our markets. We
rely on a combination of patent, copyright, trademark and trade secret laws, as well as confidentiality agreements and licensing arrangements, to establish and protect our proprietary rights. The
steps we have taken or will take in the future may not, however, be sufficient to protect our technology and information from infringement or misappropriation, or to deter independent development of
similar or superior technologies by others. In addition, the laws of some foreign countries may not protect our proprietary rights to the same extent as do the laws of the United States. Litigation
may be necessary in the future to enforce our intellectual property rights, and any such litigation could result in substantial expenses as well as the diversion of resources from the operation of our
business.

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. In May 2002, NetRatings
and Jupiter Media
Metrix, Inc. entered into a settlement agreement pursuant to which Jupiter Media Metrix agreed to dismiss with prejudice the patent infringement action it had filed against NetRatings in
March 2001. In connection with the settlement, we also acquired patents and patent applications relating to computer use tracking. As a result, we currently have two issued patents in the
United States with regard to our computer use tracking technology (U.S. Patent No. 5,675,510 and U.S. Patent No. 6,115,680). In addition, patents for the technology covered by U.S.
Patent No. 5,675,510 have also been issued in Japan, Canada, Australia and Mexico, and we have patent applications pending in other jurisdictions.

In
addition to the computer use tracking patents and patent applications described above, we also have other pending patent applications which relate to other aspects of our proprietary
technology, including pending patent applications for our AdRelevance technology. Furthermore, through the Red Sheriff acquisition, we acquired patents and patent applications in the United States and
abroad relating to Red Sheriff's proprietary site-centric Internet audience measurement technology.

Despite
the efforts we have taken, others may claim that we have misappropriated a trade secret or infringed a patent, copyright, trademark or other proprietary right belonging to them
with respect to past, current or future technologies. Any of those claims, whether meritorious or not, could be time-consuming, result in costly litigation, may distract management from
other tasks of operating the business and may result in the loss of significant rights 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.

TECHNOLOGY AND OPERATIONS

Clients can access all of our primary products and services via the Internet by using passwords specifically assigned to each client. Our services are available
24 hours a day and our proprietary data is updated regularly to provide clients with access to the most recent data.

In
connection with our NetView and MegaPanel services, our panel-based data collection, retrieval and processing systems and software have been designed utilizing well-known
industry standards for hardware and software data architecture and infrastructure. The architecture adheres to numerous standard-programming languages, including hypertext machine language, or HTML,
Java and C++,

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and
network protocols, including hypertext transfer protocol or HTTP. In addition, we believe that our system architecture is flexible and powerful enough to allow for continued growth in our
portfolio of products and services.

Red
Sheriff operates an around-the-clock global infrastructure to update and operate the SiteCensus product. Red Sheriff's Web site measurement tags measure a Web
site visitor's experience and deliver the information back to Red Sheriff's high capacity measurement collection network consisting of nine fully redundant global data centers. Red Sheriff's
measurement network currently captures in excess of 90 gigabytes worth of new measurement information from over 300 million transactions on a daily basis. In addition, the Red Sheriff
technology supports a variety of different software implementations of its measurement techniques, including pure Java, Java with CGI and CGI only.

Our
hardware systems are hosted at three professionally managed, off-site computer centers in San Jose, California, Oldsmar, Florida and Paris, France. Red Sheriff operates a
primary research data center in Melbourne, Australia, as well as eight other data centers worldwide. Backup procedures are built into the processing environment in order to reduce downtime in the
event of outages or catastrophic occurrences. Additionally, our data centers provide physical security, climate control, 24 hour a day monitoring services and fire suppression systems to help
ensure the security and continued operation of our technology.

COMPETITION

We believe that the primary competitive factors determining success in our markets include:



We
believe that we compete favorably with respect to each of these factors.

We
face competition in the United States and abroad for each of our products and services. We face direct competition from companies, such as comScore Networks, that provide panel-based
Internet measurement services. We also directly compete with numerous providers of site-centric Web analytics solutions, including CoreMetrics, Omniture, NetIQ and WebSideStory. In
addition, we face competition from companies that offer survey research capabilities relating to online behavior and activity, such as Harris Interactive, Greenfield Online and NFO. We compete less
directly with the providers of syndicated and custom research on Internet behavior and commerce. Finally, we may face increased competition from individual Web sites that develop an independent method
of measuring their own audience and from other companies that develop new or alternative audience measurement technologies.

We
expect competition to intensify because of the business opportunities presented by the growth of Internet usage and Internet commerce around the world. Competition may also intensify
as a result of industry consolidation, because of technological advancements in the way to measure Internet behavior and activity or because some of our competitors may be able to provide additional
or

10

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complementary
services. In addition, some of our current or future competitors may have longer operating histories, larger customer bases and/or greater marketing resources than we have. 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.

EMPLOYEES

As of December 31, 2003, we had 367 full-time employees, including the employees of Red Sheriff. Our employees in the United States are not
covered by a collective bargaining agreement. Outside of the United States, we are subject to extensive regulation with respect to our employees in
various jurisdictions. We have never experienced an employment-related work stoppage and consider our employee relations to be good.

AVAILABLE INFORMATION

We make available on our website (http://www.nielsen-netratings.com) under "About Us""Investor Relations""SEC Filings", free of charge,
our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as
reasonably practicable after we electronically file or furnish such material with the Securities and Exchange Commission.

ITEM 2. PROPERTIES

Our primary executive offices in the United States are located in New York, New York, where we lease approximately 12,000 square feet, and Milpitas, California,
where we lease approximately 30,000 square feet. We also lease office space in Seattle, Washington.

Outside
of the United States, our office space is leased primarily through ACNielsen. Our subsidiary and joint venture companies in France, Japan and Brazil also lease office space in
their respective international markets. Red Sheriff also leases office space in the various international markets in which it operates, including Sydney, Melbourne and London.

ITEM 3. LEGAL PROCEEDINGS

Information regarding legal proceedings is set forth in Note 10 of the Notes to Financial Statements under the heading "Litigation" and such information is
hereby incorporated by reference.

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

No matters were submitted to a vote of security holders during the fourth quarter of 2003.

11

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PART II

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

Price Range of Common Stock

Our common stock is quoted on the Nasdaq National Market under the symbol "NTRT". The following table sets forth the range of high and low closing sales prices
for each period indicated. The prices appearing in the tables below reflect over the counter market quotations, which reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions. During the periods indicated, we have not affected any stock split.

2003

2002High

Low

High

LowFirst Quarter

$
6.99

$
5.50

$
16.40

$
11.53Second Quarter


9.62


6.02


13.82


8.74Third Quarter


11.26


7.95


8.26


4.65Fourth Quarter


11.65


9.36


7.20


5.05


Dividend Policy

We have not declared or paid any cash dividends on our common stock and presently intend to retain our future earnings, if any, to fund the development and growth
of our business and, therefore, do not anticipate paying any cash dividends in the foreseeable future.

Holders of Common Stock

As of February 27, 2004, there were approximately 81 stockholders of record of our common stock. Because many of our shares are held by brokers and other
institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.

Equity Compensation Plan Information

Information for our equity compensation plans in effect as of December 31, 2003, is as follows:

|Plan Category                                               |       | Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights |           | Weighted-average
exercise price of
outstanding options,
warrants and rights |        | Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
|----------------------------------------------------------- | ----- | ------------------------------------------------------------------------------------------- | --------- | --------------------------------------------------------------------------- | ------ | -------------------------------------------------------------------------------------------------------------------------------------------
|
|Equity compensation plans approved by security holders      |       | 5,023,000                                                                                   |           | $                                                                           | 9.81   |                                                                                                                                            
|Equity compensation plans not approved by security holders* |       | 10,000                                                                                      |           | $                                                                           | 106.84 |                                                                                                                                            
|                                                            | Total |                                                                                             | 5,033,000 |                                                                             | $      | 10.01                                                                                                                                      

---

12

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ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations"
and the consolidated financial statements and the notes thereto included elsewhere herein:

|                                                                                                  |  | For the years ended December 31, |        
|------------------------------------------------------------------------------------------------- |  | -------------------------------- | -------
|
|
|Consolidated Statements of Operations Data:                                                       |  |                                  |        
|Revenue                                                                                           |  | $                                | 41,432 
|Gross profit (loss)                                                                               |  |                                  | 20,956 
|Total operating expenses                                                                          |  |                                  | 50,665 
|Operating loss                                                                                    |  |                                  | (29,709
|Net loss                                                                                          |  |                                  | (25,135
|Basic and diluted net loss per common share                                                       |  | $                                | (0.74  
|Weighted average shares outstanding used in computing basic and diluted net loss per common share |  |                                  | 33,792 

|                                                  |  | December 31,
|------------------------------------------------- |  | ------------
|
|
|Consolidated Balance Sheet Data:                  |  |             
|Cash, cash equivalents and short-term investments |  | $           
|Working capital                                   |  |             
|Total assets                                      |  |             
|Deferred revenue                                  |  |             
|Total stockholders' equity                        |  | $           

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

Overview

We are a leading provider of Internet audience measurement and analysis in the United States and around the world. All of our products and services are designed
to assist companies in making critical business decisions regarding their Internet strategies and initiatives. We have a highly diversified and global client base, including large and small companies
in the media, technology, advertising, financial services, consumer products, retail and travel industries. As of December 31, 2003, we had approximately 780 clients, excluding the clients
acquired as a result of our acquisition of Red Sheriff in December 2003.

Prior
to 2002, we were solely focused on selling our NetView product. Beginning in the first half of 2002, we began to focus on ways to expand our portfolio of products and services in
the United States and abroad. At that time, we believed that with the (i) increase in advertiser support for the Internet, (ii) continued proliferation of Internet broadband connections
and (iii) expanding impact of online commerce, companies would require a wide variety of media and market research data. In order to provide the most comprehensive product portfolio to address
the marketplace needs, we focused on investing in new products and exploring strategic acquisitions in the United States and abroad.

During
2002 and 2003, as a result of internal product development, we introduced a number of significant new products and services that address specific marketplace needs. These new
products and

13

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services
include MegaPanel, WebIntercept, Homescan Online and SiteCensus. These products and services greatly expand our market research capabilities, and these products and services will be important
to our performance in 2004 and beyond. In addition to the internal product development, we also began in early 2002 to focus on strategic acquisitions to enhance our product portfolio and to
accelerate our growth in international markets. These acquisitions included the following:



As
a result of our internal efforts and our strategic acquisitions, we believe that we currently offer the most comprehensive global portfolio of media research and market research
products and services. We also believe that our comprehensive portfolio and breadth of coverage will enable us to continue to

14

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increase
our client base, as well as increase our renewal rates, increase our ability to sell multiple products to clients and increase the total sales to individual clients.

We
currently offer our products and services in the United States and in many countries throughout Europe, Asia Pacific and Latin America. In France, Japan and Latin America, we have
historically offered our NetView service through joint ventures with leading local market research and information services companies. In April 2003, we increased our ownership interest in
NetRatings Japan, our Japanese joint venture, from approximately 49% to approximately 58%. The total amount paid for the additional equity in NetRatings Japan was approximately $1.1 million.
The remaining ownership interest is held by TransCosmos and other investors. In November 2003, we increased our ownership interest in Mediametrie NetRatings, our French joint venture, from
approximately 50% to approximately 66% in exchange for the fair value of customer contracts assigned to Mediametrie NetRatings in 2003 and
2002. The remaining ownership interest is held by Mediametrie. We used the equity method to account for these joint ventures until we obtained majority ownership of them in 2003, after which time we
began to consolidate the financial results of both Mediametrie NetRatings and NetRatings Japan. As of December 31, 2003, we held a 49% ownership interest in Ibope eRatings.com, our Latin
American joint venture, and the remaining ownership interest was held by Ibope. NetRatings uses the equity method to account for its investment in Ibope eRatings.com. In each of these locations,
revenue is allocated between NetRatings and the subsidiary or joint venture company depending on the location of the customer and the location of the panel whose data is used in the service.

We
generate revenues primarily from the sale of our Internet media research and market research products and services. Our products and services include both syndicated products and
customized products. We sell a significant majority of our syndicated products and services on an annual subscription basis and bill these clients in advance, typically on an annual or quarterly
basis. We recognize revenue from the sale of our syndicated products and services ratably over the term of the subscription agreement. Prepaid subscription fees are recorded as deferred revenue until
earned. Revenue from customized products and services is recognized in the period in which the product or service is provided. Therefore, a significant portion of revenue recognized in any period
results from the amortization of deferred revenue balances. We also derive a portion of our revenue from royalty payments from our joint venture partners.

We
have a limited operating history upon which investors may evaluate our business prospects. We have incurred net losses since our inception, and as of December 31, 2003, our
accumulated deficit was $119.5 million. We expect to continue to invest in enhancing our products and service offerings, including investment in our MegaPanel service. As a result, while our
2003 net loss decreased significantly from 2002, we expect to continue to incur net losses for the foreseeable future.

Critical Accounting Policies and Estimates

Management's Discussion and Analysis of Financial Condition and Results of Operations discusses our financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. On an ongoing basis, our management evaluates its estimates and judgments, including those related to bad debts, investments, income taxes, financing operations, contingencies and litigation.
Our management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the result of which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or
conditions.

15

---

Our
management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its financial statements:

Revenue Recognition

We recognize revenue in accordance with SEC Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB 101), as amended by SAB
101A and 101B. SAB 101 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence that an arrangement exists; (2) delivery has occurred or
services rendered; (3) the fee is fixed and determinable; and (4) collectibility is reasonably assured. Determination of criteria (4) is based on management's judgment regarding
the collectibility of those fees. We sell a significant majority of our products and services pursuant to one-year subscription agreements and bill our customers in advance, typically on a
quarterly or annual basis. We recognize revenue from the sale of these subscription products and services ratably over the term of the subscription agreement. Prepaid subscription fees are recorded as
deferred revenue until earned. If a contract's collectibility comes into question, revenue recognition is discontinued until collectibility is reasonably assured. This determination is based on
management's judgment and could adversely affect both revenue and deferred revenue.

Bad Debt

We manage credit risk on accounts receivable by performing ongoing credit evaluations of our customers, reviewing our accounts and contracts and by providing
appropriate allowances for uncollectible amounts. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of customers to make contractually required payments.
If the financial conditions of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Allowances are based on
management's judgment which considers historical experience and specific knowledge of accounts that may not be collectible.

Legal Contingencies

We are currently involved in certain legal proceedings as discussed in Note 10 of our financial statements. We are required to assess the likelihood of any
adverse judgments or outcomes to these matters as well as potential ranges of probable losses, in accordance with FAS 5. A determination of the amount of reserves required, if any, for these
contingencies are made after careful analysis of each individual case. Losses are recognized for legal contingencies when they are determined to be both probable of occurrence and the loss can be
reasonably estimated. We do not believe the outcomes to these matters will have a material adverse effect on our financial position. Nonetheless, it is possible
that future results of operations for any particular quarterly or annual period could be materially affected by changes in our assumptions or the effectiveness of our strategy related to these
proceedings.

Goodwill and Intangible Assets

We recorded goodwill and intangible assets during 2003 and 2002 in connection with our acquisitions. Valuation of those assets was determined through the use of
independent appraisals. Those intangible assets not deemed to have an indefinite life are amortized over their estimated useful lives, which range from 1 to 13 years. In accordance with SFAS
No. 142, goodwill and indefinite-lived intangibles are not amortized, but are reviewed at least annually for impairment. We performed our annual evaluation of goodwill and intangibles as of
October 1, 2003 and no impairment was indicated. We will reassess the carrying value of goodwill and intangible assets each year as of October 1, unless indicators of impairment become
apparent earlier.

16

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Investments

We hold minority interests in companies having operations or technology in areas within or adjacent to our strategic focus. These entities are
non-publicly traded companies whose value is difficult to determine. For those investments accounted for based on the cost method, we record an investment impairment charge when we believe
an investment has experienced a decline in value that is other than temporary. We have written off all cost method investments. For those investments accounted for based on the equity method, we
reduce our investment in accordance with our equity in each joint venture's loss and record a corresponding loss on joint ventures in our statement of operations. The equity basis is adjusted for any
additional capital contributions or commitments. Future adverse changes in market conditions or poor operating results of underlying investments could result in losses or an inability to recover the
carrying value of the investments and such amounts that may not be reflected in an investment's current carrying value, thereby possibly requiring an impairment charge in the future.

Results of Operations

The following table sets forth for the years indicated certain financial data as a percentage of revenue:

2003

2002

2001Revenue

100
%
100
%
100
%Costs of revenue

49
%
55
%
56
%Gross profit

51
%
45
%
44
%Operating expenses:Research and development

24
%
30
%
31
%Sales and marketing

41
%
46
%
63
%General and administrative

25
%
22
%
24
%Restructuring and other expenses



31
%
Acquisition-related expenses



10
%
Amortization of intangibles

9
%
8
%
Stock-based compensation

22
%
32
%
42
%Total operating expenses

122
%
179
%
161
%Loss from operations

(72
)%
(134
)%
(117
)%Interest income, net

10
%
27
%
66
%Loss on joint ventures



(9
)%
(24
)%Impairment of investments



(15
)%
Minority interest

1
%


Net loss

(61
)%
(131
)%
(75
)%


The
following table sets forth operating results for each of the four quarters ended December 31, 2003 and 2002:

2003Q1

Q2

Q3

Q4(in thousands, except per share data)
(unaudited)Revenue

$
9,021

$
10,201

$
10,611

$
11,599Gross profit


4,813


5,010


5,582


5,551Loss from operations


(6,523
)

(7,399
)

(7,484
)

(8,303
)Net loss


(5,185
)

(6,133
)

(6,541
)

(7,276
)Net loss per share

$
(0.15
)
$
(0.18
)
$
(0.19
)
$
(0.21
)


17

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2002Q1

Q2

Q3

Q4(in thousands, except per share data)
(unaudited)Revenue

$
4,313

$
7,283

$
8,698

$
9,412Gross profit


1,641


3,427


4,039


4,148Loss from operations


(16,046
)

(7,194
)

(7,439
)

(9,194
)Net loss


(14,643
)

(6,490
)

(5,976
)

(11,767
)Net loss per share

$
(0.45
)
$
(0.20
)
$
(0.18
)
$
(0.35
)


Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

Revenue.We generate revenue primarily from the sale of our Internet audience measurement products and services. We typically
sell these services pursuant to one-year subscription agreements and bill our customers in advance, usually on an annual or quarterly basis. We also derive a portion of our revenue from
our joint venture partners.

Revenue
increased 39% to $41.4 million for the year ended December 31, 2003 from $29.7 million for the year ended December 31, 2002. The increase in revenue
was primarily due to (i) the acquisitions completed in 2002 for which we recorded revenue in 2002 from their respective acquisition dates and a full year of revenue in 2003;
(ii) acquisitions in 2003 for which we have recorded revenue from their acquisition dates; (iii) the full consolidation of the operating results of NetRatings Japan beginning in the
second quarter of 2003; (iv) the impact of foreign exchange rates relating to our international revenues; (v) improved renewal rates and increased contract renewal amounts during 2003;
and (vi) improved average selling prices and overall client counts during 2003. For the year ended December 31, 2003:



As
of December 31, 2003, approximately 780 customers worldwide subscribed to our products and services, excluding the clients acquired as a result of our acquisition of Red
Sheriff, as compared to approximately 750 customers worldwide as of December 31, 2002. Our global contract renewal rate was 74% for the fourth quarter of 2003 compared with a 64% renewal rate for the
fourth quarter of 2002. Our global average sales price was $61,000 for the fourth quarter of 2003 compared with $60,000 for the fourth quarter of 2002. During the year ended December 31, 2003,
no customer accounted for more than 10% of our revenue.

Cost of Revenue.Cost of revenue consists primarily of expenses related to the recruitment, maintenance and support of our
Internet audience measurement panels, which are expensed as they are incurred. Cost of revenue also includes data collection costs for our products and services and operational costs related to our
data center. Accordingly, such expenses are not matched with any revenue or subscriptions generated in a given period and are higher in periods in which we are involved in significant panel
development activities. Also included in cost of revenue are the data acquisition costs related to our joint ventures, which are recognized ratably over the term of the

18

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customer's
subscription agreement, as the data is provided, as well as the royalty fees associated with certain data partnering agreements.

Cost
of revenue increased 24% to $20.5 million, or 49% of revenue, for the year ended December 31, 2003, from $16.5 million, or 55% of revenue, for the year ended
December 31, 2002. The increased cost of revenue was primarily due to (i) recruitment and panel costs related to the expansion of our international MegaPanel and the building of our
MegaPanel in the United States; (ii) the impact of foreign exchange rates relating to our international operations; (iii) recruitment and panel costs related to building our Hispanic
panel; (iv) additional costs of revenue related to the NetCrawling acquisition completed in the third quarter of 2003; (v) the full consolidation of the operating results of NetRatings
Japan beginning in the second quarter of 2003; and (vi) recruitment and panel costs related to a custom panel in Germany. These increases were partially offset by a reduction in panel related
fees associated with our U.S. home and at-work panels.

Research and Development.Research and development expenses consist primarily of compensation and related costs for personnel
associated with our research and product development activities. These costs are expensed as incurred. Research and development expenses increased 14% to $10.0 million for the year ended
December 31, 2003 from $8.8 million for the comparable period in 2002. Research and development expenses represented 24% and 30% of revenue for the years ended December 31, 2003
and 2002, respectively. The increase in research and development expenses was primarily due to (i) increased research and development personnel and associated payroll expenses resulting from
our acquisitions in 2002 and 2003; (ii) expenses incurred in connection with moving our data center to a
new facility in Florida during the fourth quarter of 2003; and (iii) the impact of foreign exchange rates relating to our international operations.

Sales and Marketing.Sales and marketing expenses consist primarily of salaries, benefits and commissions to our salespeople
and analysts, as well as costs related to seminars, promotional materials, public relations, advertising and other sales and marketing programs. Sales and marketing expenses increased 24% to
$17.1 million for the year ended December 31, 2003 from $13.8 million for the comparable period in 2002. Sales and marketing expenses represented 41% and 46% of revenue for the
years ended December 31, 2003 and 2002, respectively. The increase in sales and marketing expenses was primarily due to (i) an increase in salary-related and travel expenses as a result
of additional employees from our 2002 and 2003 acquisitions; (ii) the consolidation of the operating results of NetRatings Japan beginning in the second quarter of 2003; (iii) the impact
of foreign exchange rates relating to our international operations; and (iv) increase in bonus and commission expenses due to higher contract sales in 2003. The increases are partially offset
by a reduction in public relations, corporate marketing and trade show expenses during 2003.

General and Administrative.General and administrative expenses consist primarily of salaries and related costs for executive
management, finance, accounting, human resources, legal, information technology and other administrative personnel, in addition to professional fees and other general corporate expenses. General and
administrative expenses increased 64% to $10.5 million for the year ended December 31, 2003 from $6.4 million for the comparable period in 2002. General and administrative
expenses represented 25% and 22% of revenue for the years ended December 31, 2003 and 2002, respectively. The increase in general and administrative expenses was primarily due to
(i) higher payroll, travel and related expenses resulting from the acquisitions completed during 2002 and 2003; (ii) the impact of foreign exchange rates relating to our international
operations; (iii) higher payroll expenses due to the consolidation of the operating results of NetRatings Japan beginning in the second quarter of 2003; and (iv) higher legal expenses
resulting from legal actions initiated in 2003.

Restructuring and Other Expenses.During the first quarter of 2002, we initiated a restructuring plan to streamline our
business to focus on core products, refine our product line and consolidate space at our Milpitas, California facility. This plan also included a 15% reduction in workforce. The

19

---

restructuring
expense of $6.9 million recorded in the first quarter of 2002 reflected (i) the severance expenses related to the termination of 24 employees, all of whom were terminated
as of December 31, 2002; (ii) accruals related to costs to terminate or transition contracts due to the elimination of products; (iii) impairment charges related to fixtures and
equipment; and (iv) an accrual for the lease payments related to office space in excess of our current and projected future needs. During the fourth quarter of 2002, we decreased by
$0.4 million our accruals related to the elimination of products due to the successful resolution of customer contract issues related to the eliminated products, and recorded additional charges
related to legal matters, intangible assets and severance benefits based on the identification of 16 additional employees who were terminated prior to December 31, 2002. There were no
corresponding expenses recorded during 2003.

Acquisition-related Expenses.During the first quarter of 2002, we recognized acquisition-related expenses of
$3.0 million related to the terminated merger between NetRatings and Jupiter Media Metrix. There were no corresponding charges in 2003.

Amortization of Intangibles.Amortization of intangible expenses increased 61% to $3.9 million, or 9% of revenue, for
the year ended December 31, 2003 from $2.4 million, or 8% of revenue, for the comparable period in 2002. The increase was the result of full year 2003 amortization of specifically
identified intangibles associated with the acquisitions of AdRelevance, @Plan, eRatings, NetValue and other intangible assets, including patents.

Amortization of Stock-based Compensation.Stock-based compensation primarily represents amortization of deferred charges
related to stock warrants which Nielsen Media Research exercised in December 1999. Stock-based compensation expenses decreased 3% to $9.1 million, or 22% of revenue, for the year ended
December 31, 2003 from $9.4 million, or 32% of revenue, for the year ended December 31, 2002. The decrease primarily resulted from the scheduled amortization of our stock-based
compensation costs.

Equity in Earnings (Losses) of Joint Ventures.For the year ended December 31, 2003, gain from joint ventures was
$66,000 or 0.1% of revenue. Loss from joint ventures was $2.5 million or 9% of revenue for the corresponding period in 2002. The variance was primarily due to our acquisition of the remaining
equity interest in ACNielsen eRatings in May 2002 and our increase in ownership in NetRatings Japan in April 2003, after which each of their gains and losses have been reported in our
consolidated results rather than in equity in earnings (losses) of joint ventures.

Impairment of Investments.Management performs regular reviews to determine if investments are impaired. During our fourth
quarter 2002 review, we determined that two of our investments in equity securities were impaired due to changes in the companies' business models and their deteriorating financial position. Since we
concluded that these impairments were other than temporary, we recognized one-time non-cash charges of $4.5 million. As of December 31, 2002, we have written down
our long-term investments to zero and there was no corresponding impairment of investments in 2003.

Interest Income, Net.Interest income, net, decreased 50% to $4.1 million for the year ended December 31, 2003
from $8.0 million for the comparable period in 2002. The decrease reflects an overall reduction of interest rates in 2003 when compared with 2002. The decrease in interest income also resulted
from an overall reduction in cash and cash equivalents as compared with the beginning of 2002 as a result of the repurchase of common stock from two former executives in the first quarter of 2002, the
acquisitions completed in 2002 and 2003 and funding our normal operations. We anticipate interest income to remain at its current level or lower as the current market conditions prevail and we use
cash to fund our operations.

Minority Interest.For the year ended December 31, 2003, we held majority interests in NetValue, MMXI Switzerland,
NetRatings Japan and Mediametrie NetRatings. For the year ended December 31,

20

---

2002,
we held a majority interest in NetValue. Minority interest in profit for the years ended December 31, 2003 and 2002 was $455,000 and $17,000, respectively.

Operating Loss and Net Loss.Operating loss decreased 25% to $29.7 million, or 72% of revenue, for the year ended
December 31, 2003 from $39.9 million, or 134% of revenue, for the year ended December 31, 2002. For the year ended December 31, 2003, our net loss decreased to
$25.1 million, or $0.74 per share on approximately 33.8 million weighted average shares outstanding, as compared with a net loss of $38.9 million, or $1.17 per share on
approximately 33.2 million weighted average shares outstanding, for the year ended December 31, 2002. The decrease in operating and net loss is primarily due to (i) an increase in
overall revenues in 2003; (ii) impairment of prior investments recorded in 2002; (iii) the restructuring and other expenses incurred in 2002; (iv) acquisition-related expenses in
2002; and (v) the reduction in amortization of stock-based compensation. These decreases were partially offset by (i) an increase in our cost of revenue expenses; (ii) an increase
in research and development, sales and marketing and general and administrative expenses; (iii) higher amortization of intangibles; (iv) lowered interest income; and (v) a
decrease in minority interest.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Revenue.Revenue increased 26% to $29.7 million for the year ended December 31, 2002 from $23.5 million
for the year ended December 31, 2001. The increase in revenue was primarily due to the acquisitions during the second and third quarters of 2002. These increases were partially offset by the
decrease in the amortization of deferred revenue as a result of an overall decline in contract sales due to a deteriorating economy. For the year ended December 31, 2002:



As
of December 31, 2002, approximately 750 customers worldwide subscribed to our products and services. Our global contract renewal rate was 64% for the fourth quarter of 2002
compared with a 53% renewal rate for the fourth quarter of 2001. Our global average sales price was $60,000 for the fourth quarter of 2002, compared with $48,000 for the fourth quarter of 2001.

During
the year ended December 31, 2002, no customer accounted for more than 10% of our revenue.

Cost of Revenue.Cost of revenue increased 24% to $16.5 million, or 55% of revenue, for the year ended
December 31, 2002 from $13.3 million, or 56% of revenue, for the year ended December 31, 2001. Cost of revenue increased due to (i) the expansion of our data center
primarily related to the acquisition of AdRelevance; (ii) expenses related to the third party generated surveys related to our @Plan service; and (iii) the international panel expenses
related to the acquisitions of eRatings and NetValue. These increases were partially offset by a reduction in strategic partner royalty expenses related to the discontinuation of AdSpectrum and
eCommercepulse and a reduction in panel fees associated with both the U.S. home and at-work panels as recruiting efforts decreased.

Research and Development.Research and development expenses increased 19% to $8.8 million for the year ended
December 31, 2002 from $7.4 million for the comparable period in 2001. Research and development expenses represented 30% and 31% of revenue for the years ended December 31, 2002
and 2001, respectively. The increase was primarily due to increased research and development

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personnel
and associated payroll expenses resulting from the acquisitions during the year, partially offset by our reduction in workforce in the first quarter of 2002.

Sales and Marketing.Sales and marketing expenses decreased 7% to $13.8 million for the year ended December 31,
2002 from $14.8 million for the comparable period in 2001. Sales and marketing expenses represented 46% and 63% of revenue for the years ended December 31, 2002 and 2001, respectively.
The decrease was primarily related to a reduction in advertising, public relations, travel and entertainment expenses resulting from our efforts to reduce discretionary spending. The decrease was
partially offset by an increase in payroll and related expenses resulting from an increased headcount in 2002.

General and Administrative.General and administrative expenses increased 12% to $6.4 million for the year ended
December 31, 2002 from $5.7 million for the comparable period in 2001. General and administrative expenses represented 22% and 24% of revenue for the years ended December 31, 2002
and 2001, respectively. The increase was primarily related to higher payroll and related expenses due to a higher average headcount in 2002. In addition, higher travel and related expenses during 2002
further contributed to the overall increase in general and administrative expenses.

Restructuring and Other Expenses.During the first quarter of 2002, we initiated a restructuring plan to streamline our
business to focus on core products, refine our product line and consolidate space at our Milpitas, California facility. This plan also included a 15% reduction in workforce. The restructuring expense
of $6.9 million recorded in the first quarter of 2002 reflected (i) the severance expenses related to the termination of 24 employees, all of whom were terminated as of
December 31, 2002; (ii) accruals related to costs to terminate or transition contracts due to the elimination of products; (iii) impairment charges related to fixtures and
equipment; and (iv) an accrual for the lease payments related to office space in excess of our current and projected future needs. During the fourth quarter of 2002, we decreased by
$0.4 million our accruals related to the elimination of products due to the successful resolution of customer contract issues related to the eliminated products, and recorded additional charges
related to legal matters, intangible assets and severance benefits based on the identification of 16 additional employees who were terminated prior to December 31, 2002. There were no
corresponding expenses recorded during 2001.

Acquisition-related Expenses.During the first quarter of 2002, we recognized acquisition-related expenses of
$3.0 million related to the terminated merger between NetRatings and Jupiter Media Metrix. There were no corresponding charges in 2001.

Amortization of Intangibles.During the year ended December 31, 2002, we recognized amortization of intangible assets
of $2.4 million resulting from the amortization of the specifically identified intangibles associated with the acquisitions of AdRelevance, @Plan, eRatings, and NetValue and other intangible
assets, including patents. There was no corresponding amortization in 2001.

Amortization of Stock-based Compensation.Stock-based compensation expenses decreased 5% to $9.4 million, or 32% of
revenue, for the year ended December 31, 2002 from $9.9 million, or 42% of revenue, for the year ended December 31, 2001. The decrease primarily resulted from the scheduled
amortization of our stock-based compensation costs, partially offset by the expenses associated with the accelerated vesting for the former chairman of the board.

Equity in Earnings (Losses) of Joint Ventures.Loss from joint ventures decreased 55% to $2.5 million, or 9% of
revenue, for the year ended December 31, 2002 from $5.6 million, or 24% of revenue, for the year ended December 31, 2001. The decrease was primarily due to our acquisition of
ACNielsen's interest in eRatings in May 2002, after which eRatings' losses have been reported in our consolidated results rather than in equity in earnings (losses) of joint ventures. The
decrease in losses is also due to a 50% reduction in the number of countries in which the Nielsen//NetRatings service is offered when compared to the corresponding period in 2001.

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Impairment of Investments.Management performs regular reviews to determine if investments are impaired. During our fourth
quarter 2002 review, we determined that two of our investments in equity securities were impaired due to changes in the companies' business models and their deteriorating financial position. Since we
concluded that these impairments were other than temporary, we recognized one-time non-cash charges of $4.5 million. There was no corresponding impairment of investments
in 2001 and at December 31, 2002 we have written down our long-term investments to zero.

Interest Income, Net.Interest income, net, decreased 49% to $8.0 million for the year ended December 31, 2002
from $15.6 million for the comparable period in 2001. The decrease reflects an overall reduction of interest rates in 2002 when compared with 2001. The decrease in interest income also resulted
from an overall reduction in cash and cash equivalents during 2002 as a result of the repurchase of shares of common stock from two former executives, acquisitions completed during the year and the
settlement of the patent infringement litigation with Jupiter Media Metrix.

Minority Interest.At December 31, 2002, we owned approximately 86% of the capital of NetValue. The minority interest
in the loss of NetValue was recorded to reflect the interest of the minority shareholders in the operations of NetValue. There were no corresponding amounts in 2001.

Operating Loss.Operating loss increased 45% to $39.9 million, or 134% of revenue, for the year ended
December 31, 2002 from $27.6 million, or 117% of revenue, for the year ended December 31, 2001. The increase is primarily due to (i) the higher production costs for our
online products and services as a result of acquisitions; (ii) restructuring and other expenses; (iii) acquisition-related expenses; and (iv) amortization of intangibles. The
increase in operating loss was partially offset by an increase in revenue, a reduction in sales and marketing expenses and a reduction in amortization of stock-based compensation during 2002.

Net Loss.For the year ended December 31, 2002, our net loss increased to $38.9 million, or $1.17 per share on
approximately 33.2 million weighted average shares outstanding, as compared with a net loss of $17.6 million, or $0.54 per share on approximately 32.9 million weighted average
shares outstanding, for the year ended December 31, 2001. The increase is primarily due to (i) a decrease in interest income
resulting from acquisitions and the reduction in interest rates; (ii) impairment of investments; (iii) restructuring expenses; (iv) acquisition-related expenses;
(v) amortization of intangible assets; and (vi) an increase in cost of revenue expenses. These increases were partially offset by (i) higher revenue in 2002; (ii) a
reduction in sales and marketing expenses; and (iii) the reduction in amortization of stock-based compensation.

Inflation

Our management currently believes that inflation has not had a material impact on continuing operations.

Liquidity and Capital Resources

At December 31, 2003, the Company's cash and cash equivalents and short-term investments were $210.0 million compared with
$241.4 million at December 31, 2002. The primary use of cash during 2003 was to fund acquisitions and operations.

Cash
used in operating activities was $16.8 million in 2003 due to our net loss of $25.1 million and cash used in working capital changes of $6.5 million, partially
offset by non-cash expenses of $14.8 million. The non-cash expenses include $9.1 million for stock-based compensation, $2.1 million for depreciation,
$3.9 million for amortization of intangible assets, $0.2 million for provision for doubtful accounts and $(0.5) million related to minority interest. Cash used in operating activities
was $18.9 million in 2002 due to our net loss of $38.9 million and cash used in working capital changes of $1.6 million, offset by non-cash charges of
$21.7 million. The non-cash expenses included $9.4 million

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for
stock-based compensation, $2.6 million for depreciation, $2.5 million for loss on joint ventures, $2.4 million for amortization of intangible assets and $4.5 million
for impairment of investments. Cash used in operating activities was $1.7 million in 2001 due to our net loss of $17.6 million and net working capital changes of $1.7 million,
offset by non-cash expenses of $9.9 million for stock-based compensation, $1.6 million for depreciation, $5.6 million for loss on joint ventures and provision for
doubtful accounts of $0.5 million. We expect to continue to use cash in 2004 to fund our operations.

Net
cash provided by investing activities during 2003 was $32.4 million resulting from net sales of our short-term investments of $48.7 million. The increase
was partially offset by cash paid for acquisitions, net of cash acquired, of $14.5 million and acquisition of property and equipment of
$1.8 million. Net cash provided by investing activities during 2002 was $34.7 million resulting from net sales of our short-term investments of $77.9 million. In 2002,
the increase was partially offset by cash paid for acquisitions, net of cash acquired, cash investments in joint ventures and patent settlement and acquisition costs totaling $40.4 million, and
acquisition of property and equipment of $2.7 million. Net cash provided by investing activities during 2001 was $42.3 million due to net sales of our short-term investments
of $51.4 million, partially offset by cash investments in joint ventures of $7.8 million, and acquisition of property and equipment of $1.3 million. We had no material capital
expenditure commitments at December 31, 2003 and anticipate that capital expenditure spending in 2004 will approximate the 2003 level of spending. During the first quarter of 2004, we used
approximately $10.1 million to acquire additional shares of Red Sheriff Ltd. We expect net cash provided by investing activities to be further reduced by use of our
short-term investments to support operations and other potential strategic investments.

Net
cash provided by financing activities totaled $1.4 million for the year ended December 31, 2003 related to the exercise of options and the purchase of stock through our
employee stock purchase plan. Net cash used in financing activities totaled $18.8 million for the year ended December 31, 2002. This was primarily related to $20.6 million used to
repurchase 1.5 million shares of common stock from two former executive officers, offset by the exercise of options and stock issued through our employee stock purchase plan, totaling
$1.9 million. Net cash used in financing activities totaled $0.7 million in 2001. This was primarily related to a $3.0 million payment to settle outstanding litigation against us, which
was partially offset by the exercise of options and the purchase of stock through the employee stock purchase plan, amounting to $2.4 million.

The
following summarizes our contractual obligations as of December 31, 2003 (in thousands):

|                                                                      |  | Payments due by period
|--------------------------------------------------------------------- |  | ----------------------
|
|Long-Term Debt                                                        |  |                       
|Capital Lease Obligations                                             |  |                       
|Operating Leases                                                      |  | $                     
|Purchase Obligations*                                                 |  |                       
|Other Long-Term Liabilities Reflected on Our Balance Sheet Under GAAP |  |                       
|                                                                      |  |                       
|Total                                                                 |  | $                     
|                                                                      |  |                       

---

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While we have historically made additional contributions to our joint ventures in order to maintain our ownership percentage, we are not contractually required to make such
contributions. In the event of a request for capital infusion, we have the option as to whether or not we participate in the round of funding. Should we elect not to participate, our equity position
would be diluted in that joint venture.

We
believe that our existing balances of cash and cash equivalents and short-term investments will be sufficient to meet our cash needs for working capital and capital
expenditures for at least the next 12 months, although we could elect to seek additional funding prior to that time. We could require additional capital prior to the end of this period if, for
example, we were to experience greater than expected losses from operations, we were required to pay damages in connection with any litigation or if we were to pursue one or more business acquisitions
or investments. If we do require additional financing, however, we cannot be certain that it will be available when required, on favorable terms, or at all. If we are not successful in raising
additional capital as required, our business could be harmed. If additional funds were raised through the issuance of equity securities, the percentage ownership of our then-current
stockholders would be reduced.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements (as defined in Item 303 of Regulation S-K).

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RISK FACTORS THAT MAY AFFECT OUR PERFORMANCE

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

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

We have experienced operating losses in each quarter since our inception. We incurred net losses of $17.6 million for the year ended December 31,
2001, $38.9 million for the year ended December 31, 2002 and $25.1 million for the year ended December 31, 2003. As of December 31, 2003, our accumulated deficit was
$119.5 million. We intend to continue to make significant expenditures as our company grows and as we expand our portfolio of products and services. As a result, we will need to generate
significant revenue to achieve and maintain profitability. We may not be able to achieve significant revenue growth in the future. Our operating results for future periods are subject to numerous
uncertainties and we may not achieve sufficient revenue to become profitable.

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

We were incorporated in July 1997 and did not start generating revenue until the quarter ended September 30, 1998. We introduced our NetView service
in the quarter ended September 30, 1999. Many of our other products and services were first offered by us during 2002 and 2003. Accordingly, we are still in the early stages of development and
have only a limited operating history upon which to evaluate our business. One should evaluate our likelihood of financial and operational success in light of the risks, uncertainties, expenses,
delays and difficulties associated with an early-stage business in an evolving market, many of which may be beyond our control, including:



IF OUR NEW PRODUCTS OR SERVICES DO NOT GENERATE THE REVENUES THAT WE ANTICIPATE, OUR FINANCIAL RESULTS WILL SUFFER

During 2003, we launched a number of new products and services that we believe will generate interest in the marketplace and result in increased revenues during
2004 and beyond. These new products and services include LemonAd, which we acquired in July 2003, and WebIntercept and Homescan Online, which were both launched in the second half of 2003. In
addition, in the first half of 2004, we will begin selling our MegaPanel service in the United States as well as operating the Red Sheriff business which we have recently acquired. It is also possible
that we will launch new products or expanded features during 2004. Our financial results during 2004 will depend in part on the success of these new product initiatives and our ability to generate
meaningful revenues from them. If we fail in

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our
efforts to market and sell these new products and services, our financial results will be negatively affected. Furthermore, we believe that our new products and services fill gaps in our product
portfolio and that the introduction of new products will not result in decreased sales of our existing products. If we are mistaken in our view of the marketplace, and the introduction of these new
products results in decreased sales of our existing portfolio, then our financial results will also be negatively affected.

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

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

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



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

We derive a large percentage of our revenue from annual subscriptions for our services. As our business becomes more established, we expect subscription renewals
and sales of additional products and services to existing customers to account for an increasing proportion of our revenue. Any unexpectedly low renewal rates or a reduction in the number of products
and services that we are able to sell to existing customers would harm our operating results and could prevent us from becoming profitable. To date, renewals have been an essential element of our
revenue growth. We cannot assure you that we will be able to achieve or sustain high renewal rates, particularly during an economic

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downturn.
Additionally, because many Internet-related businesses are still in the early stages of development, consolidations in our customer base or the failure of a significant number of our
customers' businesses could cause a decline in renewal rates for our products and services.

IF THE INTERNET ADVERTISING AND ELECTRONIC COMMERCE MARKETS DEVELOP MORE SLOWLY THAN WE EXPECT, OUR BUSINESS WILL SUFFER

Our future success will depend on an increase in the use of the Internet as an advertising medium, the proliferation of e-commerce and the use of the
Internet as part of multi-channel marketing strategies. These markets and marketing techniques are fairly new and rapidly evolving, and it is not certain that the current trends will continue.

The
adoption of Internet advertising, particularly by entities that have historically relied on traditional media for advertising, requires the acceptance of a new way of conducting
business. These companies may find Internet advertising to be less effective than traditional advertising for promoting their products and services. They may also be unwilling to pay premium rates for
advertising that is targeted at specific types of users based on demographic profiles or recent Internet behavior. The Internet advertising and e-commerce markets may also be adversely
affected by privacy issues surrounding the targeting of this type of advertising or the use of personal information. Providers of goods and services online continue to work toward the establishment of
commerce models that are cost effective and unique, and effectively deal with issues such as channel conflict and infrastructure costs. Growth in the use of the Internet for e-commerce may
not continue, or the Internet may not be adopted as a medium of commerce by a broad base of customers. Because of the foregoing factors, among others, the market for Internet advertising and
e-commerce may not continue to grow or grow at significant rates. If these markets fail to develop or develop more slowly than we expect, our business will suffer.

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

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

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



Some
of our competitors may be able to:



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

IF WE FAIL TO SUCCESSFULLY CLOSE AND INTEGRATE ACQUISITIONS, INCLUDING OUR RECENT ACQUISITION OF RED SHERIFF, OUR BUSINESS WILL SUFFER

We may continue to acquire or make investments in complementary businesses, technologies, services or products if appropriate opportunities arise. Negotiating
such acquisitions can be difficult, time consuming and expensive and our ability to close such transactions may often be subject to approvals, such as governmental regulation, which are beyond our
control. Consequently, we can make no assurances that such acquisitions, once undertaken and announced, will close.

Further,
the process of integrating any acquired business, technology, service or product into our business may result in unforeseen operating difficulties and expenditures. Integration
of an acquired company, including Red Sheriff which was based in Australia, may also consume significant management time and attention that would otherwise be available for the ongoing development of
our business. Moreover, the anticipated benefits of any acquisition may not be realized. For example, we cannot be certain that we will be successful in meeting the goals and financial objectives that
we have developed for the Red Sheriff business. We may be unable to identify, negotiate or finance future acquisitions or investments successfully, or to integrate successfully any acquisitions with
our current business. Future acquisitions could result in potentially dilutive issuances of equity securities or the
incurrence of debt, contingent liabilities or amortization expenses related to intangible assets, any of which could harm our business.

WE ARE DEPENDENT ON NIELSEN MEDIA RESEARCH AND ACNIELSEN FOR VARIOUS SERVICES RELATED TO OUR DOMESTIC AND INTERNATIONAL OPERATIONS

The data for our NetView service is collected from randomly-selected panels of Internet users. Our NetView Internet audience measurement panel in the United
States has been developed and is maintained by Nielsen Media Research as part of our strategic relationship with that company. In addition, ACNielsen has granted us a license to use ACNielsen's
sampling methodology and the "Nielsen" name outside North America in the Internet audience measurement business, and has entered into a service agreement to provide us with the services of certain
dedicated marketing and panel management personnel who are employed by ACNielsen, as well as specific back office services. Accordingly, for a significant period of time, we expect that our business
will be substantially dependent upon these arrangements for the continued maintenance of our international Internet audience measurement panels and for other international business operations. Any
failure on the part of Nielsen Media Research, ACNielsen or our other business partners to devote adequate resources to the development or maintenance of such panels or other sampling methodologies,
or to maintain the overall quality of these methodologies, will harm our business. In addition, Nielsen Media Research may terminate its obligations with respect to Internet audience measurement
panels in the event it no longer holds at least 5% of our outstanding stock on a fully-diluted basis.

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

VNU,
N.V., through its wholly-owned subsidiaries Nielsen Media Research and ACNielsen, has a majority stock ownership position in NetRatings, which enables it to control the direction
and policies of NetRatings, including the election of our board of directors, amendment of our certificate of

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incorporation,
and decisions regarding mergers, acquisitions, consolidations and the sale of all or substantially all of our assets. This control may have the effect of discouraging certain types of
transactions involving a change of control.

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

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

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

OUR COSTS TO DEVELOP AND MAINTAIN ACCURATE INTERNET AUDIENCE MEASUREMENT PANELS, INCLUDING PANELS FOR OUR MEGAPANEL SERVICE, ARE SIGNIFICANT AND MAY INCREASE

We believe that the quality, size and scope of our panels is critical to the success of our business. To date, the expense of recruiting and operating our
audience measurement panels has made up a very significant portion of the cost of revenue reported on our financial statements and, therefore, any increase in this expense will likely result in a
decrease in our gross margin. The costs associated with maintaining the quality, size and scope are dependent on many factors some of which are beyond our control, including the cooperation rate of
potential panel members and turnover among existing panel members, and accordingly we cannot necessarily control these costs to match increases or decreases in revenue. To the extent that such
additional expenses are not accompanied by increased revenue, our results of operations will be harmed. Recruiting panelists for our MegaPanel service in Europe and the United States has also required
significant investment and there can be no assurance that we will be able to achieve or maintain panels of sufficient size to meet client demand. We have limited experience in developing Internet
audience measurement panels, and we could experience lower cooperation rates or higher turnover rates in the future.

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

As a result of our acquisitions in 2002 and 2003, we are now operating Internet audience measurement businesses in countries that we did not previously operate in
or where we have previously served only
through our minority interest in eRatings. Our international markets will require significant management attention and resources. In addition, there can be no assurance of the continued growth of
Internet usage and electronic commerce in international markets. The international markets for audience measurement services have historically been localized and difficult to penetrate.

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



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



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

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

WE MAY NOT BE ABLE TO RECRUIT OR RETAIN QUALIFIED PERSONNEL

Our future success depends in large part on our ability to attract, retain and motivate highly skilled employees in many locations around the world. Although we
provide compensation packages that include competitive salaries, stock options, bonus incentives and other employee benefits, we may be unable to retain our key employees or to attract, assimilate and
retain other highly qualified employees in the future. If we are unable to attract or retain key employees, our business would suffer.

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

Nielsen
Media Research's principal business consists of providing television audience measurement services based on audience panels that it develops independent of its strategic
relationship with us. ACNielsen also derives a substantial portion of its revenue from television audience measurement

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services
outside of the United States. If television and the Internet converge in the future as expected, any Internet audience information that is reported by television audience measurement services
through these VNU subsidiaries may overlap with the audience information that is reported by the Nielsen//NetRatings Internet audience measurement services. In the event of such overlap, VNU's
services could begin competing with our services for the same research budgets among customers in the marketplace, and its offering of such services could conflict with its obligation to develop and
maintain our Internet audience panels.

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

If we furnish inaccurate information to our customers, our brand may be harmed. The information that we collect and information in our databases may contain
inaccuracies that our customers may not accept. Any dissatisfaction by our customers with our measurement or collection methodologies or databases could have an adverse effect on our ability to
attract new customers and retain existing customers and could ultimately harm our brand. Our customer contracts generally provide that each
customer must indemnify us for any damages arising from the use of data, reports or analyses by the customer or the performance of any consulting, analytic or other services by us. However, we cannot
be certain that our contract provisions provide sufficient protection and, in any event, enforcing these protections could be very costly. Any liability that we incur or any harm to our brand that we
suffer because of irregularities or inaccuracies in the data we supply to our customers could harm our business.

SYSTEM FAILURES OR DELAYS IN THE OPERATION OF OUR COMPUTER AND COMMUNICATIONS SYSTEMS MAY HARM OUR BUSINESS

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

We
are in the process of moving the servers on which we collect our panel members' data from our leased facilities in San Jose, California to Nielsen Media Research's facilities in
Oldsmar, Florida. Any damage or delay resulting from the move of these servers could result in significant interruptions or delays in our service, which could damage our reputation and harm our
business. In addition, we may face a number of technical challenges, including the integration of our servers with Nielsen Media Research's technology infrastructure, which we may not be able to
address successfully.

We
currently do not have a backup facility to provide redundant network capacity in the event of a system failure. Accordingly, our ability to collect Internet audience data in real time
is dependent upon the efficient and uninterrupted operation of Nielsen Media Research's computer and communications hardware and software systems. Despite any precautions we may take, damage from
fire, floods, hurricanes, power loss, telecommunications failures, computer viruses, break-ins and similar events at Nielsen Media Research's computer facility could result in
interruptions in the flow of data to our servers. In addition, any failure by Nielsen Media Research's computer to provide our required data communications capacity could result in interruptions in
our service. In the event of a delay in the delivery of data from Nielsen Media Research, or if Nielsen Media Research should discontinue its services to us, we would be required to transfer our data
collection operations to an alternative provider of server hosting services. Such a transfer could result in significant delays in our ability to deliver our products and services to our customers,
which could damage our reputation and harm our business.

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We intend to develop back-up systems outside of Nielsen Media Research's facilities in Oldsmar, Florida. However, as we replicate our systems at other locations, we will face
a number of technical challenges, particularly with respect to database replications, which we may not be able to address successfully. Although we carry property and business interruption insurance,
our coverage may not be adequate to compensate us for all losses that may occur.

PRIVACY CONCERNS COULD LEAD TO LEGISLATIVE, REGULATORY AND OTHER LIMITATIONS THAT COULD AFFECT OUR ABILITY TO COLLECT AND USE INFORMATION ABOUT INTERNET USERS, IMPAIR OUR
ABILITY TO PROVIDE OUR PRODUCTS AND SERVICES TO CLIENTS AND EXPOSE US TO LIABILITY

Privacy
concerns could lead to legislative, judicial and regulatory limitations on our ability to collect, maintain and use information about Internet users both in the United States and
abroad. Restrictions could be placed upon the collection, management, aggregation and use of information, which could require significant reengineering time and resources. We could be prohibited from
collecting or disseminating certain types of information, which could in turn materially adversely affect our ability to provide our products and services to our clients. Failure to comply with the
law and regulatory requirements may result in, among other things, administrative enforcement actions and fines, class action lawsuits and civil and criminal liability. The occurrence of one or more
of these events could materially harm our business, results of operation, and financial condition.

WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS

We regard our intellectual property as critical to our success. We rely on patent, trademark, copyright and trade secret laws to protect our proprietary rights,
and we seek to obtain the issuances of patents for our core technology and the registration of our material trademarks and service marks in the United States and in selected other countries. We cannot
assure you, however, that the steps we have taken will be sufficient to protect our intellectual property from infringement or misappropriation. Moreover, effective intellectual property protections
may not be available in every country in which we offer our products and services to the extent these protections are available in the United States. Our patent applications or trademark registrations
may not be approved or, even if approved, could be challenged by others or invalidated through administrative process or litigation. If our patent applications or trademark registrations are not
approved because third parties own rights to the
technology we are trying to patent or the trademarks we are trying to register, our use of such technology or trademark would be restricted unless we enter into arrangements with the third-party
owners, which might not be possible on commercially reasonable terms or at all. In March 2003, we filed a complaint against The NPD Group alleging that NPD is using methods for computer use
tracking that infringes one of our patents for computer use tracking (United States Patent No. 6,115,680). In addition, the complaint alleges that NPD breached an agreement between NetRatings
and NPD which provided NPD with a limited license to use the patented technology. This litigation is currently in discovery proceedings and there is no assurance that we will be successful in the
lawsuit against NPD.

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

Third parties may, from time to time, assert claims that we have infringed upon their proprietary rights or claims that our own trademarks, patents or other
intellectual property rights are invalid. Such claims could adversely affect our reputation and the value of our own proprietary rights. From time to time we have been, and we may in the future be,
subject to such claims in the ordinary course of our business, including claims of alleged infringement of patents, trademarks and other intellectual property

33

---

rights
of third parties. Protection of proprietary rights in Internet-related industries is inherently uncertain due to the rapidly evolving technological environment. As such, there may be numerous
patent applications pending, many of which are confidential when filed, that provide for technologies similar to ours.

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

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

Personal information regarding our panelists is included in the data that our software captures from a panelist's Internet use. Our panel data are released only
on an anonymous basis. However, if a person were to penetrate our network security or otherwise misappropriate sensitive data about our panel members, our reputation could be harmed or we could be
subject to claims or litigation arising from damages suffered by panel members as a result of such misappropriation.

GOVERNMENTAL REGULATION OF THE INTERNET MIGHT HARM OUR BUSINESS

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

LEGISLATIVE ACTIONS, HIGHER INSURANCE COSTS AND REGULATORY REQUIREMENTS APPLICABLE TO PUBLIC REGISTRANTS ARE LIKELY TO CAUSE OUR GENERAL AND ADMINISTRATIVE EXPENSES TO INCREASE
AND IMPACT OUR FUTURE FINANCIAL POSITION AND RESULTS OF OPERATIONS

In order to comply with the newly adopted Sarbanes-Oxley Act of 2002, as well as changes to Nasdaq listing standards and rules adopted by the Securities and
Exchange Commission, we may be required to increase our internal controls and hire additional personnel and additional outside legal, accounting and advisory services, all of which will cause our
general and administrative costs to increase. Insurers may also increase premiums, and so our premiums for our various insurance policies, including our directors' and officers' insurance policies,
may increase. Changes in the accounting rules, including legislative and other proposals to account for employee stock options as a compensation expense among others, could materially increase the
expenses that we report under generally accepted accounting principles and adversely affect our operating results. In addition, any such changes may

34

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impact
the amount of stock options we grant to our employees, which may affect our ability to recruit or retain key employees.

WE ARE SUBJECT TO PENDING LEGAL PROCEEDINGS

We are currently subject to a securities class action complaint relating to our initial public offering. The plaintiffs allege that our prospectus was materially
false and misleading because it failed to disclose that the underwriters required several investors who sought large allocations of stock in the offering to pay excessive underwriters' compensation in
the form of increased brokerage commissions on other trades and required investors to agree to buy shares of our stock after the offering was completed at predetermined prices as a precondition to
obtaining allocations in the offering. The plaintiffs further allege that because of these purchases, our stock price after its initial public offering was artificially inflated. Similar complaints
have been filed against a number of other issuers that had initial public offerings in 1999 and 2000. While the issuer defendants have been engaged in settlement negotiations with the plaintiffs,
there is no assurance that a settlement will be reached with the plaintiffs. An adverse outcome could materially affect our results of operations and financial position.

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

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

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

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



35

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of December 31, 2003, we had cash and cash equivalents and short-term investments of $210.0 million consisting of cash and highly
liquid, short-term investments. Declines in interest rates over time will reduce our interest income from our cash and cash equivalents and short-term investments and,
accordingly, could adversely affect our net income and earnings per share. The primary objective of our investment activities is to preserve capital while at the same time maximizing yields without
significantly increasing risk. To achieve this objective, we maintain our portfolio of cash equivalents and short-term investments in a variety of government and corporate obligations and
money market funds. As of December 31, 2003, our investments had a weighted-average time to maturity of approximately 280 days.

The
following table presents the amounts of our financial instruments that are subject to interest rate risk by expected maturity and average interest rates as of December 31,
2003:

Time to maturityOne year
or less

One to two
years(in thousands, except percent data)
(unaudited)Cash and cash equivalents

$
103,221


Average interest rates


1.05
%

Short term investments

$
70,284

$
36,534Average interest rates


1.93
%

1.87
%


NetRatings
adjusts its equity investment in Ibope eRatings.com based on its share of the net gains/losses recorded by this joint venture. At December 31, 2003, our joint venture
with Ibope eRatings.com is accounted for under the equity method.

Revenues
from outside of the United States accounted for approximately 38% of our total revenues during 2003. These international sales are typically denominated in the local currency of
the relevant country, and the international expenses are also primarily incurred in the local currency. When we consolidate the financial results of our foreign operations, our financial results could
be positively or negatively affected depending on changes in the relevant currency exchange rates. As a result, our financial results could be adversely affected by unfavorable exchange rate
fluctuations. Fluctuations in currency exchange rates did not materially impact our net loss in 2003. We have not entered into hedging transactions in order to mitigate the risk from currency
fluctuations, but we might consider using currency forward contracts or other financial instruments commonly utilized to reduce financial market risk if it is determined by us that such instruments
are appropriate to reduce currency risk.

36

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

NETRATINGS, INC.  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                          |  | Page
|--------------------------------------------------------- |  | ----
|Report of Independent Auditors                            |  | 38  
|Consolidated Balance Sheets                               |  | 39  
|Consolidated Statements of Operations                     |  | 40  
|Consolidated Statements of Stockholders' Equity (Deficit) |  | 41  
|Consolidated Statements of Cash Flows                     |  | 42  
|Notes to Consolidated Financial Statements                |  | 43  

37

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REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders,
NetRatings, Inc.:

We
have audited the accompanying consolidated balance sheets of NetRatings, Inc. as of December 31, 2003 and 2002, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2003. These financial statements are the responsibility of NetRatings, Inc.'s
management. Our responsibility is to express an opinion on these financial statements 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 NetRatings, Inc. at
December 31, 2003 and 2002, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2003, in conformity with
accounting principles generally accepted in the United States.

| | /s/ Ernst & Young LLPErnst & Young LLP
| | --------------------------------------

February
20, 2004
New York, New York

38

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NETRATINGS, INC.  CONSOLIDATED BALANCE SHEETS  (in thousands)

|                                                |                                           | December 31, 2003                                                                                                                                               |       | December 31, 2002 |        
|----------------------------------------------- | ----------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----- | ----------------- | -------
|ASSETS                                          |                                           |                                                                                                                                                                 |       |                   |        
|Current assets:                                 |                                           |                                                                                                                                                                 |       |                   |        
|                                                | Cash and cash equivalents                 |                                                                                                                                                                 | $     | 103,221           |        
|                                                | Short-term investments                    |                                                                                                                                                                 |       | 106,818           |        
|                                                | Accounts receivable, net                  |                                                                                                                                                                 |       | 10,141            |        
|                                                | Due from joint ventures                   |                                                                                                                                                                 |       | 589               |        
|                                                | Due from related parties                  |                                                                                                                                                                 |       | 458               |        
|                                                | Prepaid expenses and other current assets |                                                                                                                                                                 |       | 3,444             |        
|                                                |                                           |                                                                                                                                                                 |       |                   |        
|                                                |                                           | Total current assets                                                                                                                                            |       |                   | 224,671
|                                                | Property and equipment, net               |                                                                                                                                                                 |       | 3,943             |        
|                                                | Intangibles, net                          |                                                                                                                                                                 |       | 19,089            |        
|                                                | Goodwill                                  |                                                                                                                                                                 |       | 66,612            |        
|                                                | Other assets                              |                                                                                                                                                                 |       | 936               |        
|                                                |                                           |                                                                                                                                                                 |       |                   |        
|                                                |                                           | Total assets                                                                                                                                                    |       | $                 | 315,251
|                                                |                                           |                                                                                                                                                                 |       |                   |        
|LIABILITIES AND STOCKHOLDERS' EQUITY            |                                           |                                                                                                                                                                 |       |                   |        
|Current liabilities:                            |                                           |                                                                                                                                                                 |       |                   |        
|                                                | Accounts payable                          |                                                                                                                                                                 | $     | 3,314             |        
|                                                | Accrued liabilities                       |                                                                                                                                                                 |       | 11,298            |        
|                                                | Deferred revenue                          |                                                                                                                                                                 |       | 10,777            |        
|                                                | Due to related parties                    |                                                                                                                                                                 |       | 12,195            |        
|                                                | Restructuring liabilities                 |                                                                                                                                                                 |       | 1,711             |        
|                                                |                                           |                                                                                                                                                                 |       |                   |        
|                                                |                                           | Total current liabilities                                                                                                                                       |       |                   | 39,295 
|Restructuring liabilities, less current portion |                                           |                                                                                                                                                                 | 1,680 |                   |        
|                                                |                                           |                                                                                                                                                                 |       |                   |        
|                                                |                                           | Total liabilities                                                                                                                                               |       |                   | 40,975 
|Minority interest                               |                                           |                                                                                                                                                                 | 222   |                   |        
|Commitments and contingencies                   |                                           |                                                                                                                                                                 |      |                   |        
|Stockholders' equity:                           |                                           |                                                                                                                                                                 |       |                   |        
|                                                | Common stock, par value $0.001:           |                                                                                                                                                                 |       |                   |        
|                                                |                                           | Authorized shares: 200,000;                                                                                                                                     |       |                   |        
|                                                |                                           | Issued shares: 35,442 and 35,114 at December 31, 2003 and 2002, respectively; outstanding shares: 33,942 and 33,614 at December 31, 2003 and 2002, respectively |       |                   | 35     
|                                                | Additional paid-in capital                |                                                                                                                                                                 |       | 420,172           |        
|                                                | Deferred compensation and other costs     |                                                                                                                                                                 |       | (7,587            | )      
|                                                | Accumulated other comprehensive income    |                                                                                                                                                                 |       | 1,538             |        
|                                                | Treasury stock                            |                                                                                                                                                                 |       | (20,631           | )      
|                                                | Accumulated deficit                       |                                                                                                                                                                 |       | (119,473          | )      
|                                                |                                           |                                                                                                                                                                 |       |                   |        
|                                                |                                           | Total stockholders' equity                                                                                                                                      |       |                   | 274,054
|                                                |                                           |                                                                                                                                                                 |       |                   |        
|                                                |                                           | Total liabilities and stockholders' equity                                                                                                                      |       | $                 | 315,251
|                                                |                                           |                                                                                                                                                                 |       |                   |        

See
accompanying notes to the financial statements.

39

---



NETRATINGS, INC.  CONSOLIDATED STATEMENTS OF OPERATIONS  (in thousands, except per share data)

|                                                                      |                                          | For the years ended December 31, |        
|--------------------------------------------------------------------- | ---------------------------------------- | -------------------------------- | -------
|
|Revenue                                                               |                                          | $                                | 41,432 
|Cost of revenue                                                       |                                          |                                  | 20,476 
|                                                                      |                                          |                                  |        
|Gross profit                                                          |                                          |                                  | 20,956 
|Operating expenses:                                                   |                                          |                                  |        
|                                                                      | Research and development                 |                                  |        
|                                                                      | Sales and marketing                      |                                  |        
|                                                                      | General and administrative               |                                  |        
|                                                                      | Restructuring and other expenses         |                                  |        
|                                                                      | Acquisition-related expenses             |                                  |        
|                                                                      | Amortization of intangibles              |                                  |        
|                                                                      | Amortization of stock-based compensation |                                  |        
|                                                                      |                                          |                                  |        
|Total operating expenses                                              |                                          |                                  | 50,665 
|                                                                      |                                          |                                  |        
|Loss from operations                                                  |                                          |                                  | (29,709
|Equity in earnings (losses) of joint ventures                         |                                          |                                  | 66     
|Impairment of investments                                             |                                          |                                  |       
|Interest income, net                                                  |                                          |                                  | 4,053  
|Minority interest in net (income) losses of consolidated subsidiaries |                                          |                                  | 455    
|                                                                      |                                          |                                  |        
|Net loss                                                              |                                          | $                                | (25,135
|                                                                      |                                          |                                  |        
|Basic and diluted net loss per common share                           |                                          | $                                | (0.74  
|                                                                      |                                          |                                  |        
|Shares used to compute basic and diluted net loss per common share    |                                          |                                  | 33,792 

See
accompanying notes to the financial statements.

40

---



NETRATINGS, INC.  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY  (in thousands)

|                                                   |  | Common Stock |  |   |    | Deferred
Compensation
and
Other Costs |   | Accumulated
Other
Comprehensive
Income (Loss) |   | Treasury Stock |         |   |   |        |  
|-------------------------------------------------- |  | ------------ |  | - | -- | ------------------------------------- | - | --------------------------------------------- | - | -------------- | ------- | - | - | ------ | -
|
|
|Balances at December 31, 2000                      |  | 32,638       |  | $ | 33 |                                       | $ | 399,364                                       |   | $              | (35,734 | ) | $ | 266    |  
|Net loss                                           |  |             |  |   |   |                                       |   |                                              |   |                |        |   |   |       |  
|Unrealized gain from short-term investments        |  |             |  |   |   |                                       |   |                                              |   |                |        |   |   | 702    |  
|                                                   |  |              |  |   |    |                                       |   |                                               |   |                |         |   |   |        |  
|Comprehensive loss                                 |  |              |  |   |    |                                       |   |                                               |   |                |         |   |   |        |  
|                                                   |  |              |  |   |    |                                       |   |                                               |   |                |         |   |   |        |  
|Issuance of common stock                           |  | 516          |  |   |   |                                       |   | 2,363                                         |   |                |        |   |   |       |  
|Stock-based compensation expense                   |  |             |  |   |   |                                       |   | 377                                           |   |                |        |   |   |       |  
|Amortization of deferred compensation              |  |             |  |   |   |                                       |   | (266                                          | ) |                | 690     |   |   |       |  
|Amortization of deferred service costs             |  |             |  |   |   |                                       |   |                                              |   |                | 9,105   |   |   |       |  
|Additional financing fees                          |  |             |  |   |   |                                       |   | (2,970                                        | ) |                |        |   |   |       |  
|                                                   |  |              |  |   |    |                                       |   |                                               |   |                |         |   |   |        |  
|Balances at December 31, 2001                      |  | 33,154       |  |   | 33 |                                       |   | 398,868                                       |   |                | (25,939 | ) |   | 968    |  
|Net loss                                           |  |             |  |   |   |                                       |   |                                              |   |                |        |   |   |       |  
|Unrealized gain from short-term investments        |  |             |  |   |   |                                       |   |                                              |   |                |        |   |   | 203    |  
|Accumulated translation adjustment                 |  |             |  |   |   |                                       |   |                                              |   |                |        |   |   | 342    |  
|                                                   |  |              |  |   |    |                                       |   |                                               |   |                |         |   |   |        |  
|Comprehensive loss                                 |  |              |  |   |    |                                       |   |                                               |   |                |         |   |   |        |  
|                                                   |  |              |  |   |    |                                       |   |                                               |   |                |         |   |   |        |  
|Stock-based compensation charges                   |  |             |  |   |   |                                       |   | 1,287                                         |   |                |        |   |   |       |  
|Stock repurchase                                   |  |             |  |   |   |                                       |   |                                              |   |                |        |   |   |       |  
|Issuance of stock in conjunction with acquisitions |  | 1,521        |  |   | 2  |                                       |   | 16,758                                        |   |                |        |   |   |       |  
|Issuance of common stock                           |  | 439          |  |   |   |                                       |   | 1,949                                         |   |                |        |   |   |       |  
|Amortization of deferred compensation              |  |             |  |   |   |                                       |   | (83                                           | ) |                | 142     |   |   |       |  
|Amortization of deferred service costs             |  |             |  |   |   |                                       |   |                                              |   |                | 9,105   |   |   |       |  
|                                                   |  |              |  |   |    |                                       |   |                                               |   |                |         |   |   |        |  
|Balances at December 31, 2002                      |  | 35,114       |  |   | 35 |                                       |   | 418,779                                       |   |                | (16,692 | ) |   | 1,513  |  
|Net loss                                           |  |             |  |   |   |                                       |   |                                              |   |                |        |   |   |       |  
|Unrealized loss from short-term investments        |  |             |  |   |   |                                       |   |                                              |   |                |        |   |   | (1,307 | )
|Accumulated translation adjustment                 |  |             |  |   |   |                                       |   |                                              |   |                |        |   |   | 1,332  |  
|                                                   |  |              |  |   |    |                                       |   |                                               |   |                |         |   |   |        |  
|Comprehensive loss                                 |  |              |  |   |    |                                       |   |                                               |   |                |         |   |   |        |  
|                                                   |  |              |  |   |    |                                       |   |                                               |   |                |         |   |   |        |  
|Issuance of common stock                           |  | 328          |  |   |   |                                       |   | 1,393                                         |   |                |        |   |   |       |  
|Amortization of deferred service costs             |  |             |  |   |   |                                       |   |                                              |   |                | 9,105   |   |   |       |  
|                                                   |  |              |  |   |    |                                       |   |                                               |   |                |         |   |   |        |  
|Balances at December 31, 2003                      |  | 35,442       |  | $ | 35 |                                       | $ | 420,172                                       |   | $              | (7,587  | ) | $ | 1,538  |  
|                                                   |  |              |  |   |    |                                       |   |                                               |   |                |         |   |   |        |  

See accompanying notes to the financial statements.

41

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NETRATINGS, INC.  CONSOLIDATED STATEMENTS OF CASH FLOWS  (in thousands)

|                                                                                                                   |                                                                                                                                                             | For the years ended
December 31, |        
|------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------- | -------
|
|OPERATING ACTIVITIES                                                                                               |                                                                                                                                                             |                                  |        
|Net loss                                                                                                           |                                                                                                                                                             | $                                | (25,135
|Adjustments to reconcile net loss to net cash used in operating activities, net of effects of acquired businesses: |                                                                                                                                                             |                                  |        
|                                                                                                                   | Depreciation                                                                                                                                                |                                  |        
|                                                                                                                   | Equity in (earnings) losses of joint ventures                                                                                                               |                                  |        
|                                                                                                                   | Provision for doubtful accounts                                                                                                                             |                                  |        
|                                                                                                                   | Stock-based compensation                                                                                                                                    |                                  |        
|                                                                                                                   | Impairment of investments                                                                                                                                   |                                  |        
|                                                                                                                   | Minority interest                                                                                                                                           |                                  |        
|                                                                                                                   | Amortization of intangibles                                                                                                                                 |                                  |        
|Changes in current assets and liabilities:                                                                         |                                                                                                                                                             |                                  |        
|                                                                                                                   | Accounts receivable                                                                                                                                         |                                  |        
|                                                                                                                   | Due from joint ventures                                                                                                                                     |                                  |        
|                                                                                                                   | Prepaids, other current assets, and other assets                                                                                                            |                                  |        
|                                                                                                                   | Deferred acquisition costs                                                                                                                                  |                                  |        
|                                                                                                                   | Accounts payable                                                                                                                                            |                                  |        
|                                                                                                                   | Accrued liabilities                                                                                                                                         |                                  |        
|                                                                                                                   | Restructuring reserves                                                                                                                                      |                                  |        
|                                                                                                                   | Due to/from related parties                                                                                                                                 |                                  |        
|                                                                                                                   | Deferred revenue                                                                                                                                            |                                  |        
|                                                                                                                   |                                                                                                                                                             |                                  |        
|Net cash used in operating activities                                                                              |                                                                                                                                                             |                                  | (16,767
|                                                                                                                   |                                                                                                                                                             |                                  |        
|INVESTING ACTIVITIES                                                                                               |                                                                                                                                                             |                                  |        
|                                                                                                                   | Acquisition of property and equipment                                                                                                                       |                                  |        
|                                                                                                                   | Purchase of investments                                                                                                                                     |                                  |        
|                                                                                                                   | Sale of investments                                                                                                                                         |                                  |        
|                                                                                                                   | Acquisitions, net of cash acquired of $2,375 and $15,504 in 2003 and 2002, respectively, and investment in joint ventures and patent settlement/acquisition |                                  |        
|                                                                                                                   |                                                                                                                                                             |                                  |        
|Net cash provided by investing activities                                                                          |                                                                                                                                                             |                                  | 32,442 
|                                                                                                                   |                                                                                                                                                             |                                  |        
|FINANCING ACTIVITIES                                                                                               |                                                                                                                                                             |                                  |        
|                                                                                                                   | Proceeds from issuance of common stock                                                                                                                      |                                  |        
|                                                                                                                   | Additional financing fees                                                                                                                                   |                                  |        
|                                                                                                                   | Principal payments on notes payable and capital lease obligations                                                                                           |                                  |        
|                                                                                                                   | Stock repurchase                                                                                                                                            |                                  |        
|                                                                                                                   |                                                                                                                                                             |                                  |        
|Net cash (used in) provided by financing activities                                                                |                                                                                                                                                             |                                  | 1,393  
|Effect of exchange rate fluctuations                                                                               |                                                                                                                                                             |                                  | 1,584  
|                                                                                                                   |                                                                                                                                                             |                                  |        
|Net increase (decrease) in cash and cash equivalents                                                               |                                                                                                                                                             |                                  | 18,652 
|Cash and cash equivalents at beginning of period                                                                   |                                                                                                                                                             |                                  | 84,569 
|                                                                                                                   |                                                                                                                                                             |                                  |        
|Cash and cash equivalents at end of period                                                                         |                                                                                                                                                             | $                                | 103,221
|                                                                                                                   |                                                                                                                                                             |                                  |        
|Supplemental disclosure of cash flow information                                                                   |                                                                                                                                                             |                                  |        
|                                                                                                                   | Cash paid for interest                                                                                                                                      |                                  | $      
|                                                                                                                   | Stock issued in conjunction with acquisitions                                                                                                               |                                  | $      

See accompanying notes to the financial statements.

42

---



NETRATINGS, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Summary of Significant Accounting Policies

NetRatings, Inc.

NetRatings, Inc. ("NetRatings" or the "Company") is a provider of Internet audience measurement and analysis in the United States and around the world. All
of the Company's products and services are designed to assist companies in making critical business decisions regarding their Internet strategies and initiatives. The Company has a diversified and
global client base, including large and small companies in the media, technology, advertising, financial services, consumer products, retail and travel industries. A significant majority of the
Company's products and services are sold on an annual subscription basis. In 1998 and 1999, the Company formed strategic relationships with Nielsen Media Research, a provider of television audience
measurement and related services in the United States, and ACNielsen, a global provider of market research information and analysis. The segment in which NetRatings currently operates is the market
for providing media and market research focused on Internet audience behavior and activity. All of the Company's revenues are generated through the sale of products in this one segment.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of NetRatings and its wholly owned and majority owned subsidiaries. All significant
intercompany transactions and balances are eliminated upon consolidation. NetRatings consolidates the results of operations and financial position
of its international operations on a one month lag. The impact of this one month lag is not significant to NetRatings' consolidated financial results.

Cash and Cash Equivalents and Short-Term Investments

Cash and cash equivalents consist of highly liquid investments including money market accounts, commercial paper, U.S. government and agency securities, and
corporate notes with insignificant interest-rate risk and original maturities of three months or less at date of purchase. Cash and cash equivalents are stated at fair market value, which
approximates cost.

Short-term
investments consist principally of corporate notes, commercial paper and U.S. government and agency securities, all of which are carried at fair market value. All
short-term investments have maturities of less than twenty-four months and are classified as available-for-sale. NetRatings uses the specific
identification method to compute realized gains and losses on its short-term investments.

Interest
income was $4.3 million, $8.4 million and $16.3 million for the years ended December 31, 2003, 2002 and 2001, respectively.

Property and Equipment

Property and equipment is stated at cost, net of accumulated depreciation. Property and equipment is depreciated on a straight-line basis over the
estimated useful lives of the assets, generally three to five years.

Impairment of Long-Lived Assets

NetRatings evaluates its long-lived assets for impairment annually, or sooner if events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future

43

---

net
cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets
exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

Other Assets

Other assets include investments in joint ventures, investments in third-parties, restricted cash related to the Company's office leases in Seattle, Washington
and New York, New York, long-term security deposits and other assets. Investments in joint ventures are accounted for based on the equity method of accounting. As such, the investments are
adjusted for NetRatings' equity interest in each joint venture's gains or losses. NetRatings includes the gains/losses on joint ventures on a one quarter lag. The impact of this one quarter lag is not
significant to NetRatings' consolidated financial statements. The equity basis is adjusted for any additional capital contributions or commitments. Investments in third parties are accounted for on a
cost basis. As such, an investment impairment charge is recorded when an investment has experienced a decline in value that is other than temporary. In 2002, the Company wrote off its investment in
third parties accounted for on a cost basis. As such, the balance in the Company's cost-based, long-term investment account was zero at December 31, 2003 and 2002.

Foreign Currency Translation

The Company applies Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation," with respect to its international operations. All
assets and liabilities are remeasured at the current exchange rate at the end of the period, and revenues and expenses are remeasured at average exchange rates in effect during the period. A
translation gain resulting from the process of remeasuring foreign currency financial statements into U.S. dollars was $1.3 million and $0.3 million in 2003 and 2002, respectively. Gains
(losses) resulting from foreign currency transactions were not material in 2003 and 2002.

Revenue Recognition

Revenue is recognized when persuasive evidence of an arrangement exists, services have been rendered, the price is fixed or determinable and collectibility is
reasonably assured.

Revenue
for recurring services is recognized ratably over the term of the related contract as services are provided. Revenue for nonrecurring services is recognized in the period in
which the product is delivered. Billings rendered in advance of services being performed are recorded as deferred revenue in the accompanying balance sheet.

Panel Costs

Costs of establishing and maintaining the Company's panels, including the MegaPanel, are expensed as incurred and are included in cost of revenue in the
accompanying statements of operations.

Advertising Expense

All advertising and promotion costs are expensed as incurred. Advertising and promotion costs, which are included in sales and marketing expense, were
$0.1 million, $0.5 million and $1.5 million for the years ended December 31, 2003, 2002 and 2001, respectively.

44

---

Income Taxes

NetRatings accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("FAS 109"), which requires the use of the liability method in accounting for income taxes. Under FAS 109, deferred tax assets and liabilities are measured based on differences between
the financial reporting and tax bases of assets and liabilities using enacted tax rates and laws that will be in effect when the differences are expected to reverse.

Comprehensive Loss

Comprehensive loss includes net loss as well as other comprehensive income. At December 31, 2003 and 2002, NetRatings' accumulated other comprehensive
income included unrealized losses of $0.1 million and unrealized gains of $1.2 million on available-for-sales securities, and $1.6 million and
$0.3 million of gains on foreign currency translation adjustments, respectively.

Goodwill and Intangible Assets

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 142 "Goodwill and Other
Intangible Assets". Under SFAS 142, goodwill and indefinite-lived intangible assets are no longer amortized, but are reviewed at least annually for impairment. Separable intangible assets that
are not deemed to have an indefinite life continue to be amortized over their useful lives. The amortization provisions of SFAS 142 apply to goodwill and intangible assets acquired after
June 30, 2001. The Company had no goodwill or intangible assets prior to 2002.

Through
its acquisitions in 2002 and 2003, NetRatings has recorded $66.6 million of goodwill and $25.4 million of intangible assets. The intangible assets are not deemed to
have an indefinite life and are, therefore, being amortized over their estimated useful lives, which range from 1 to 13 years. The Company performed its annual evaluation of goodwill and other
intangibles as of October 1, 2003 and no impairment was indicated. The Company will reassess the carrying value of its goodwill and intangible assets each year as of October 1, unless
indicators of impairment become apparent earlier.

Fair Value of Financial Instruments and Concentration of Credit Risk

The fair value of NetRatings' cash and cash equivalents and short-term investments is based on quoted market prices. At December 31, 2003, the
fair market value, cost and net unrealized loss of NetRatings' short-term investments totaled $106.8 million, $106.9 million and $0.1 million, respectively. At
December 31, 2002, the fair market value, cost and net unrealized gains of NetRatings' short-term investments totaled $156.8 million, $155.7 million and
$1.2 million, respectively. NetRatings uses the specific identification method to compute realized gains and losses on its short-term investments. For the years ended
December 31, 2003, 2002 and 2001, realized gains and losses were not material.

Financial
instruments that potentially subject NetRatings to concentrations of credit risk include cash and cash equivalents, short-term investments and trade accounts
receivable. NetRatings places certain of its cash in banks that are federally insured in limited amounts and in investment-grade debt instruments, many of which are backed by the U.S. government or
other government agencies. NetRatings conducts business with companies in various industries throughout the United States and internationally. NetRatings manages credit risk on accounts receivable by
performing ongoing credit evaluations of its customers, reviewing its accounts and contracts, and by providing appropriate allowances for uncollectible amounts. For the years ended December 31,
2003 and 2002, NetRatings had bad debt write-offs of $0.1 million and $0.4 million, respectively. At December 31, 2003 and 2002, the allowance for doubtful accounts
totaled $0.9 million and $0.8 million, respectively.

45

---

Stock-Based Compensation

NetRatings accounts for stock-based awards to employees under the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and discloses the general and pro forma financial information required by SFAS 123 and SFAS 148.

In
December 2002, the FASB issued SFAS 148 "Accounting for Stock-Based Compensation Transition and Disclosure." SFAS 148 amends SFAS 123 "Accounting for
Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair-value for stock-based employee compensation. In addition, SFAS 148 amends
the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and
the effect of the method used on reported results.

Disclosures
required by SFAS 123 and SFAS 148 are as follows:

Option value information(a)

2003

2002

2001Fair value per option(b)

$
8.50

$
9.31

$
12.91Valuation assumptionsExpected option term (years)


4.00


4.00


4.00Expected volatility


328
%

63
%

51
%Expected dividend yield


0
%

0
%

0
%Risk-free interest rate


1.31
%

1.45
%

2.20
%


---

For
purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. In addition, the 15% discount in market value
under the Employee
Stock Purchase Plan is treated as compensation expense for pro forma purposes. The following table illustrates the pro forma effect on consolidated net income and earnings per share of all outstanding
awards in each period (in thousands, except for earnings per share data):

2003

2002

2001Net loss, as reported

$
(25,135
)
$
(38,876
)
$
(17,634
)Add: Stock-based compensation expense included in reported net loss


0


328


802Deduct: Total stock-based compensation expense determined under fair value based method for all awards


(6,715
)

(8,271
)

(6,265
)Pro forma net loss

$
(31,850
)
$
(46,819
)
$
(23,097
)Earnings per share:Basic and diluted net loss per share, as reported

$
(0.74
)
$
(1.17
)
$
(0.54
)Pro forma basic and diluted net loss per share

$
(0.94
)
$
(1.41
)
$
(0.70
)


The
pro forma impact of compensation expense measured under FAS 123 on the net loss for the years ended December 31, 2003, 2002 and 2001 is not representative of the
effects on net income (loss) for future years, as future years will include the effects of additional years of stock option grants.

46

---

Computation of Net Loss Per Common Share

NetRatings computes net loss per common share based on Financial Accounting Standards Board Statement No. 128, "Earnings Per Share" ("FAS 128"). In
accordance with FAS 128, basic net loss per share is calculated as net loss divided by the weighted-average number of common shares outstanding less shares subject to repurchase. Diluted net
loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding and dilutive common stock equivalents outstanding during the period. Common equivalent
shares from stock options have been excluded from the calculation of net loss per share as their effect is anti-dilutive.

The
following table sets forth the calculation of basic and diluted weighted-average shares outstanding and net loss per share (in thousands, except per share amounts):

2003

2002

2001Net loss

$
(25,135
)
$
(38,876
)
$
(17,634
)Weighted-average shares of common stock outstanding


33,792


33,168


32,969Less: weighted-average shares of common stock subject to repurchase








105Weighted-average shares of common stock outstanding used in computing basic and diluted net loss per share


33,792


33,168


32,864Basic and diluted net loss per common share

$
(0.74
)
$
(1.17
)
$
(0.54
)


If
NetRatings had reported net income, the calculation of historical diluted earnings per share would have included approximately an additional 0.2 million, 0.3 million and
0.9 million common equivalent shares related to outstanding stock options not included above (determined using the treasury stock method) for the years ended December 31, 2003, 2002 and
2001, respectively.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements. For NetRatings, these estimates primarily relate to the collectibility of receivables; the valuation of fixed assets, goodwill and intangible
assets, including depreciable lives assigned; and the valuation of certain liabilities, including restructuring reserves. Actual results could differ from these estimates.

Recent Accounting Pronouncements

In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities, an Interpretation of ARB
No. 51," which addresses consolidation by business enterprises of variable interest entities ("VIEs") either: (1) that do not have sufficient equity investment at risk to permit the
entity to finance its activities without additional subordinated financial support, or (2) in which the equity investors lack an essential characteristic of a controlling financial interest. In
December 2003, the FASB completed deliberations of proposed modifications to FIN 46 ("Revised Interpretations") resulting in multiple effective dates based on the nature as well as the creation
date of the VIE. VIEs created after January 31, 2003, but prior to January 1, 2004, may be accounted for either based on the original interpretation or the Revised Interpretations.
However, the Revised Interpretations must be applied no later than the Company's first quarter of fiscal 2004. VIEs created after January 1, 2004 must be accounted for under the Revised
Interpretations. Special Purpose Entities ("SPEs") created prior to February 1, 2003 may be accounted for under the original

47

---

interpretation
or the Revised Interpretations' provisions no later than December 31, 2003. Non-SPEs created prior to February 1, 2003 should be accounted for under the
Revised Interpretations' provisions no later than the Company's first quarter of fiscal 2004. The Company has not entered into any material arrangements with VIEs created after January 31,
2003. The Company has evaluated the effect of the adoption of FIN 46 and has determined that it does not have a material impact on the Company's results of operations or financial position.

In
December 2003, the Emerging Issues Task Force issued EITF Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments" (EITF Issue No. 03-1). EITF Issue No. 03-1 requires companies to disclose information about temporarily impaired investments
in debt or marketable equity securities. The requirement applies only to annual financial statements, and comparative disclosures for prior periods are not required. The adoption of EITF Issue
No. 03-1 did not have a material impact on the Company's results of operations or financial position.

Note 2: Balance Sheet Details

Details of balance sheet items are as follows:

The
following is a summary of estimated fair value of cash and cash equivalents and short-term investments based on quoted market prices as of December 31, 2003 and
2002 (in thousands):

2003

2002Cash, money market and corporate notes

$
49,909

$
45,682U.S. government and agency securities


53,312


38,887Total cash and cash equivalents


103,221


84,569Corporate notes


19,641


67,072Commercial paper


36,534


31,213U.S. government and agency securities


50,643


58,557Total short-term investments


106,818


156,842Total

$
210,039

$
241,411


Property
and equipment, net (in thousands):

2003

2002Computer equipment and software

$
10,909

$
8,425Office equipment, furniture, and fixtures


1,528


1,500Leasehold improvements


495


43012,932


10,355Less accumulated depreciation


(8,989
)

(7,361
)Property and equipment, net

$
3,943

$
2,994


Accrued
liabilities (in thousands):

2003

2002Accrued compensation

$
4,454

$
3,975Acquisition related transaction costs


2,244


2,913Other accrued liabilities


4,600


3,283Accrued liabilities

$
11,298

$
10,171


48

---

Due to related parties (in thousands):

2003

2002Due to VNU and its affiliates

$
11,602

$
7,993Due to joint venture partners


593


1,031Due to related parties

$
12,195

$
9,024


Note 3: Due from Related Parties

During the second quarter of 2003, the Company increased its ownership in NetRatings Japan from 49% to 58%. As a result of obtaining majority ownership in
NetRatings Japan on April 1, 2003, the Company now includes NetRatings Japan's $0.5 million loan receivable from its minority shareholder in NetRatings' consolidated financial
statements.

Note 4: Goodwill and Intangible Assets

During 2003, NetRatings finalized the purchase price allocation related to its acquisitions in 2002, resulting in (i) adjustments to certain asset and
liability balances existing at the acquisition dates; (ii) adjustments to acquisition related costs; and (iii) an adjustment to intangible assets. In the fourth quarter of 2003,
NetRatings received a refund of approximately $1.8 million on its purchase price for eRatings.com related to certain liabilities existing at the acquisition date. This refund, along with the
other purchase price allocation adjustments, resulted in net decreases to goodwill and intangible assets in 2003 of $2.8 million and $1.0 million, respectively.

During
2003, NetRatings acquired 100% beneficial ownership of MMXI Switzerland, the assets and customer contracts of NetCrawling S.A, and 58% of the ownership interests in Red
Sheriff Ltd. NetRatings also increased its ownership in NetRatings Japan from 49% to 58% and Mediametrie NetRatings from 50% to 66%. These transactions resulted in consolidation of these
entities and recognition of goodwill and intangible assets in 2003 totaling $18.1 million and $2.3 million, respectively. The valuation for Red Sheriff is in process, and therefore
goodwill and intangible assets recorded in relation to this acquisition are estimates as of December 31, 2003.

Goodwill
and other intangible assets along with their weighted average life, at December 31, 2003 and 2002, consisted of the following (in thousands, except average life):

December 31, 2003Gross
carrying
amount

Accumulated
amortization

Net

Weighted average
lifeIntangible assets continuing to be amortized:Core technologies

$
6,040

$
1,126

$
4,914

7Customer contracts


3,690


2,089


1,601

2Patents and other


15,682


3,108


12,574

11Total

$
25,412

$
6,323


19,089Goodwill not being amortized








66,612Total goodwill and other intangible assets







$
85,701


49

---

December 31, 2002Gross
carrying
amount

Accumulated
amortization

Net

Weighted average
lifeIntangible assets continuing to be amortized:Core technologies

$
4,890

$
428

$
4,462

7Customer contracts


2,540


818


1,722

2Patents and other


16,679


1,179


15,500

11Total

$
24,109

$
2,425


21,684Goodwill not being amortized








51,298Total goodwill and other intangible assets







$
72,982


Based
on the current amount of intangibles subject to amortization, the estimated amortization expense for each of the succeeding five years is as follows: 2004: $3.8 million;
2005: $2.8 million; 2006: $1.9 million; 2007: $1.9 million; and 2008: $1.9 million.

Note 5: Restructuring and Other Expenses

During the first quarter of 2002, NetRatings' management approved and initiated a restructuring plan intended to streamline its business to focus on core
products, refine its product line and consolidate space at its Milpitas, California facility. Accordingly, NetRatings recognized a restructuring charge of approximately $6.9 million during the
first quarter of 2002. The restructuring plan involved (i) the termination of 40 employees worldwide, all of whom were terminated as of December 31, 2002; (ii) lease termination
costs and other costs associated with vacating certain facilities and abandoning certain long-lived assets; and (iii) costs incurred for discontinuation of certain services. Also,
in connection with the acquisitions completed in 2002, NetRatings established additional restructuring liabilities of $7.5 million. These restructuring plans involved (i) the termination
of 80 employees worldwide, all of whom were terminated as of December 31, 2003; (ii) amounts accrued related to ongoing lease obligations for vacated properties; and (iii) costs
related to contractual obligations or payments for certain products and/or projects which were eliminated as of the acquisition dates. During 2002, $7.9 million of restructuring liabilities had
been paid, resulting in a remaining balance of $6.6 million as of December 31, 2002.

In
finalizing the purchase price allocations of the Company's acquisitions in 2002, NetRatings adjusted its restructuring liabilities in 2003 based on the latest available information.
These adjustments include (i) decreases in severance related liabilities that will not be paid; (ii) adjustments to estimates relating to accruals for discontinuation of certain products
or services; and (iii) adjustments to estimates relating to idle facility lease commitments.

In
connection with its acquisitions of MMXI Switzerland, the assets and customer contracts of NetCrawling S.A. and Red Sheriff in 2003, the Company recorded $1.0 million in
restructuring liabilities that have been accounted for as additional purchase price. The restructuring plans involve (i) the termination of 15 employees worldwide, of which 9 have been
terminated as of December 31, 2003; (ii) amounts accrued related to ongoing lease obligations for vacated properties; and (iii) costs related to contractual obligations or
payments for certain products and/or projects which were eliminated as of the acquisition dates. Positions were eliminated primarily in the executive management, general and administration,
engineering and sales functions.

50

---

The
following table summarizes activity associated with the restructuring plans for the years ended December 31, 2003 and 2002 (in thousands):

|                                                                             |  | Balance
December 31,
2002 |       | Additions
Related to
Acquisitions |   | Utilized
Cash |  | Adjustments |        | Balance
December 31,
2003
|---------------------------------------------------------------------------- |  | ------------------------- | ----- | --------------------------------- | - | ------------- |  | ----------- | ------ | -------------------------
|Employee severance benefits                                                  |  | $                         | 2,266 |                                   | $ | 307           |  | $           | (1,651 | )                        
|Costs incurred due to discontinuation of certain services and other expenses |  |                           | 670   |                                   |   | 90            |  |             | (594   | )                        
|Lease commitments and related write-down of property and equipment           |  |                           | 3,668 |                                   |   | 620           |  |             | (1,364 | )                        
|                                                                             |  |                           |       |                                   |   |               |  |             |        |                          
|Total                                                                        |  | $                         | 6,604 |                                   | $ | 1,017         |  | $           | (3,609 | )                        
|                                                                             |  |                           |       |                                   |   |               |  |             |        |                          

|                                                                             |  | Restructuring
Charge |       | Acquisition
Related
Restructuring
Liabilities |   | Utilized
Cash |  | Utilized
Non Cash |        | Adjustments |   | Balance
December 31,
2002
|---------------------------------------------------------------------------- |  | -------------------- | ----- | --------------------------------------------- | - | ------------- |  | ----------------- | ------ | ----------- | - | -------------------------
|Employee severance benefits                                                  |  | $                    | 3,736 |                                               | $ | 3,943         |  | $                 | (4,402 | )           | $ | (1,019                   
|Costs incurred due to discontinuation of certain services and other expenses |  |                      | 1,551 |                                               |   | 443           |  |                   | (898   | )           |   |                         
|Lease commitments and related write-down of property and equipment           |  |                      | 1,682 |                                               |   | 2,438         |  |                   | (944   | )           |   | (643                     
|                                                                             |  |                      |       |                                               |   |               |  |                   |        |             |   |                          
|Total                                                                        |  | $                    | 6,969 |                                               | $ | 6,824         |  | $                 | (6,244 | )           | $ | (1,662                   
|                                                                             |  |                      |       |                                               |   |               |  |                   |        |             |   |                          

Adjustments
to restructuring charges did not impact the Company's results of operations. The long term portion of restructuring relates to idle facility lease commitments.

Note 6: Acquisitions

During 2002, we completed a number of acquisitions that expanded our portfolio of products and services in the United States and abroad. These acquisitions
included the acquisitions of (i) all of the assets of the AdRelevance online advertising expenditure measurement division of Jupiter Media Metrix Inc.; (ii) all of the assets of
DoubleClick's @Plan unit; and (iii) selected assets of Jupiter Media Metrix related to their European Internet audience measurement services. We also acquired from ACNielsen Corporation the
remaining 80.1% interest in ACNielsen eRatings.com that we did not already own.

In
the third quarter of 2002, we completed the acquisition of 52% of NetValue's outstanding common stock. During the fourth quarter of 2002, we acquired additional shares of NetValue
bringing our total to approximately 86% of the capital and 87.5% of the voting rights of NetValue. In the fourth quarter of 2003, NetValue's stockholders approved a resolution to dissolve NetValue and
take steps to voluntarily liquidate NetValue's net assets. During the fourth quarter of 2003, NetRatings acquired the remaining net assets of NetValue and the company was dissolved.

In
January 2003, NetRatings acquired beneficial ownership of 80% of MMXI Switzerland, a Swiss company whose business is focused in the international Internet media and market research
industries. During the second quarter of 2003, NetRatings acquired beneficial ownership of the remaining 20% of MMXI Switzerland.

In
July 2003, NetRatings acquired the assets and customer contracts of NetCrawling S.A., the developer and marketer of LemonAd, Europe's leading online advertising monitoring
service.

51

---

NetRatings
increased its ownership in two of its joint ventures during 2003. In the second quarter of 2003, NetRatings increased its ownership in NetRatings Japan from 49% to 58%. In the
fourth quarter of 2003, the Company increased its ownership in Mediametrie NetRatings, its joint venture in France, from approximately 50% to 66%.

In
December 2003, NetRatings acquired 58% of the common stock of Red Sheriff Ltd., a site-centric-based Internet audience measurement company.

NetRatings
accounts for its acquisitions under the purchase method. The allocation of purchase price related to the acquisitions reflects the fair value of the acquired assets and
liabilities. The results of operations of each acquired entity are reflected in the consolidated results of operations beginning on their respective acquisition dates. Prior to the Company's majority
ownership in NetRatings Japan and Mediametrie NetRatings, NetRatings recorded its equity share of these joint venture's gains or losses in equity in earnings (losses) of joint venture. Effective
May 2003 and November 2003, respectively, NetRatings Japan's and Mediametrie NetRatings' financial results are consolidated into the Company's financial statements.

Acquisition
and restructuring costs are estimates based on certain preliminary assumptions. The estimates related to our 2003 acquisitions will be finalized during 2004, as we finalize
our purchase accounting related to those acquisitions. The accompanying table represents the estimated purchase price allocation related to our 2003 acquisitions (in thousands):

Red Sheriff

All Other
Acquisitions

TotalCash paid

$
13,513

$
5,140

$
18,653Note payable





350


350Acquisition costs


960


550


1,510Restructuring costs original accrual


627


390


1,017Total Purchase Price

$
15,100

$
6,430

$
21,530Purchase Price AllocationCash acquired

$
506

$
1,869

$
2,375Tangible assets acquired, at fair value


3,233


5,362


8,595Liabilities assumed


(3,689
)

(6,125
)

(9,814
)Intangible assets


2,300





2,300Goodwill


12,750


5,324


18,074Total Purchase Price

$
15,100

$
6,430

$
21,530


Results
of operations for each of the acquired companies are included prospectively from the date of acquisition. Pro forma results of operations reflecting the acquisitions have not
been presented because the results of operations of the acquired companies, either individually or collectively, are not material to the Company's results of operations.

52

---

The
accompanying table represents the estimated purchase price allocation recorded in 2002 for acquisitions completed in 2002 (in thousands):

eRatings

NetValue

All Other
Acquisitions

TotalCash paid

$


$
13,823

$
22,339

$
36,162Stock issued


9,079


1,563


6,118


16,760Acquisition costs


1,784


2,750


1,300


5,834Restructuring costsoriginal accrual


2,073


3,000


1,751


6,824Adjustments to restructuring accrual








717


717Total Purchase Price

$
12,936

$
21,136

$
32,225

$
66,297Purchase Price AllocationCash acquired

$
2,816

$
12,688

$


$
15,504Tangible assets acquired, at fair value


4,765


2,175


3,007


9,947Liabilities assumed


(7,630
)

(7,524
)

(5,508
)

(20,662
)Intangible assets


2,800


2,440


4,970


10,210Goodwill


10,185


11,357


29,756


51,298Total Purchase Price

$
12,936

$
21,136

$
32,225

$
66,297


As
discussed in Note 4, in 2003 the Company finalized the purchase price allocation related to the acquisitions completed in 2002 resulting in net decreases to goodwill of
$2.8 million and intangible assets of $1.0 million.

The
following pro forma summary of consolidated revenues, net loss, and net loss per share for the years ended December 31, 2002 and 2001 assumes that the eRatings and NetValue
acquisitions occurred on January 1, 2001. The impact of the other acquired entities on the consolidated results of operations is not significant and therefore the effects of these other
acquisitions are only reflected in this pro forma presentation for the periods since acquisition. The consolidated results are not necessarily indicative of the results of future operations nor of
results that would have occurred had the acquisitions been consummated as of the beginning of the period presented.

Years Ended
December 31,2002

2001(in thousands, except per share amounts)Revenue

$
36,031

$
36,334Net loss

$
(49,301
)
$
(54,348
)Net loss per share:Basic and diluted

$
(1.44
)
$
(1.60
)Shares used in the calculation of net loss per share:Basic and diluted


34,183


33,879


Note 7: Stockholders' Equity

Common Stock

The Company's Board of Directors is authorized, subject to limitations prescribed by Delaware law, to issue up to 200 million shares of common stock. At
December 31, 2003, 35.4 million shares of common stock were issued and 33.9 million shares were outstanding. At December 31, 2002, 35.1 million shares of common
stock were issued and 33.6 million shares were outstanding. The Company issued 0.3 million and 0.4 million shares of common stock during 2003 and 2002, respectively,

53

---

in
connection with the NetRatings employee benefit plans. Additionally, the Company issued 1.5 million shares of common stock in conjunction with acquisitions completed during 2002.

Common Stock Repurchase/Treasury Stock

In March 2002, two former executives exercised their rights pursuant to stock repurchase agreements. Pursuant to these agreements, NetRatings repurchased
1.5 million shares of NetRatings common stock held by them. The repurchase price was based on the average closing price of NetRatings common stock for the ten trading days preceding the request
for repurchase. Accordingly, NetRatings repurchased the shares for approximately $13.75 per share for a total aggregate repurchase price of $20.6 million.

1998 Stock Option Plan

In April 1998, NetRatings adopted the 1998 Stock Option Plan (the "Plan"). Under the Plan, up to 1.2 million shares of NetRatings' common stock were
initially reserved for issuance. An additional 1.0 million, 2.0 million, 1.5 million and 2.8 million were reserved for issuance under the Plan during the years ended
December 31, 2003, 2001, 2000 and 1999, respectively. Options may be granted at exercise prices of no less than 85% of the fair value of the related common stock on the date of the grant (110%
of fair value in certain instances), as determined by the Board of Directors. Options generally vest over a four-year period and have a maximum term of ten years. In addition to the
options granted pursuant to the Plan, the Company assumed a total of 26,000 options in connection with the Company's purchase of the remaining 80.1% interest in eRatings.

Information
with respect to stock option activity is summarized as follows:

|                                  |                   | Options Outstanding
|--------------------------------- | ----------------- | -------------------
|
|Balance at December 31, 2000      |                   | 1,434,000          
|Authorized                        |                   | 2,000,000          
|Granted                           |                   | (1,705,000         
|Exercised                         |                   |                   
|Canceled                          |                   | 372,000            
|                                  |                   |                    
|Balance at December 31, 2001      |                   | 2,101,000          
|Granted                           |                   | (1,961,000         
|Assumed from eRatings acquisition |                   |                   
|Exercised                         |                   |                   
|Canceled                          |                   | 1,047,000          
|                                  |                   |                    
|Balance at December 31, 2002      |                   | 1,187,000          
|Authorized                        |                   | 1,000,000          
|Granted                           |                   | (1,692,000         
|Exercised                         |                   |                   
|Canceled                          |                   | 903,000            
|                                  |                   |                    
|Balance at December 31, 2003      |                   | 1,398,000          
|                                  |                   |                    
|Options exercisable at:           |                   |                    
|                                  | December 31, 2001 |                    
|                                  | December 31, 2002 |                    
|                                  | December 31, 2003 |                    

54

---

The following table summarizes information concerning options outstanding and exercisable at December 31, 2003:

Options outstanding

Options exercisableExercise Price

Number
of
Shares

Weighted-
Average
Exercise
Price

Weighted-
Average
Remaining
Term

Number
of Shares

Weighted-
Average
Exercise
Price$0.10 - $5.40

220,000

$
3.26

6.42

162,000

$
2.50$5.82

1,176,000

$
5.82

9.19

0

$
0.00$5.84 - $7.95

606,000

$
6.34

8.84

125,000

$
6.19$8.40 - $10.20

558,000

$
9.29

8.15

257,000

$
9.38$10.31 - $11.55

511,000

$
11.19

7.99

288,000

$
11.10$11.90 - $12.51

814,000

$
12.39

7.64

474,000

$
12.37$12.60 - $13.90

578,000

$
13.38

7.91

327,000

$
13.35$14.88 - $19.50

516,000

$
15.32

7.29

351,000

$
15.35$22.38 - $43.88

44,000

$
28.23

6.40

39,000

$
28.45$106.84

10,000

$
106.84

8.35

0

$
0.00$0.10 - $106.84

5,033,000

$
10.01

8.17

2,023,000

$
11.62


Shares Reserved for Future Issuance

NetRatings has reserved shares of common stock for future issuance as of December 31, 2003 and December 31, 2002 as follows:

2003

2002Stock options outstanding

5,033,000

4,476,000Stock options available for grant

1,398,000

1,187,000Employee stock purchase plan

128,486

208,000


The
pro forma information, as required by SFAS 123 and SFAS 148, regarding net loss and loss per share determined as if the Company had accounted for its stock options
under the fair value method of accounting is presented in Note 1 to these financial statements.

1999 Employee Stock Purchase Plan

On October 26, 1999, NetRatings' Board of Directors adopted the 1999 Employee Stock Purchase Plan effective upon the completion of NetRatings' initial
public offering of its common stock. NetRatings initially reserved a total of 0.3 million shares of common stock for issuance under the plan, which is cumulatively increased on January 1
of each year through January 1, 2010 by an amount equal to the lesser of (i) 0.5 million shares, (ii) 2% of the number of shares of common stock that were issued and
outstanding on the preceding December 31, or (iii) a lesser amount determined by the Company's Board of Directors. The Board of Directors approved an increase of 132,000 shares in
February 2002. Eligible employees may purchase common stock at 85% of the lesser of the fair market value of the Company's common stock on the first day of the applicable offering period or the
date of purchase. All NetRatings' employees are eligible to participate in the Employee Stock Purchase Plan except employees who (i) normally work 20 hours or less per week;
(ii) normally work 5 months or less per year; or (iii) are 5% or greater shareholders of NetRatings. Eligible employees may contribute from 1%-15% of their after tax
compensation from each paycheck during each 6 month purchase period. However, no person may purchase more than 2,500 shares on a purchase date. Furthermore, pursuant to the Internal Revenue
Code, no person may purchase stock under the Plan valued at more than $25,000 in any calendar year.

55

---

Deferred Compensation

NetRatings recorded deferred stock compensation charges of $3.9 million for the year ended December 31, 1999, representing the difference between
the exercise price of stock options and the fair value of common stock as of the date of grant. There have been no additional deferred stock compensation amounts recorded through December 31,
2003. These amounts are being amortized to operations, using the graded method, over the vesting periods of the individual stock options, which are generally four years.

For
the years ended December 31, 2003, 2002 and 2001, amortization expense of $0, $0.3 million, and $0.8 million, respectively, is included in stock-based
compensation in the accompanying statements of operations. As of December 31, 2003, the deferred stock-based compensation charges have been fully amortized and no additional amortization is
scheduled in 2004.

Deferred Service Costs

In 1999, NetRatings recorded a deferred charge totaling $46.7 million representing the value of warrants issued to Nielsen Media Research, which were
exercised in December 1999. The value of the warrants was determined using the Black-Scholes valuation model and is being amortized to operating expense through December 31, 2004.
Amortization expense is $9.1 million in each of the three years ended December 31, 2003 and is included in stock based compensation in the accompanying statements of operations. At
December 31, 2003, the remaining deferred charge to be amortized is $7.6 million all of which will be amortized in 2004.

Note 8: Joint Ventures

In June 1999, NetRatings granted a five-year license for the use of its proprietary software to NetRatings Japan, in which it held a direct
ownership interest of approximately 49%. The joint venture was formed to adapt, market, service and sell interactive media and market research data in Japan. NetRatings made a capital contribution of
$1.3 million for the year ended December 31, 2001. On April 1, 2003 NetRatings increased its ownership in NetRatings Japan to 58% for an additional investment of approximately
$1.1 million. Prior to 2003, this investment was accounted for using the equity method and, therefore, the Company's investment was reduced for its pro-rata share of NetRatings
Japan's losses. Effective April 1, 2003, the Company consolidates the results of operations and financial position of NetRatings Japan in its consolidated financial statements.

In
January 2000, NetRatings established a joint venture in France, Mediametrie NetRatings, in which it held a 50% ownership interest. Mediametrie NetRatings is responsible for
building and maintaining a French audience measurement panel. NetRatings made capital contributions of $0.5 million for each of the years ended December 31, 2002 and 2001, respectively.
Effective November 1, 2003, NetRatings increased its ownership in Mediametrie NetRatings to 66% in exchange for the fair value of customer contracts assigned to Mediametrie NetRatings in 2003
and 2002. Prior to 2003, this investment was adjusted for using the equity method and, therefore, the Company's investment was reduced for its pro-rata share of Mediametrie NetRatings'
earnings/losses. Effective November 1, 2003, the Company consolidates the results of operations and financial position for Mediametrie NetRatings in its consolidated financial statements.

On
May 7, 2002, NetRatings acquired a 49% stake in Ibope eRatings.com through the acquisition of ACNielsen eRatings.com. NetRatings accounts for this investment using the equity
method and, therefore, has adjusted its investment for its pro-rata share of Ibope eRatings.com's earnings/losses.

56

---

Revenue
from the joint ventures' Internet audience measurement services is allocated between NetRatings and the joint ventures depending on the location of the customer and the location
of the panel whose data is used in the service:



For
the years ended December 31, 2003, 2002 and 2001, NetRatings recorded revenue of $0.2 million, $1.2 million and $2.1 million respectively, related to
royalties from the joint ventures. For the years ended December 31, 2003, 2002 and 2001, revenue of $1.6 million, $1.7 million and $2.0 million, respectively, was recorded
related to NetRatings' sales to its customers of international data produced by the joint ventures. In connection with these sales, NetRatings also recorded cost of revenue of $0.2 million,
$0.9 million and $1.5 million for the years ended December 31, 2003, 2002 and 2001, respectively, related to the data acquisition fees due to our international partners.

Note 9: Related Party Transactions

In August 1999, NetRatings entered into an operating agreement with Nielsen Media Research. Under the terms of the operating agreement, NetRatings paid
Nielsen Media Research a 35% commission for selling services to certain customers. Commissions paid were $0.8 million and $1.6 million for the years ended December 31, 2002 and
2001, respectively, and are included in sales and marketing expenses in the accompanying statements of operations. In May 2002, this agreement was amended to provide that, in lieu of paying
commissions, NetRatings will pay the actual costs associated with the operation and maintenance by Nielsen Media Research of a sales force dedicated to selling NetRatings' products and services. This
expense totaled approximately $1.0 million for each of the years ended December 31, 2003 and 2002.

NetRatings
is also charged by Nielsen Media Research for the costs of maintaining the U.S. panels at the rates Nielsen Media Research charges its own internal divisions. These costs
totaled $4.1 million, $3.5 million and $6.4 million for the years ended December 31, 2003, 2002 and 2001, respectively, and are included in cost of revenue in the
accompanying statements of operations. The panel costs in 2001 included costs to build, recruit and maintain the U.S. home panel. The panel costs in 2002 primarily relate to the maintenance of the
U.S. home panel built and recruited during 2001 and the maintenance of the at-work panel during 2002. The panel costs in 2003 included costs to maintain the home and at-work
panels and the Hispanic panel. In the fourth quarter of 2003, Nielsen Media Research started providing services to recruit and survey respondents for NetRatings' @Plan service. The cost incurred for
these services in 2003 was $0.6 million and is included in cost of revenue in the accompanying statement of operations.

Since
May 2002, ACNielsen has provided back office services for the Company's international operations. These services include payment of all international operating expenses for
which NetRatings reimburses them on a quarterly basis. Fees related to these back office services were approximately $1.6 million and $0.7 million for the years ended December 31,
2003 and 2002, respectively.

57

---

As
of December 31, 1999, Nielsen Media Research became a wholly owned subsidiary of VNU N.V. As Nielsen Media Research is a majority stockholder of NetRatings, its parent company,
VNU N.V., is required to consolidate NetRatings' operating results with its own for financial reporting purposes. As of December 31, 2003, VNU owned, through its subsidiaries, approximately 64%
of the outstanding common stock of NetRatings.

During
the three years ended December 31, 2003, NetRatings assisted in the introduction of international panels by the joint ventures. This assistance primarily included
engineering expertise, as well as marketing, operations and sales assistance and such costs were reimbursed by the respective joint ventures, net of overhead expense. For the years ended
December 31, 2003, 2002 and 2001, NetRatings recorded $1.0 million, $1.0 million and $1.8 million, respectively, in reimbursements from joint ventures related to this
assistance and such reimbursements have been netted against the respective expense categories in the accompanying statements of operations.

Note 10: Commitments and Contingencies

Leases

As of December 31, 2003, minimum payments under all non-cancelable lease agreements were as follows (in thousands):

Year ending December 31:2004

$
1,7562005


6002006


3482007


2002008 and thereafter


Total minimum lease payments

$
2,904


Rent
expense was $1.5 million, $1.5 million and $1.4 million for the years ended December 31, 2003, 2002 and 2001, respectively.

In
connection with business acquisitions and restructuring activities in 2003, the Company has recorded a liability for several facilities in which there is idle space or space in excess
of projected needs (Note 5). Rent payments related to these facilities are not included in the future minimum lease payments.

Litigation

Securities Class Action Complaint

A class action lawsuit was filed on November 6, 2001 in the United States District Court for the Southern District of New York on behalf of purchasers of
our common stock alleging violations of federal securities laws. The case is now designated as In re NetRatings, Inc. Initial Public Offering Securities Litigation, related to In re Initial
Public Offerings Securities Litigation. The case is brought purportedly on behalf of all persons who purchased the Company's common stock from December 8, 1999 through December 6, 2000.
The complaint names as defendants NetRatings; two of our former directors; and investment banking firms that served as underwriters for our initial public offering in December 1999. The
Plaintiffs electronically served an amended complaint on or about April 19, 2002. The amended complaint alleges violations of Section 11 and 15 of the Securities Act of 1933, and
Section 10(b) of the Securities Exchange Act of 1934, on the grounds that the prospectus incorporated in the registration statement for the offering failed to disclose, among other things, that
(i) the underwriters had solicited and received excessive and undisclosed commissions from certain investors in

58

---

exchange
for which the underwriters allocated to those investors material portions of the shares of our stock sold in the initial public offering, and (ii) the underwriters had entered into
agreements with customers whereby the underwriters agreed to allocate shares of our stock sold in the initial public offering to those customers in exchange for which the customers agreed to purchase
additional shares of our stock in the aftermarket at pre-determined prices. The amended complaint also alleges that false analyst reports were issued following the IPO. No specific damages
are claimed.

We
are aware that similar allegations have been made in lawsuits relating to more than 300 other initial public offerings conducted in 1999 and 2000. Those cases, including our case,
have been consolidated for pretrial purposes before the Honorable Judge Shira A. Scheindlin. On July 15, 2002, we (as well as the other issuer defendants) filed a motion to dismiss the
complaint. The motions were heard on November 1, 2002. In February 2003, the judge granted the motion to dismiss certain of the claims against NetRatings and the two individual
defendants and denied the motion to dismiss certain other claims against NetRatings and the two individual defendants. We believe that the remaining claims against us and our former directors are
without merit and intend to defend them vigorously. The issuer defendants and the plaintiffs have been engaged in settlement negotiations and it is possible that the issuer defendants and the
plaintiffs will reach a settlement. However, there can be no assurance that a settlement will be reached in this matter. Our management currently believes that the resolution of this matter will not
have a material adverse impact on our financial position. However, an adverse outcome could materially affect our results of operations and financial position.

Note 11: Industry Segment and Foreign Operations

NetRatings operates in one segment for providing media and market research focused on Internet audience behavior and activity. For geographical reporting,
revenues are attributed to the geographic location in which the customer is located. Long-lived assets consist primarily of property and equipment and are attributed to the geographic
location in which they are located.

The
following table sets forth operating results for the years ended December 31, 2003 and 2002. There were no foreign operations in 2001.

For the year ended 2003US

Int'l

Total(in thousands)
(unaudited)Revenue

$
25,651

$
15,781

$
41,432Gross profit


13,211


7,745


20,956Loss from operations


(21,024
)

(8,685
)

(29,709
)Net loss


(16,952
)

(8,183
)

(25,135
)


For the year ended 2002US

Int'l

Total(in thousands)
(unaudited)Revenue

$
24,060

$
5,646

$
29,706Gross profit


12,142


1,113


13,255Loss from operations


(35,173
)

(4,700
)

(39,873
)Net loss


(34,726
)

(4,150
)

(38,876
)


59

---



Note 12: Income Taxes

No income tax expense was recorded for the years ended December 31, 2003, 2002, and 2001 due to net operating losses.

The
difference between the income tax benefit and the amount computed by applying the federal statutory income tax rate to loss before income taxes is as follows:

2003

2002

2001(in thousands)Income tax benefit at federal statutory rate

$
(8,819
)
$
(13,607
)
$
(6,172
)Amortization of deferred stock compensation


3,058


3,301


3,467Losses on joint ventures


23


892


1,962Unutilized net operating losses


5,738


9,414


743Other








Total

$


$


$



Significant
components of NetRatings' deferred tax assets are as follows:

2003

2002Deferred tax assets:Net operating loss carryforwards

$
25,056

$
16,300Tax credit carryforwards


1,020


644Reserves and accrued costs and expenses not currently deductible


2,068


4,645Asset write-offs not currently deductible


1,834


2,754Fixed assets and intangibles


804


130Other


188


686Total deferred tax assets


30,970


25,159Valuation allowance for deferred tax assets


(30,970
)

(25,159
)Net deferred tax assets

$


$



FAS 109
provides for the recognition of deferred tax assets if it is more likely than not that such assets will be realized. Based upon the weight of available evidence, which
includes NetRatings' historical operating performance and the reported cumulative net losses in all prior years, NetRatings has provided a full valuation allowance against its net deferred tax assets.
NetRatings will continue to evaluate the realizability of the deferred tax assets on a quarterly basis.

The
net valuation allowance increased by $5.8 million, $14.5 million and $3.0 million during the years ended December 31, 2003, 2002 and 2001, respectively.
Approximately $3.6 million and $3.3 million of the valuation allowance at December 31, 2003 and 2002, respectively, is attributable to stock option deductions, the benefit of
which will be credited to paid-in capital if and when realized.

As
of December 31, 2003, NetRatings had net operating loss carryforwards for federal and state tax purposes of approximately $67.5 million and $25.1 million,
respectively. NetRatings also had federal and state research and development tax credit carryforwards of approximately $0.6 million and $0.6 million, respectively. The federal and state
net operating loss and tax credit carryforwards begin to expire in 2017 if not utilized, and the state net operating losses begin to expire in 2007 if not utilized. The state tax credits may be
carried forward indefinitely.

Utilization
of the net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal
Revenue Code of

60

---

1986,
as amended, and similar state provisions. The annual limitation may result in the expiration of net operating loss and tax credit carryforwards before utilization.

Note 13. Subsequent Event (Unaudited)

Since December 31, 2003, NetRatings acquired additional shares of Red Sheriff for approximately $10.1 million, bringing the total shares owned to
approximately 97% at March 10, 2004. NetRatings has offered to purchase the remaining shares of Red Sheriff.

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

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the
Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of
such period, the Company's disclosure controls and procedures are effective. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not
absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company's periodic reports.

Internal Control over Financial Reporting

There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) during the fourth quarter of 2003 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over
financial reporting.

61

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PART III

Certain information required by Part III of this Annual Report on Form 10-K is omitted from this report because NetRatings intends to
file its definitive proxy statement pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report (the "Proxy Statement") and certain
information in the Proxy Statement is incorporated herein by reference.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item is incorporated by reference to information set forth in the Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference to information set forth in the Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item is incorporated by reference to information set forth in the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is incorporated by reference to information set forth in the Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated by reference to information set forth in the Proxy Statement.

62

---

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)
The following documents are filed as a part of this report:





(b)
Reports on Form 8-K during the quarter ended December 31, 2003:



63

---





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.

| |  | NETRATINGS, INC.
| |  | ----------------
| |  | By:             

Date:
March 15, 2004

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 and on the dates
indicated:

|Signature                                 |  | Title                                                                                                                              |  | Date          
|----------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------- |  | --------------
|                                          |  |                                                                                                                                    |  |               
|/s/WILLIAM PULVERWilliam Pulver           |  | Chief Executive Officer, President and Director (Principal Executive Officer)                                                      |  | March 15, 2004
|/s/TODD SLOANTodd Sloan                   |  | Executive Vice President Corporate Development, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) |  | March 15, 2004
|/s/JOHN DIMLINGJohn Dimling               |  | Chairman of the Board                                                                                                              |  | March 15, 2004
|/s/MICHAEL P. CONNORSMichael P. Connors   |  | Director                                                                                                                           |  | March 15, 2004
|/s/DAVID H. HARKNESSDavid H. Harkness     |  | Director                                                                                                                           |  | March 15, 2004
|/s/ARTHUR F. KINGSBURYArthur F. Kingsbury |  | Director                                                                                                                           |  | March 15, 2004
|                                          |  |                                                                                                                                    |  |               

64

---

|/s/THOMAS A. MASTRELLIThomas A. Mastrelli |  | Director |  | March 15, 2004
|----------------------------------------- |  | -------- |  | --------------
|/s/D. SCOTT MERCERD. Scott Mercer         |  | Director |  | March 15, 2004
|/s/JERRELL W. SHELTONJerrell W. Shelton   |  | Director |  | March 15, 2004

65

---



EXHIBIT INDEX

|Exhibit
Number |  | Exhibit Title                                                                                                                                                                     
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1(1)         |  | Asset Purchase Agreement by and among NetRatings, Inc., AdRelevance, Inc. and Jupiter Media Metrix, Inc., dated as of April 9, 2002.                                              
|2.2(2)         |  | Asset Purchase Agreement by and among NetRatings, Inc., and DoubleClick Inc., dated as of May 6, 2002.                                                                            
|2.3(3)         |  | Asset Purchase Agreement by and among NetRatings, Inc., Jupiter Media Metrix, Inc., and certain international subsidiaries of Jupiter Media Metrix, Inc., dated as of May 7, 2002.
|2.4(4)         |  | Agreement and Plan of Reorganization dated as of May 7, 2002, by and among NetRatings, Inc., Estancia Acquisition Corporation, ACNielsen eRatings.com and ACNielsen Corporation.  
|2.5(5)         |  | Share Purchase Agreement with certain stockholders of NetValue, S.A., dated as of August 5, 2002.                                                                                 
|2.6(6)         |  | Agreement with NetValue, S.A., a French stock corporation (société anonyme), dated as of August 5, 2002.                                                                          
|2.7            |  | Form of Share Purchase Agreement between NetRatings, Inc. and certain Red Sheriff shareholders.                                                                                   
|3.1            |  | Restated Certificate of Incorporation of Registrant.                                                                                                                              
|3.2(7)         |  | Amended and Restated By-Laws of Registrant.                                                                                                                                       
|4.1(8)         |  | Second Restated Rights Agreement.                                                                                                                                                 
|*10.1(8)       |  | Form of Indemnification Agreement between Registrant and its directors and officers.                                                                                              
|*10.2(10)      |  | 1998 Stock Plan, including form of option agreement (as amended).                                                                                                                 
|*10.3(9)       |  | 1999 Employee Stock Purchase Plan.                                                                                                                                                
|*10.4(10)      |  | Form of Director Retention Agreement.                                                                                                                                             
|*10.5(10)      |  | Form of Management Retention Agreement.                                                                                                                                           
|*10.6(11)      |  | Employment Offer Letter with Bill Pulver dated November 1, 2001.                                                                                                                  
|*10.7(12)      |  | Stock Repurchase Agreement with David J. Toth.                                                                                                                                    
|*10.8(13)      |  | Stock Repurchase Agreement with Charles Meadows.                                                                                                                                  
|*10.9(19)      |  | Employment Offer Letter with Todd Sloan dated February 28, 2002.                                                                                                                  
|10.10(25)      |  | Operating Agreement between Registrant and Nielsen Media Research dated as of August 15, 1999.                                                                                    
|10.11(26)      |  | Software License Agreement between Registrant and Nielsen Media Research, dated as of August 15, 1999.                                                                            
|10.12(27)      |  | Panel Maintenance Agreement between Registrant and Nielsen Media Research, dated as of August 15, 1999.                                                                           
|10.13(17)      |  | NMR Commissions Agreement by and between NetRatings, Inc. and Nielsen Media Research, Inc., dated as of May 7, 2002.                                                              
|               |  |                                                                                                                                                                                   

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|10.14(24) |  | Office Space Lease between Registrant and The Irvine Company dated November 9, 1999 (as subsequently amended).                                                                                                           
|--------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.15(14) |  | Services Agreement by and among NetRatings, Inc., ACNielsen eRatings.com and ACNielsen Corporation, dated as of May 7, 2002.                                                                                             
|10.16(15) |  | Post-Closing Agreement by and among NetRatings, Inc., ACNielsen eRatings.com and ACNielsen Corporation, dated as of May 7, 2002.                                                                                         
|10.17(16) |  | Agreement of Reimbursement by and between NetRatings, Inc. and ACNielsen Corporation, dated as of May 7, 2002.                                                                                                           
|10.18(18) |  | Agreement of Reimbursement by and between NetRatings, Inc. and VNU, Inc., dated as of May 7, 2002.                                                                                                                       
|10.19(21) |  | Settlement Agreement by and between NetRatings, Inc. and Jupiter Media Metrix, Inc., dated as of May 7, 2002.                                                                                                            
|10.20(22) |  | Intellectual Property Agreement by and between NetRatings, Inc. and Jupiter Media Metrix, Inc., dated as of May 7, 2002.                                                                                                 
|10.21(23) |  | Services Agreement, dated as of September 30, 1998, by and between Jupiter Media Metrix, Inc. and The NPD Group, Inc., as amended by Jupiter Media Metrix, Inc., The NPD Group, Inc. and NetRatings, Inc. on May 7, 2002.
|10.22(20) |  | Sub-sublease dated September 13, 2002.                                                                                                                                                                                   
|21        |  | Subsidiaries.                                                                                                                                                                                                            
|23        |  | Consent of Independent Auditors.                                                                                                                                                                                         
|31.1      |  | Certificate of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                       
|31.2      |  | Certificate of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                       
|32.1      |  | Certificate of Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.            
|32.2      |  | Certificate of Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.            

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