10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT

PURSUANT TO SECTIONS 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

(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, 2005
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-27907

NETRATINGS, INC.

(Exact name of Registrant as specified in its charter)

Delaware	77-0461990
(State or other jurisdiction	(I.R.S. Employer
of incorporation of organization)	Identification No.)
120 West 45th Street, 35th Floor
New York, New York	10036
(Address of principal executive offices)	(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 registered
None	None

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

Common Stock

(Title of Class)

Indicated by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No ý

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 a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer oAccelerated filer ýNon-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).
Yes o No ý

The aggregate market value of the common 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, 2005, was $201,776,726.

The number of shares of the Registrant’s Common Stock outstanding as of February 28, 2006 was 35,048,147.

DOCUMENTS INCORPORATED BY REFERENCE

Parts of the definitive proxy statement for the Registrant’s 2006 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 Item 1A, “Risk Factors.”

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, MegaPanel, SiteCensus, AdRelevance, @Plan and Homescan Online. 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. 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. AdRelevance offers 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. Homescan Online, which is a joint product with ACNielsen, combines ACNielsen’s offline consumer retail purchasing data with our in-depth Internet audience measurement data. Our custom and analytical services offer customized research and advisory services from experienced industry experts.

Our products and services are currently sold in the United States and in numerous countries throughout Europe, Asia Pacific and Latin America. In France, Japan and Brazil, we have 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, 2005, we had 1,615 clients.

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, owned approximately 62% of our outstanding common stock as of February 28, 2006.

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

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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.

NetView

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 nine locations around the world and track a large majority of 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 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 certain international markets, we expect to supplement our NetView panels with panelists recruited through various online methods, including online surveys and sweepstakes offers, in order to obtain an even deeper understanding of Internet audience behavior and use.

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 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.

MegaPanel

Our MegaPanel service is designed to address the expanding need for accurate Internet market research data and intelligence. The core feature of our MegaPanel service is a very large panel of computer and Internet users, representing a broad cross-section of home, work and university users. Because of the panel’s size and scope, our MegaPanel service allows us to provide increased breadth and depth of data, integration of online and offline datasets and more advanced custom reporting. Currently available in the United States, the United Kingdom, Germany and France, MegaPanel delivers detailed information that can be used to understand in-depth consumer attitudes and behavior. Combined with comprehensive demographic and trend data, MegaPanel demonstrates how people react and respond to companies’ products, services, brands and promotions—both on and off the Internet. We believe that our MegaPanel service complements our NetView service in assisting clients in integrating the Internet into their global marketing strategies.

Panelists for our MegaPanel service are recruited through a variety of methods, including online survey and sweepstakes offers, as well as through partnerships with local market research providers. As with our NetView panels, our tracking software requires virtually no panelist intervention, and software updates are automatic. The information we collect,

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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. Our MegaPanel service is balanced with our NetView panels to ensure that the MegaPanel is an accurate statistical representation of the Internet population.

Our MegaPanel service 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, the size of the MegaPanel allows us to offer survey capabilities to help clients better understand consumer attitudes and behavior. By allowing clients to connect directly with visitors to their own Web site, as well as those of their competitors, MegaPanel surveys provide a unique and efficient way for clients to benchmark performance using survey data and behavioral data collected by our tracking software. By administering 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 as well as provide critical competitive intelligence.

The MegaPanel service includes both syndicated and custom offerings. Our current offerings include the following:

•MegaView Retail:  Our retail service provides clients with comprehensive insight into the retail e-commerce landscape. Clients can assess total traffic to top retail sites, sales conversion rates, number of purchases and average order sizes, as well as compare the success of customer acquisition, conversion and loyalty by site.

•MegaView Financial:  Our financial offering shows detailed activity at online financial services sites, including data related to checking and savings accounts, credit card activity, lending and mortgage information and online trading accounts. The service allows companies to monitor average account balances, application completion figures and bill-pay activity, as well as to benchmark client performance versus the industry and/or key competitors.

•MegaView Search:  Our search product reports on behavior across various search categories, including local, news and shopping. Clients can view search query volume by type, evaluate the contextual advertising potential for search terms and gain a quantitative perspective of business opportunities at search sites.

•MegaView Travel:  Our travel service provides in-depth insight into the online travel market. Clients can assess the rate at which travelers are booking flights, rental cars, hotels and vacation packages for the top online travel sites, offering companies unique insight into their own performance versus the industry and/or key competitors.

•MegaView Local:  Our local market reporting provides in depth rankings of Web site performance at the local market level. A valuable tool for local publishers and national publishers focusing on local marketing, the local market report provides site traffic rankings by Designated Market Area (DMA) as well as demographic profiles and category rankings on a local market basis.

SiteCensus

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 looking for comprehensive data and research metrics about their own Web sites or networks. In December 2003, we acquired Red Sheriff, a global provider of various Web site measurement services. This acquisition significantly expanded our SiteCensus business and our ability to offer SiteCensus in new global regions. We currently offer SiteCensus in over fifteen countries around the world.

Panel-based research products, such as our NetView service, have historically been the standard by which demographics, frequency and other measurements are used for the buying and selling of online media. SiteCensus is designed to complement panel-based research by measuring every visitor and providing a complete census count of page views. 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 SiteCensus service is provided through use of a page-tagging system. When encoded in any Web site page or component of Web site page, the tag provides an accurate and direct count of every page view, visitor and click 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 such as libraries and

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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 obtained 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.

Our SiteCensus service is currently comprised of three core product offerings:

•Customer Intelligence: This census-based service provides companies with the business critical information they need to understand the effectiveness of their Web sites, including unique users, page impressions, session duration and demographic profiling. This data is used by companies to assess site performance, usage trends, content and product placement, audience circulation, visitor loyalty, search engine performance and visitor behavior. The data is delivered via concisely constructed reporting modules so that each important process can be researched independently and benchmarked internally.

•Market Intelligence:  This service provides census-based market rankings that provide insight into a company’s positioning within an industry and relative to its competitors. Market Intelligence also reports on the overall Internet audience behavior for a single company’s site or network of sites. Market Intelligence enables advertisers and agencies to identify the most effective sites for reaching primary and secondary demographic targets, as well as the best groups of sites in order to optimize reach and frequency. The service also allows companies to identify their own demographic weaknesses within a whole category or against an entire market.

•AdIntelligence:  This service provides census-based advertising measurement, thereby allowing online advertisers to measure their online marketing activities. AdIntelligence, which measures all types of online advertisements, enables companies to identify the best performing advertising campaigns and delivery locations throughout a marketing plan’s execution. AdIntelligence also enables advertisers to conduct effective post-campaign analysis, including the measurement of impressions, clicks, campaign unique visitors and frequency. The AdIntelligence technology may also be deployed across an enterprise advertising network to provide third-party ad delivery verification that can be used to report back to advertisers.

@Plan

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, as well as 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 offline survey 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 enhancing their advertising strategy in both traditional and online markets.

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AdRelevance

We offer advertising measurement products and services around the world through our AdRelevance service, which we acquired in April 2002. We recently launched AdRelevance in Australia, and currently offer the service in fifteen markets outside the United States. We expect that we will continue to launch AdRelevance in additional international markets that are experiencing growth in online advertising.

AdRelevance tracks competitive online advertising and advertiser data for many 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 millions of probes a week 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.

Homescan Online

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 thousands of 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 21,000 CPG brands and online visitors to approximately 1,700 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.

WebRF

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.

Custom and Analytical Services

As we have expanded our product offerings to more completely address the media and market research needs of our customers, clients have increasingly relied on us to provide sophisticated 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 research goals and objectives. While all of our syndicated services allow for custom applications, our investments in MegaPanel, SiteCensus and our survey capabilities have allowed for a new wave of custom opportunities in the past year. Examples of the types of custom research and analytics projects that we have conducted in recent months include the following:

•Competitive Dashboards: A leading multi-channel retailer contracted with us to integrate data from NetView, MegaPanel, surveys and custom analysis to create a quarterly competitive dashboard that compares their own customer satisfaction results with ten leading competitors. The information is used to inform the strategic direction of the retailer’s online business, and is relied on by the company’s executive management team.

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•Online Advertising Media Mix Analysis:  In conjunction with a leading online publisher and VNU, we generated cutting edge approaches to determining optimal levels of online media spend for leading CPG ad campaigns. Information from our MegaPanel and SiteCensus services were incorporated into sophisticated consumer market mix models, allowing for the online medium to be assessed side-by-side with traditional media choices.

•Behavioral Driver Analysis: Using MegaPanel and survey capabilities, we worked with a large multimedia publisher to determine what user behaviors were the key drivers of engagement for their site. Results of this research had a direct impact on the publisher’s online content decisions and web site architecture.

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. Nielsen Media Research also provides us with certain research services in connection with our @Plan service, including telephone recruitment of survey respondents and the administration of online surveys. In the first quarter of 2004, we completed the re-location of our main data center facilities in San Jose, California to Nielsen Media Research’s technology center in Oldsmar, Florida, where Nielsen Media Research provides us with certain 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 global leader in providing business information, analysis and insights to CPG 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 provides us with certain back-office services for a period of up to five years. We are currently in the process of transitioning these services out of ACNielsen and expect to complete the transition by the end of 2006.

On March 8, 2006, VNU announced that it had reached an agreement with a consortium of private equity firms on a public offer for VNU’s outstanding shares.  VNU also announced that the closing of the public offer is conditioned upon 95% of VNU shareholders in each class tendering their shares.  Assuming this transaction is completed, it is possible that the new owners of VNU will adopt a new strategy for our company or make different decisions regarding our direction and policies.  For example, we cannot assure you, among other things, that VNU will continue to (i) own a majority stake in our company, (ii) provide various services to us and/or (iii) offer us the opportunity to develop joint products with other VNU entities, particularly Nielsen Media Research and ACNielsen. Likewise, it is also possible that the new owners of VNU will make different decisions with respect to our product investments, international expansion, use of our cash and other operating decisions.

SALES AND MARKETING

As of December 31, 2005, we had 1,615 clients. 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 2005.

We sell our products and services in the United States through a direct sales force. Our domestic sales representatives are located at our offices in New York, New York, Milpitas, California, San Francisco, California and Seattle, Washington, and we also maintain local representatives in various locations throughout the United States. Internationally, we

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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 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, Shop.org, Web Analytics Association, Direct Marketing Association and Advertising Research Foundation, as well as aggressive public relations. We maintain standing arrangements for the use of our data with key business and trade press including The Associated Press, The Wall Street Journal, CNN, BusinessWeek, USA Today, San Jose Mercury News, Hollywood Reporter, Chicago Tribune, Sports Business Journal, American Banker, 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 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 intellectual property rights. The steps we have taken or will take in the future to establish and protect our intellectual property rights 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 protect our proprietary rights to a greater or lesser extent as do the laws of the United States.

We seek to obtain the issuance of patents and the registration of our trademarks and service marks in the United States and in selected other countries. We currently own six issued patents in the United States with regard to our computer use tracking and monitoring technology (U.S. Patent No. 5,675,510; U.S. Patent No. 6,115,680; U.S. Patent No. 5,796,952; U.S. Patent No. 6,138,155; U.S. Patent No. 6,643,696; and U.S. Patent No. 6,763,386). Patents for the technology covered by these six patents have also been issued in various foreign countries, including Japan, Canada, Australia, Israel, New Zealand, South Korea and Mexico. We also have other patents and pending patent applications which relate to our proprietary technology, including pending patent applications for our AdRelevance technology. In addition, we own an undivided fifty percent ownership interest in U.S. Patent No. 6,108,637, which relates to the monitoring of computer uses, and the patents for this technology which have been issued in many other jurisdictions.

In the first half of 2005, we launched a program to enforce our intellectual property rights against various companies that compete against us in the Internet technology fields. As part of this program, we initiated patent infringement lawsuits in 2005 and 2006 against six companies (Omniture, Inc., Coremetrics, Inc., SageMetrics, Corp., Sane Solutions, LLC, Visual Sciences, LLC and WebSideStory, Inc.) and also entered into licensing discussions with a few other companies. Our lawsuit against Visual Sciences was settled in October 2005, and our lawsuits against Omniture and SageMetrics were settled in 2006. Under each of these settlements, we have licensed certain of our patents in exchange for license or royalty fees payable to us. We cannot be sure that we will prevail in any of our remaining litigations, and these lawsuits could result in a finding that our patents are invalid and divert resources from the operation of our business.

As part of our patent enforcement program, we have also held discussions with other companies that have expressed an interest in signing a patent licensing arrangement with us. We expect to expand our patent enforcement program in 2006.

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. In February 2006, WebSideStory filed a patent infringement lawsuit against us in the United States District Court for the Southern District of California. While we believe this lawsuit is without merit, defending patent infringement or other intellectual property cases, whether meritorious or not, could be time-consuming, result in additional expense, 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

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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 mark-up language, or HTML, Java and C++, 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.

Our SiteCensus service operates on an around-the-clock global infrastructure. The service’s Web site measurement tags measure a Web site visitor’s experience and deliver the information back to our high capacity measurement collection network consisting of nine fully redundant global data centers. The SiteCensus measurement network currently captures in excess of 350 gigabytes worth of new measurement information from over one billion transactions on a daily basis. In addition, the SiteCensus 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. For our SiteCensus service, our primary research data center is located in Melbourne, Australia, along with ten 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:

•the ability to provide high-quality, accurate and reliable data regarding Internet audience behavior and activity in a timely manner;

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

•the availability of data across various geographic areas;

•the ability to offer high-quality analytical services based on the Internet audience measurement information;

•the ability to offer products and services that meet the changing needs of our customers; and

•the prices that are charged for the products and services, as well as the general economic conditions.

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, WebTrends and WebSideStory. 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 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.

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EMPLOYEES

As of December 31, 2005, we had 396 full-time employees. 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.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 1A. RISK FACTORS

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 could (i) materially adversely affect our business, operating results and financial condition, (ii) cause the trading price of our common stock to decline and (iii) 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 incurred net losses of $25.1 million for the year ended December 31, 2003, $17.4 million for the year ended December 31, 2004 and $8.4 million for the year ended December 31, 2005. As of December 31, 2005, our accumulated deficit was $145.3 million. We intend to continue to incur 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 additional 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 AND ANALYSIS

We were incorporated in 1997, did not start generating revenue until 1998 and introduced our NetView service in 1999. Many of our other products and services were first offered by us during the last few years. 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, some of which may be beyond our control, including:

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

•the extent of the global growth in the Internet media research and market research markets;

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

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

•the risks associated with operating a business in numerous international markets.

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

During the past few years, we launched a number of new products and services that we believe will generate interest in the marketplace and result in increased revenues in the coming years. Our financial results during 2005 and beyond 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 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

Due to the evolving nature of our business and 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:

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

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

•the impact on our renewal rates caused by our customers’ budgetary constraints or a perceived lack of need for our services;

•changes in demand for our products and services due to the announcement or introduction of new products and services or the cancellation of existing products and services by us or our competitors;

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

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

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

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 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.

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

Our future success will depend on the continued 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 growth trends will continue throughout the world.

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 at a rapid rate, or the Internet may not be adopted as a medium of commerce by a broad base of customers worldwide. Because of the foregoing factors, among others, the market for Internet advertising and e-commerce may not continue to grow at significant rates. If these markets fail to develop or develop slower 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:

•the ability to provide high-quality, accurate and reliable data regarding Internet audience behavior and activity in a timely manner;

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

•the availability of data across various geographic areas;

•the ability to offer high-quality analytical services based on the Internet audience measurement information;

•the ability to offer products and services that meet the changing needs of our customers; and

•the prices that are charged for the products and services, as well as the general economic conditions.

Some of our competitors may be able to:

•devote greater resources to marketing and promotional campaigns;

•adopt more aggressive pricing policies; or

•devote more resources to technology and systems development.

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

IF WE FAIL TO SUCCESSFULLY CLOSE AND INTEGRATE ACQUISITIONS, 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

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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 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. 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.

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

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

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.

On March 8, 2006, VNU announced that it had reached an agreement with a consortium of private equity firms on a public offer for VNU’s outstanding shares.  Assuming this transaction is completed, it is possible that the new owners of VNU will adopt a new strategy for our company or make different decisions regarding our direction and policies.  For example, we cannot assure you, among other things, that VNU will continue to (i) own a majority stake in our company, (ii) provide various services to us and/or (iii) offer us the opportunity to develop joint products with other VNU entities, particularly Nielsen Media Research and ACNielsen. Likewise, it is also possible that the new owners of VNU will make different decisions with respect to our product investments, international expansion, use of our cash and other operating decisions.

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

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. 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 to devote adequate resources to the development or maintenance of such panels, or any failure on the part of Nielsen Media Research, ACNielsen or our other business partners to maintain the overall quality of these methodologies or to develop alternative sampling 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.

As noted above, in the event that VNU is sold to a consortium of private equity firms, it is possible that the new owners of VNU will make decisions that impact our ability to rely on VNU entities for some or all of the services that we currently obtain from them.

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.

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

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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.

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

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

OUR 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 are 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 the past few years, we offer our products and services in numerous countries around the world. 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, and the governmental authorities in each country have different views regarding the regulatory oversight of the Internet. For example, the Chinese government has recently taken steps to restrict the content available to Web users in China, and this has caused us to forecast slower growth in our business there.

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

•effectively select the appropriate countries to serve;

•recruit and maintain panels that are representative of a geographic area;

•control costs and effectively manage foreign operations; and

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

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:

•changes in regulatory requirements;

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•deficiencies in the telecommunications infrastructure in some countries;

•reduced protection for intellectual property rights in some countries;

•more rigorous levels of privacy protection in some countries;

•potentially adverse tax consequences;

•economic and political instability; and

•fluctuations in currency exchange rates.

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 misuse of data, reports or analyses by the customer. 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.

CONCERN OVER SPYWARE COULD IMPAIR OUR ABILITY TO RECRUIT PANELISTS OR MAINTAIN PANELS OF SUFFICIENT SIZE TO MEET CLIENT DEMAND, WHICH IN TURN COULD MATERIALLY ADVERSELY AFFECT OUR ABILITY TO PROVIDE OUR PRODUCTS AND SERVICES

Public concern has increased recently regarding certain kinds of downloadable software known as “spyware” and “adware.”  These types of programs are often installed on a computer without the consent of the user or without the user’s full understanding while navigating the Internet. Concern over spyware and adware might cause users to be less inclined to download legitimate software from the Internet, including our proprietary metering technology, which could make it difficult to recruit additional panelists or maintain panels of sufficient size to meet client demand.

Moreover, in response to spyware and adware concerns, numerous programs are available (many of which are available for free) that claim to identify and remove spyware and adware from users’ computers. While our technology is not spyware, some of these anti-spyware programs have identified our software as spyware or as a potential spyware application. We actively seek to persuade the authors of these anti-spyware programs that our software should not be included on their lists of spyware applications or potential spyware applications. However, to the extent that we are not successful, or to the extent that new anti-spyware programs classify our software as spyware or as a potential spyware application, our goodwill might be harmed and users of these programs might uninstall our software. Loss of goodwill or a decrease in the size of our panels could increase the cost of recruiting panelists and materially adversely affect our ability to provide our products and services to our clients, which in turn could cause our expected revenues to decline.

TECHNOLOGICAL CHANGES MAY RESULT IN WIDESPREAD BLOCKING OR ERASING OF COOKIES, WHICH COULD REDUCE THE AMOUNT AND VALUE OF THE INFORMATION WE COLLECT AND ADVERSELY AFFECT OUR ABILITY TO PROVIDE OUR PRODUCTS AND SERVICES TO CLIENTS

Our SiteCensus technology currently uses “cookies” and “action tags” to track the behavior of Internet users. Cookies are small files of information placed on an Internet user’s computer to collect information about the user’s visits to a Web site. An action tag, also known as “web beacon,” “pixel tag,” and “clear gif,” generally consists of a small string of invisible code that represents a graphic image request on a Web page that companies place on their Web sites to allow them to analyze the general usage patterns of visitors to their Web sites. Third-party software and our own technology and privacy policy make it easy for users to block or delete our cookies. Software programs, sometimes marketed as adware or spyware detectors, may block our cookies by default or prompt users to delete or block our cookies. If a large percentage of users delete or block our cookies, this could, among other things, reduce the amount and value of the information we collect, cause us to spend substantial money and time to change our technology, and adversely affect our ability to provide our SiteCensus service to our clients.

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Changes in Web browsers may also encourage users to block our cookies or impair our ability to use cookies and action tags for data collection purposes. Technologies like the Platform for Privacy Preferences (P3P) may also limit the collection of information from cookies and action tags. If these or other technological changes are implemented and we are unable to adapt our technology and practices adequately in response to these changes, then the value of our SiteCensus service will be substantially impaired.

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 engineering time and resources. Several states have enacted legislation designed to protect Internet users’ privacy by prohibiting certain kinds of downloadable software defined as “spyware.” Similar legislation has been introduced in other states and the U.S. Congress, including the Safeguard Against Privacy Invasions Act in the House of Representatives and the SPYBLOCK Act in the Senate. In addition, the European Union has adopted a directive requiring the disclosure of the use of cookies and instructions on their removal. It is possible that this legislation or future legislation intended to regulate spyware could affect our ability to collect information, which could prevent us from operating or distributing some of our products and services or which could require us to change our business practices. In addition, 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 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, equity compensation, 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.

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. 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.

In the first half of 2005, we decided to launch a program to enforce our intellectual property rights against various companies that compete against us in the Internet technology fields. As part of this program, we initiated patent infringement lawsuits in 2005 against five companies (Omniture, Inc., Coremetrics, Inc., SageMetrics, Corp., Sane Solutions, LLC and Visual Sciences, LLC) and also entered into licensing discussions with a few other companies. In February 2006, we initiated a patent infringement lawsuit against WebSideStory, Inc. Our lawsuit against Visual Sciences was settled in 2005, and our lawsuits against Omniture and SageMetrics were settled in 2006. We cannot be sure that we will prevail in any of the remaining litigations, or any new lawsuits that we initiate, and any such lawsuits could result in a finding that our patents are invalid and divert resources from the operation of our business.

We also cannot assure you that any other steps we take 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.

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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 that our own trademarks, patents or other intellectual property rights are invalid. In February 2006, WebSideStory, Inc. filed a patent infringement lawsuit against us in the United States District Court for the Southern District of California. While we believe this lawsuit is without merit, we cannot assure you that we will prevail in this litigation.

Any claims of infringement and any resulting litigation, including the WebSideStory litigation, 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 additional expense 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.

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, the provision of our services and day-to-day management of our business and could result in the corruption or loss of data.

The servers on which we collect and process our panel members’ data reside in Nielsen Media Research’s facilities in Oldsmar, Florida and at IBM Global Service facilities in Paris, France. We currently have a back-up data collection facility to provide redundant network capacity in the event of a system failure. However, this back-up facility only has the capacity to collect our Internet audience data, not process it. Accordingly, our ability to report Internet audience data in real time is dependent upon the efficient and uninterrupted operation of Nielsen Media Research’s and IBM Global Service’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 these data centers could result in interruptions in the flow of data to our servers. In addition, any failure by these data centers to provide our required data communications capacity could result in interruptions in our service. In the event that any of these data centers 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 be costly and 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 other back-up systems outside of our primary facilities. 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.

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 to our clients 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. Under California SB 1386, companies that maintain data on California residents are required to inform individuals of any security breaches that result in their personal information being stolen. In the event that any personal information about our panelists residing in California was misappropriated, we could incur significant costs in complying with the disclosure requirements of California SB 1386. In addition, any such disclosure could harm our reputation and result in a higher rate of panel attrition.

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. For example, China has recently taken steps to require certain companies to restrict their search engine results and other content available to Web users in China. 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 REGULATORY REQUIREMENTS APPLICABLE TO PUBLIC REGISTRANTS MAY CAUSE OUR GENERAL AND ADMINISTRATIVE EXPENSES TO INCREASE AND MAY IMPACT OUR RESULTS OF OPERATIONS

In order to comply with the Sarbanes-Oxley Act of 2002, as well as changes to Nasdaq listing standards and rules adopted by the Securities and Exchange Commission, we were required to enhance our internal controls and hire additional finance personnel and to retain additional outside legal, accounting and advisory services, all of which have caused our general and administrative costs to increase. For example, we have hired outside consultants to assist us with our compliance with Section 404 of the Sarbanes-Oxley Act of 2002, and this has resulted in additional general and administrative expenses during 2004 and 2005. Recent changes in the accounting rules, in particular the rules relating to accounting for employee stock options, have increased the expenses that we report under generally accepted accounting principles and adversely affect our operating results. Additional changes in the accounting rules could cause our financial results to be negatively impacted.

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.

As stated above, VNU has announced that it has reached an agreement with a consortium of private equity firms on a public offer for VNU’s outstanding shares. Assuming this transaction is completed, we cannot assure you that the new owners of VNU will decide to retain its stake in NetRatings.

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

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

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

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

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

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

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 and San Francisco, California.

Outside of the United States, we lease office space in various countries, including the United Kingdom, Italy, Spain, France, Germany, Australia, Japan, China, India and Hong Kong.

ITEM 3. LEGAL PROCEEDINGS

Information regarding legal proceedings is set forth in Note 10 of the Notes to Consolidated 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 2005.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

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 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 effected any stock split.

	2005				2004
	High		Low		High		Low
First Quarter	$	19.08	$	14.70	$	13.00	$	9.70
Second Quarter	15.25		11.99		17.00		10.11
Third Quarter	15.78		12.63		17.86		12.46
Fourth Quarter	15.50		12.10		20.76		17.49

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 28, 2006, there were approximately 168 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, 2005, 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))
	(a)	(b)		(c)
Equity compensation plans approved by security holders	3,101,807	$	10.39	599,000
Equity compensation plans not approved by security holders*	7,813	$	106.83	—
Total	3,109,620	$	10.64	599,000

*  Assumed in connection with our acquisition of eRatings in May 2002.

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Issuer Purchase of Equity Securities

Period	(a) Total Number of Shares (or Units) Purchased	(b) Average Price Paid Per Share (or Unit)	(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs(1)	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs(1)
October 1, 2005 – October 31, 2005	—	—	—	—
November 1, 2005 – November 30, 2005	428,800	$13.64	428,800	$19,152,840
December 1, 2005 – December 31, 2005	720,600	$13.19	720,600	$9,648,844
Total	1,149,400	$13.36	1,149,400

(1)  On November 3, 2005, we announced that our Board of Directors had authorized the repurchase of up to $25 million of our outstanding common stock.

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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,
	2005			2004			2003			2002			2001
	(in thousands, except per share data)
Consolidated Statements of Operations Data:
Revenue	$	68,017		$	59,294		$	41,432		$	29,706		$	23,504
Gross profit	45,366			36,237			20,956			13,255			10,240
Total operating expenses	57,266			56,422			50,665			53,128			37,830
Operating loss	(11,900		)	(20,185		)	(29,709		)	(39,873		)	(27,590		)
Net loss	(8,395		)	(17,419		)	(25,135		)	(38,876		)	(17,634		)
Basic and diluted net loss per common share	$	(0.23	)	$	(0.50	)	$	(0.74	)	$	(1.17	)	$	(0.54	)
Weighted average shares outstanding used in computing basic and diluted net loss per common share	35,985			34,637			33,792			33,168			32,864

	December 31,
	2005		2004		2003		2002		2001
	(in thousands)
Consolidated Balance Sheet Data:
Cash, cash equivalents and marketable securities	$	180,252	$	197,602	$	210,039	$	241,411	$	322,563
Working capital	136,935		131,478		144,566		213,362		304,791
Total assets	300,254		314,457		314,923		331,266		341,699
Deferred revenue	12,666		11,435		10,449		10,823		7,031
Total stockholders’ equity	$	263,398	$	280,438	$	274,054	$	288,666	$	318,468

In 2002, 2003 and 2005, we completed several acquisitions which impacted the results of operations for those years and future years. Also in 2002, we incurred expenses related to a restructuring and a write-off of investments. In 2004, the Company received an insurance recovery settlement and renegotiated a lease, which resulted in a release of restructuring expenses. In 2005, we incurred restructuring charges primarily related to our European operations. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for additional information.

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

Summary

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. VNU N.V., through its subsidiaries ACNielsen Corporation and Nielsen Media Research, owned approximately 62% of our outstanding common stock as of February 28, 2006.

Our revenues for the year ended December 31, 2005 totaled $68.0 million, compared to $59.3 million and $41.4 million for the years ended December 31, 2004 and December 31, 2003, respectively. As of December 31, 2005, we had 1,615 clients, compared to 1,429 clients as of December 31, 2004 and 1,098 clients as of December 31, 2003. The increases in our revenues and number of clients during the last few years are the result of both acquisitions that we have completed, as well as organic growth in our product portfolio. We expect our revenues and client base to continue to grow as (i) our newer products gain marketplace acceptance, (ii) we develop and sell additional products and services to new and existing clients, (iii) we launch our products and services in new international territories, (iv) we generate price increases for our existing products and services and (v) we expand our patent licensing program.

We have incurred operating losses and net losses since our inception, and, as of December 31, 2005, our accumulated deficit was $145.3 million. Since the beginning of 2002, however, we have made significant progress in

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reducing our annual operating loss and annual net loss. Our operating loss decreased from $39.9 million in 2002 to $29.7 million in 2003, to $20.2 million in 2004 and to $11.9 million in 2005. Likewise, our net loss decreased from $38.9 million in 2002 to $25.1 million in 2003, to $17.4 million in 2004 and to $8.4 million in 2005. Our ability to reduce our operating and net losses, and our belief that we will make further progress in reducing such losses in 2006, is attributable to a number of factors. First, we expect the revenue growth we have experienced in the past few years to continue. Second, a significant initial investment was required to launch certain of our services in 2003 and 2004, including our MegaPanel services, and while the ongoing expense to operate such services will continue, we expect such expenses to be less than the initial expenses required to launch such services. In addition, because we offer syndicated panel services and are able to utilize our existing databases to expand our custom analytical offerings, our revenue growth does not require a corresponding increase in our expenses.

As of December 31, 2005, our cash, cash equivalents and marketable securities totaled $180.3 million, which we believe is sufficient to meet our cash needs for at least the next twelve months.

Industry Trends

The success of our business depends heavily on the continued expansion of the Internet for advertising, commerce and communications. Internet advertising, e-commerce and the number of people using the Internet, particularly through the use of Internet broadband connections, have dramatically increased in recent years, and we expect this growth to continue in upcoming years around the world. These growth trends have made the Internet an increasingly important component of companies’ overall business strategies. As a result, companies conducting business online are increasingly seeking analysis and insights to (i) define and reach their target audiences, (ii) measure the effectiveness of their advertising and marketing strategies, (iii) benchmark their performance with their competitors and (iv) increase brand equity and commerce revenue.

Companies are also increasingly recognizing that, compared with other media, the Internet allows online market participants to obtain a unique understanding of consumer behavior. Unlike with other forms of advertising, including print, radio and television, advertisers can (i) target advertising in an unprecedented manner, (ii) confirm whether consumers have actually viewed advertisements (and when) and (iii) decipher whether consumers have taken certain actions, whether completing a purchase or visiting a Web site, and understand exactly why. Because of the unique dynamics of the Internet, we expect that Internet advertising and commerce will not only continue to grow in coming years, but that Internet advertising and commerce will garner a larger percentage of total advertising and commerce dollars. We believe that this growth will require a commensurate increase in Internet media and market research, and that we are particularly well-suited to address the global needs of online participants.

Product Portfolio

Our goal for the last few years has been to offer the most comprehensive global portfolio of Internet media and market research products and services. In order to reach this goal, we have focused on both strategic acquisitions in the United States and abroad and investing in new products to meet changing marketplace needs. As a result of these efforts, we currently offer a wide range of products and services in the United States and in many countries throughout Europe, Asia Pacific and Latin America. We believe that this product portfolio and breadth of coverage will enable us to continue to increase our client base, increase our ability to sell multiple products to clients and increase the total sales to individual clients.

In the first half of 2002, we acquired AdRelevance, our online advertising expenditure service, and @Plan, which provides demographic, lifestyle and product preference information. During 2002, we also made strategic acquisitions designed to expand our NetView service around the world, which provides detailed panel-based Internet audience information. These included our acquisition of NetValue S.A., an international provider of Internet audience measurement services, and the purchase from ACNielsen Corporation of the 80.1% interest in ACNielsen eRatings.com that we did not already own. Since the beginning of 2003, we acquired LemonAd (now branded AdRelevance), our international online advertising measurement service, and Red Sheriff, a global provider of site-centric-based Internet audience measurement tools.

In conjunction with these strategic acquisitions, we have also devoted significant resources to internal product development. Our key new products and services include (i) MegaPanel, which includes our vertical offerings, such as MegaView Financial, MegaView Retail, MegaView Search, MegaView Travel and MegaView Local, and (ii) Homescan Online, a joint product with ACNielsen that combines offline consumer purchasing data with Internet audience measurement data. We believe these new products and services, as well as additional MegaPanel offerings, will be important

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to our financial performance over the next few years.

Revenue Overview

We generate revenues primarily from the sale of our Internet media and market research products and services, which include both syndicated products and customized products. Syndicated products currently represent a significant majority of our total revenues, and our goal is for syndicated products to continue to represent a significant majority of our total revenues. We also generate revenues from the licensing of our patents.

In France, Japan and Latin America, we offer many of our services through strategic relationships with leading local market research and information services companies. We currently own 56.8% of NetRatings Japan, our Japanese subsidiary, while the remaining ownership interest is owned by TransCosmos, Dentsu.com and other investors. We currently own 66% of Mediametrie NetRatings, our French subsidiary, and the remainder is owned by Mediametrie. We currently own 49% of Ibope eRatings.com, our Latin American joint venture, and the remainder is owned 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. As a result of the Red Sheriff acquisition, we also obtained a 50% ownership interest in an Italian company, Red Sheriff S.r.l., which offers site-centric-based services in Italy. On February 25, 2005, we purchased the remaining 50% of Red Sheriff S.r.l., and we subsequently renamed the company NetRatings Italia S.r.l. As a result of this acquisition, we have consolidated the operating results of NetRatings Italia in our consolidated financial statements beginning in the second quarter of 2005.

We have experienced revenue growth in each of the years since we launched our first product in 1999, as demonstrated by the table below:

Years ended December 31:	Revenues (in thousands)
2001	$	23,504
2002	$	29,706
2003	$	41,432
2004	$	59,294
2005	$	68,017

We expect our 2006 revenues to exceed our 2005 revenues, primarily as a result of sales from our new products and services, price increases for our existing products and services and the launch of our new and existing products and services in new international territories. In addition, in the first half of 2005 we decided to launch a program to enforce our intellectual property rights against various companies that compete against us in the Internet technology fields. As a result of this program, we will recognize patent licensing revenue in 2006.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss 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 revenue recognition, collectibility of receivables, the valuation of fixed assets, goodwill, intangible assets, including depreciable lives assigned, marketable securities and income taxes, as well as the estimates and judgments relating to the valuation of certain liabilities, including restructuring liabilities, service periods for stock awards with performance criteria, and contingencies and litigation. Our management bases its estimates and judgments about the carrying values of assets and liabilities on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

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

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Revenue Recognition

We recognize revenue in accordance with SEC Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104”). SAB 104 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 majority of our products and services pursuant to one-year subscription agreements. We recognize revenue from the sale of our subscription products and services and our custom products and services ratably over the term of the agreement. Invoiced amounts 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. We also generate revenue from the licensing of our patents and record the revenue in accordance with the four basic criteria of SAB 104 listed above.

Accounting for Stock-Based Compensation

We measure compensation expenses for our stock-based compensation plans using the intrinsic value method in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and FASB Interpretation No. 28, “Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans - an interpretation of APB Opinions No. 15 and 25”. Under the intrinsic value recognition provisions of APB No. 25, stock-based compensation cost is measured at the grant date based on the difference between the quoted market price of the stock at the measurement date less the amount, if any, that the employee is required to pay under the award, and is recognized as expense over the vesting period using the accelerated method.

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 described in Note 10 of our consolidated 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 Statement of Financial Accounting Standards (“SFAS”) No. 5, “Accounting for Contingencies.” 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 both the probability of occurrence and the loss can be reasonably estimated. 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 legal proceedings.

Goodwill and Intangible Assets

Our long lived assets include goodwill and other intangible assets. In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets”, goodwill and indefinite-lived intangibles are not amortized but are reviewed at least annually for impairment. We retain an independent appraisal firm that annually provides a valuation of our Company’s fair value, based on discounted cash flow and comparable company analyses. The cash flow analysis requires significant judgment and estimates by management relating to assumptions about expected future operating performance and appropriate discount rates. An impairment loss is recorded if the estimated future cash flows plus net proceeds expected from disposition of the asset (if any) are less than the carrying value of the asset. Our estimate of discounted cash flows may differ from actual cash flows due to, among other things, economic conditions, changes to our business model and changes in operating performance. An impairment loss recorded in the future, if any, could have a material adverse impact on our financial position or results of operations.

We performed our annual evaluation of goodwill and intangibles as of October 1, 2005 at which time no impairment was indicated. There has been no indication of impairment since October 1, 2005.

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Restructuring

We have engaged in, and may continue to engage in, restructuring actions and activities associated with productivity improvement initiatives and expense reduction measures. These restructuring actions and activities require us to make estimates related to severance and other employee separation costs and the ability to generate sublease income. We accrue severance restructuring costs in a period provided the following criteria are met:  (1) management commits to a plan of termination prior to the date of the financial statements and establishes the benefit employees will receive; (2) the benefit arrangement is either communicated to employees, or part of a pre-established or legally required benefit; (3) the plan of termination specifically identifies the number and job classifications of employees to be terminated; and (4) the plan of termination will be completed in a reasonably short period of time such that significant changes are unlikely. The amounts we have accrued represent our best estimate of the obligations we expect to incur in connection with these actions, but could be subject to change due to various factors including market conditions and the outcome of negotiations in certain international jurisdictions. Should the actual amounts differ from our estimates, the amount of the restructuring charges could be materially impacted.

Income Taxes

Estimates and judgments are required in the calculation of certain tax liabilities and in the determination of the recoverability of deferred tax assets, which arise from net operating losses, tax carryforwards and temporary differences between the tax and financial statement recognition of revenue and expense. SFAS No. 109, “Accounting for Income Taxes”, also requires that the deferred tax assets be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods.  In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations in a multitude of domestic and international jurisdictions. If our estimate of tax liabilities proves to be less than the ultimate assessment, a charge to expenses would result.

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Results of Operations

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

	2005		2004		2003
Revenue	100	%	100	%	100	%
Costs of revenue	33	%	39	%	49	%
Gross profit	67	%	61	%	51	%
Operating expenses:
Research and development	17	%	20	%	24	%
Sales and marketing	38	%	38	%	41	%
General and administrative	18	%	21	%	25	%
Restructuring and other expenses	2	%	(1	)%	—
Litigation settlement recovery	—		(3	)%	—
Amortization of intangibles	4	%	6	%	9	%
Stock-based compensation	5	%	13	%	22	%
Total operating expenses	84	%	94	%	122	%
Loss from operations	(17	)%	(33	)%	(72	)%
Interest income, net	7	%	5	%	10	%
Loss on joint ventures	—		—		—
Minority interest	(1	)%	—		1	%
Provision for income taxes	(1	)%	—		—
Net loss	(12	)%	(28	)%	(61	)%

The following table sets forth operating results for each of the four quarters ended December 31, 2005 and 2004:

	2005
	Q1			Q2			Q3			Q4
	(in thousands, except per share data) (unaudited)
Revenue	$	16,433		$	17,105		$	16,796		$	17,683
Gross profit	10,865			11,087			11,278			12,136
Loss from operations	(2,397		)	(3,108		)	(4,741		)	(1,654		)
Net loss	(1,629		)	(2,321		)	(3,732		)	(713		)
Basic and diluted net loss per share	$	(0.05	)	$	(0.06	)	$	(0.10	)	$	(0.02	)

	2004
	Q1			Q2			Q3			Q4
	(in thousands, except per share data) (unaudited)
Revenue	$	13,266		$	14,473		$	15,623		$	15,932
Gross profit	7,362			8,440			9,970			10,465
Loss from operations	(7,249		)	(4,817		)	(5,057		)	(3,062		)
Net loss	(6,490		)	(4,272		)	(4,346		)	(2,311		)
Basic and diluted net loss per share	$	(0.19	)	$	(0.12	)	$	(0.12	)	$	(0.07	)

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

Revenue. We generate revenue primarily from the sale of our Internet audience measurement products and services. We typically sell our syndicated services pursuant to one-year subscription agreements. We also derive a portion of our revenue from our customized products and services and from licensing our patents.

As of December 31, 2005, 1,615 customers worldwide subscribed to our products and services. As of December 31, 2004, 1,429 customers worldwide subscribed to our products and services. The increase of 186 customers during 2005 is the result of organic growth in our worldwide customer base in 2005, including the addition of 41 customers in the fourth quarter of 2005. We expect our global customer base to continue to increase in the next few quarters as we market and sell our new products and services and expand into new geographical markets.

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Our global contract renewal rate was 82% for the fourth quarter of 2005, an increase over the global contract renewal rate of 80% for the fourth quarter of 2004. Our global average sales price was $45,000 for the fourth quarter of 2005, compared with $46,000 for the fourth quarter of 2004. The decrease in average sales price is due to an increase in sales of our SiteCensus service, which typically have a lower average sales price than our other products and services. During the year ended December 31, 2005, no customer accounted for more than 10% of our revenue.

Revenue increased 15% to $68.0 million for the year ended December 31, 2005, compared to $59.3 million for the year ended December 31, 2004. The increase in revenue was primarily organic revenue growth due to (i) new business sales of our products and services, (ii) the launch of new product offerings (particularly in our MegaPanel service) and (iii) price increases for existing products and services. The revenue for 2005 also includes our consolidation of the results of operations of Red Sheriff S.r.l., which we acquired on February 25, 2005 (and we subsequently renamed NetRatings Italia S.r.l.).

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 data centers. 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.

Cost of revenue decreased 2% to $22.7 million, or 33% of revenue, for the year ended December 31, 2005 from $23.1 million, or 39% of revenue, for year ended December 31, 2004. The decrease in cost of revenue was primarily due to (i) reductions in our international NetView and MegaPanel recruitment costs and (ii) the elimination of our Hispanic panel in the third quarter of 2004. The reductions in costs were partially offset by (i) costs related to our data center in China which began operations in the fourth quarter of 2004, (ii) additional data collection costs related to our SiteCensus product, (iii) additional costs related to expanding the scope of information available through our MegaPanel product and (iv) additional costs related to certain custom research projects. As a percentage of revenue, our cost of revenue decreased by 6% from 2004 to 2005. This decrease is primarily due to revenue growth from the launch of our new products.

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, except for costs related to internally developed software, which are capitalized and subsequently depreciated when the development of the software is completed.

Research and development expenses decreased 4% to $11.6 million, or 17% of revenue, for the year ended December 31, 2005 from $12.0 million, or 20% of revenue, for the year ended December 31, 2004. The net decrease was primarily due to the capitalization of engineering costs related to internally developed software, which was partially offset by the additional personnel required to work on the internally developed software. During the year ended December 31, 2005, capitalized engineering costs totaled $1.1 million.

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, corporate marketing and other sales and marketing programs.

Sales and marketing expenses increased 13% to $25.7 million, or 38% of revenue, for the year ended December 31, 2005 from $22.8 million, or 38% of revenue, for the year ended December 31, 2004. The increases were primarily related to (i) an increase in sales and marketing personnel due to the acquisition of the remaining shares of NetRatings Italia S.r.l., (ii) additional personnel in our analytics area due to the growth in the custom analytics market and (iii) additional product marketing and sales personnel due to our product and business expansion.

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 decreased 4% to $12.1 million, or 18% of revenue, for the year ended December 31, 2005 from $12.6 million, or 21% of revenue, for the year ended December 31, 2004. The decrease is primarily due to international and US personnel reductions, which was partially offset by legal expenses related to a number of pending litigations.

Restructuring Expenses. In the third quarter of 2005, management approved and initiated a restructuring plan primarily

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intended to streamline our European operations. The restructuring plan included relocating engineering operations in Europe to the United States and the elimination of certain management positions. In connection with this restructuring plan, we recorded a charge of $1.7 million, or 2% of revenue, for severance costs in 2005. During the first quarter of 2004, we negotiated an amendment to the lease for our offices in Milpitas, California which included a release from our obligations for the abandoned portion of the facility, resulting in a reversal of restructuring expense of $0.5 million.

Litigation Settlement Recovery. In 2002, we expensed costs related to the settlement in 2002 of a patent infringement lawsuit initiated against us by Jupiter Media Metrix, Inc. In the second quarter of 2004, we received, net of legal fees, $1.8 million from our insurance company in reimbursement for these expenses. No similar amounts were recorded in 2005.

Amortization of Intangibles. Amortization of intangible expenses decreased 26% to $2.8 million, or 4% of revenue, for the year ended December 31, 2005 from $3.7 million, or 6% of revenue, for the comparable period in 2004. The decrease was primarily due to certain assets reaching their final amortization period during 2004 and 2005.

Amortization of Stock-based Compensation. Amortization of stock-based compensation in 2005 represents amortization of compensation expense related to restricted stock grants, which were issued for the first time in 2005 following a review of our overall equity compensation strategy. Amortization of stock-based compensation in 2004 represents amortization of deferred service costs related to warrants which Nielsen Media Research exercised in December 1999, and were fully amortized by the end of 2004. Accordingly, no amortization costs related to the stock warrants exercised by Nielsen Media Research in December 1999 were recorded in 2005.

Equity in Earnings of Joint Ventures. Equity in earnings from joint ventures was $0.1 million for each of the years ended December 31, 2005 and 2004, primarily reflecting our equity in the earnings of our joint venture in Italy, NetRatings Italia S.r.l. At the end of the first quarter of 2005, we purchased the remaining 50% interest in NetRatings Italia S.r.l., which resulted in its results of operations being reported in our consolidated results rather than in equity in earnings of joint ventures. Due to losses incurred by Ibope eRatings.com, we reduced our investment in Ibope eRatings.com to zero in the first quarter of 2004. In addition, we have no financial support commitments to Ibope and therefore we do not presently recognize our share of Ibope’s net losses in our consolidated financial statements.

Interest Income, Net. Interest income, net, increased 57% to $4.5 million for the year ended December 31, 2005, from $2.9 million for the year ended December 31, 2004. The increase in interest income was due to an overall higher interest yield on our investments in 2005.

Minority Interest. Minority interest was $(0.8) million and $(0.2) million for the years ended December 31, 2005 and 2004, respectively. The minority interest for each of these periods primarily represents the minority share of the profits from Mediametrie NetRatings and NetRatings Japan. During the year ended December 31, 2004, there was a minority interest related to Red Sheriff. Red Sheriff had a negative equity balance on the date we acquired majority control of Red Sheriff, and, therefore, we recognized 100% of the loss of Red Sheriff during the first half of 2004.

Provision for Income Taxes. The provision for income taxes totaled $0.3 million, or 1% of revenue, for the year ended December 31, 2005. This expense relates to taxes that are owed as a result of earnings from certain foreign subsidiaries. No amounts were recorded in prior periods as we incurred net taxable losses in the United States and foreign locations during such prior periods.

Operating Loss and Net Loss. Operating loss decreased 41% to $11.9 million, or 17% of revenue, for the year ended December 31, 2005 from $20.2 million, or 33% of revenue, for the year ended December 31, 2004. For the year ended December 31, 2005, our net loss decreased to $8.4 million, or $0.23 per share, on approximately 36.0 million weighted average shares outstanding, as compared with a net loss of $17.4 million, or $0.50 per share, on approximately 34.6 million weighted average shares outstanding, for the year ended December 31, 2004. The decreases in operating loss and net loss were primarily due to (i) increased revenue from organic growth and our consolidation of the results of operations of NetRatings Italia S.r.l. (which we acquired in February 2005), (ii) decreases in certain operating expenses and (iii) decreases in amortization of stock-based compensation costs and amortization of intangibles. These improvements to operating loss and net loss were partially offset by (i) expenses resulting from additional personnel to support our global expansion, including SiteCensus and custom analytics work related to MegaPanel, (ii) increased expenses resulting from our consolidation of the results of operations of NetRatings Italia S.r.l., (iii) the restructuring charge recorded in the third quarter of 2005 and (iv) the litigation recovery recorded in 2004. Net loss was further reduced by an increase in interest income, which was partially offset by (i) minority interest in net income of consolidated subsidiaries and (ii) the provision for income taxes.

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Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

Revenue. We generate revenue primarily from the sale of our Internet audience measurement products and services. We typically sell our syndicated services pursuant to one-year subscription agreements. We also derive a portion of our revenue from our customized products and services and from joint venture and other distribution partners.

As of December 31, 2004, 1,429 customers worldwide subscribed to our products and services. As of December 31, 2003, 1,098 customers worldwide subscribed to our products and services. The increase of 331 customers during 2004 is the result of organic growth in our worldwide customer base in 2004, including the addition of 91 customers in the fourth quarter of 2004.

Our global contract renewal rate was 80% for the fourth quarter of 2004, an increase over the global contract renewal rate of 74% for the fourth quarter of 2003. Our global average sales price was $46,000 for the fourth quarter of 2004, compared with $61,000 for the fourth quarter of 2003. The average sales price decreased due to the acquisition in December 2003 of Red Sheriff’s SiteCensus customer contracts, which typically have a lower average selling price. During the year ended December 31, 2004, no customer accounted for more than 10% of our revenue.

Revenue increased 43% to $59.3 million for the year ended December 31, 2004, compared to $41.4 million for the year ended December 31, 2003. The acquisitions we completed in 2003 contributed approximately $10.9 million of the increase in revenue. The remaining increase in revenue was primarily organic growth due to (i) new business sales of our products and services, (ii) the launch of new product offerings, (iii) price increases for existing products and services, (iv) an increase in sales of our custom research and analytical services and (v) the impact of foreign exchange rates relating to our international revenue. The increase in revenue was partially offset by the discontinuation of our custom panel in Germany.

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 data centers. 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.

Cost of revenue increased 13% to $23.1 million, or 39% of revenue, for the year ended December 31, 2004 from $20.5 million, or 49% of revenue, for year ended December 31, 2003. The increase in cost of revenue was due primarily to (i) the acquisitions in 2003 for which we have incurred cost of revenue expense from their acquisition dates, (ii) additional costs to build our MegaPanel in the United States in the first half of 2004 and (iii) the impact of foreign exchange rates relating to our international operations. The increase was partially offset by (i) reductions in our NetView home and work panel recruitment costs, (ii) reduced expenses for @Plan as a result of retaining Nielsen Media Research to handle recruitment, (iii) reduced costs to operate our data center in the United States and (iv) reductions in our international MegaPanel and NetView panel costs. As a percentage of revenue, our cost of revenue decreased by 10% from 2003 to 2004. This decrease is due to the fact that a large portion of the expense related to launching a new product is incurred prior to the launch of such product. Once a product is launched, however, the cost of operating and maintaining such product is reduced and, as a result, our cost of revenue declines as a percentage of revenue. During 2003, we incurred significant expenses related to launching our new products, particularly MegaPanel, and these expenses declined in 2004.

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, except for costs related to internally developed software, which are capitalized.

Research and development expenses increased 20% to $12.0 million, or 20% of revenue, for the year ended December 31, 2004 from $10.0 million, or 24% of revenue, for the year ended December 31, 2003. 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 2003 and (ii) additional quality assurance and research and development personnel primarily related to our MegaPanel service.

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, corporate marketing and other sales and marketing programs.

Sales and marketing expenses increased 33% to $22.8 million, or 38% of revenue, for the year ended December 31, 2004 from $17.1 million, or 41% of revenue, for the year ended December 31, 2003. The increase in sales and marketing

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expenses was primarily related to (i) an increase in salary-related and travel expenses as a result of additional employees from our acquisitions in 2003, (ii) additional personnel in our analytics area related to the launch of our MegaPanel service and (iii) the impact of foreign exchange rates relating to our international operations. The increase was partially offset by reductions in the number of personnel in our sales department.

 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 19% to $12.6 million, or 21% of revenue, for the year ended December 31, 2004 from $10.5 million, or 25% of revenue, for the year ended December 31, 2003. The increase in general and administrative expenses was primarily due to (i) higher expenses, particularly personnel costs, resulting from the acquisitions completed during 2003, (ii) the impact of foreign exchange rates relating to our international operations and (iii) higher expenses related to compliance with new corporate governance regulations, particularly Section 404 of the Sarbanes-Oxley Act of 2002. The increase was partially offset by savings in costs to support our internal information technology requirements.

Restructuring Expenses. During the first quarter of 2004, we negotiated an amendment to the lease for our offices in Milpitas, California which included a release from our obligations for the abandoned portion of the facility, resulting in a reversal of restructuring expense of $525,000.

Litigation Settlement Recovery. During the fourth quarter of 2002, we expensed costs related to the settlement in 2002 of a patent infringement lawsuit initiated against us by Jupiter Media Metrix, Inc. In the second quarter of 2004, we received, net of legal fees, $1.8 million from our insurance company in reimbursement for these expenses.

Amortization of Intangibles. Amortization of intangibles expense decreased 4% to $3.7 million, or 6% of revenue, for the year ended December 31, 2004 from $3.9 million, or 9% of revenue, for the comparable period in 2003. The decrease was primarily due to some assets reaching their final amortization period during 2004. The decrease was partially offset by additional amortization related to specifically identified intangibles associated with the acquisition of Red Sheriff in the fourth quarter of 2003.

Amortization of Stock-based Compensation. Stock-based compensation represents amortization of deferred service costs related to stock warrants which Nielsen Media Research exercised in December 1999. Amortization of stock-based compensation expenses decreased 17% to $7.6 million, or 13% of revenue, for the year ended December 31, 2004 from $9.1 million, or 22% of revenue, for the comparable period in 2003. The decrease is the result of reaching the final amortization period for the deferred service costs. As of December 31, 2004 the deferred service costs were fully amortized.

Equity in Earnings of Joint Ventures. Equity in earnings from joint ventures was $0.1 million for each of the years ended December 31, 2004 and 2003. In 2004, the equity in earnings from joint ventures primarily reflected our equity in the earnings of our joint venture in Italy, Red Sheriff S.r.l. (subsequently renamed NetRatings Italia S.r.l.), which was partially offset by losses related to Ibope eRatings, our Latin America joint venture, in the first quarter of 2004. As a result of the losses incurred by Ibope eRatings.com, our balance in our investment in Ibope eRatings.com was zero as of March 31, 2004, and therefore no losses were recorded after the first quarter of 2004. In 2003, the equity in earning from joint ventures reflected our equity in earnings (losses) related to Ibope eRatings, Mediametrie NetRatings and NetRatings Japan through the respective dates that we obtained majority ownership of each joint venture and, accordingly, we began consolidating their results of operations in our consolidated financial statements.

Interest Income, Net. Interest income, net, decreased 29% to $2.9 million for the year ended December 31, 2004, from $4.1 million for the year ended December 31, 2003. The decrease in interest income was due to an overall reduction in cash and cash equivalents as compared with the beginning of 2003 as a result of acquisitions and the funding of our operations during 2003 and 2004. The reduction in cash in 2004 was partially offset by cash received as a result of the exercise of employee stock options during the year.

Minority Interest. Minority interest was $(242,000) and $455,000 for the years ended December 31, 2004 and 2003, respectively. During the year ended December 31, 2004, we held majority interests in Red Sheriff, NetRatings Japan and Mediametrie NetRatings. Red Sheriff had a negative equity balance on the date we acquired majority control of Red Sheriff and, therefore, we recognized 100% of the loss of Red Sheriff during the first half of 2004. Minority interest for the year ended December 31, 2003 primarily represented the minority interest in the net losses of NetValue and NetRatings Japan.

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Operating Loss and Net Loss. Operating loss decreased 32% to $20.2 million, or 33% of revenue, for the year ended December 31, 2004 from $29.7 million, or 72% of revenue, for the year ended December 31, 2003. For the year ended December 31, 2004, our net loss decreased to $17.4 million, or $0.50 per share, on approximately 34.6 million weighted average shares outstanding, as compared with a net loss of $25.1 million, or $0.74 per share, on approximately 33.8 million weighted average shares outstanding, for the year ended December 31, 2003. The decreases in operating loss and net loss were primarily due to (i) increased revenue from organic growth and our acquisitions in 2003, (ii) decreased cost of revenue related to our NetView home and work panels and @Plan recruitment costs, (iii) decreased amortization of stock-based compensation, (iv) the litigation settlement recovery and (v) the reversal of restructuring expenses. These improvements to operating loss and net loss were partially offset by (i) increases in cost of revenue and operating expenses related to our acquisitions in 2003, (ii) additional quality assurance and research and development personnel primarily related to our MegaPanel service, (iii) lower interest income and (iv) higher expenses related to compliance with new corporate governance regulations, particularly Section 404 of the Sarbanes-Oxley Act of 2002.

Inflation

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

Liquidity and Capital Resources

At December 31, 2005, the Company’s cash, cash equivalents and marketable securities were $180.3 million, compared with $197.6 million at December 31, 2004.

Cash used in operating activities was $1.2 million in 2005, due to our net loss of $8.4 million and cash used in working capital changes of $3.6 million, partially offset by non-cash expenses of $10.8 million. The non-cash expenses include $3.6 million for depreciation, $3.4 million for stock-based compensation, $2.8 million for amortization of intangible assets, $0.7 million related to minority interest, $0.3 million for provision for doubtful accounts, $0.1 related to utilization of net operating loss carryforwards of companies that we acquired and $(0.1) million related to equity in earnings of joint ventures. Cash used in operating activities was $13.4 million in 2004, due to our net loss of $17.4 million and cash used in working capital changes of $10.5 million, partially offset by non-cash expenses of $14.5 million. The non-cash expenses include $7.6 million for stock-based compensation, $2.8 million for depreciation, $3.7 million for amortization of intangible assets, $0.3 million for provision for doubtful accounts, $0.2 million related to minority interest and $(0.1) million related to equity in earnings of joint ventures. Cash used in operating activities was $17.1 million in 2003, due to our net loss of $25.1 million and cash used in working capital changes of $6.8 million, partially offset by non-cash expenses of $14.8 million. The non-cash expenses included $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, $(0.4) million related to minority interest and $(0.1) million related to equity in earnings of joint ventures.

Net cash provided by investing activities during 2005 was $13.2 million, resulting from net purchases of our short-term investments of $19.2 million and the repayment of a loan to us from a related party in the amount of $1.2 million. These increases were partially offset by acquisitions of property and equipment of $5.4 million and cash paid for acquisitions, net of cash acquired, of $1.8 million. Net cash used in investing activities during 2004 was $20.6 million, resulting from cash paid for acquisitions, net of cash acquired, of $10.1 million, acquisitions of property and equipment of $4.8 million, loans to related parties of $0.7 million and net purchases of our short-term investments of $5.0 million. Net cash provided by investing activities during 2003 was $16.3 million, resulting from net sales of our short-term investments of $32.2 million and a decrease in loans to related parties of $0.4 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 (used in) provided by financing activities totaled $(7.6), $16.8 million, and $1.4 million for the years ended December 31, 2005, 2004 and 2003, respectively. In November 2005, we initiated a stock repurchase program, under which we were authorized to repurchase up to $25 million of our common stock in the open market or in privately negotiated transactions. In 2005, we used $13.5 million to repurchase 1.0 million shares of our common stock pursuant to this program. This use of cash in 2005 was partially offset by cash provided by the exercise of options and the purchase of stock through our stock plan and employee stock purchase plan. In 2004 and 2003, cash was provided primarily from the exercise of options and the purchase of stock through our stock plan and employee stock purchase plan. In the first quarter of 2006, we purchased an additional 0.9 million shares of stock for approximately $11.5 million.

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The following summarizes our contractual obligations as of December 31, 2005 (in thousands):

	Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-Term Debt	—		—		—		—		—
Capital Lease Obligations	—		—		—		—		—
Operating Leases	$	10,498	$	3,150	$	5,126	$	2,222	—
Purchase Obligations*	16,160		8,709		7,162		289		—
Other Long-Term Liabilities Reflected on Our Balance Sheet Under GAAP	—		—		—		—		—
Total	$	26,658	$	11,859	$	12,288	$	2,511	—

*  The expected timing of payment of the purchase obligations set forth above, which consist primarily of panel and data center costs, is estimated based on current information. Timing of payments and actual amounts paid may be different depending on the time of receipt of goods or services or changes to agreed-upon amounts for some obligations.

While we have historically made additional contributions to our majority owned subsidiaries and joint ventures, we are not contractually required to make such contributions. In the event of a request for a 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, cash equivalents and marketable securities 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.

Off-Balance Sheet Arrangements

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

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of December 31, 2005, we had cash, cash equivalents and marketable securities of $180.3 million consisting of cash and highly liquid, short-term investments. 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 marketable securities in a variety of government and corporate obligations and money market funds. As of December 31, 2005, our investments had a weighted-average time to maturity of approximately 156 days.

Investments in both fixed-rate and floating-rate interest-earning instruments carry varying degrees of interest rate risk. The fair market value of our fixed-rate securities may be adversely impacted due to a rise in interest rates. In general, securities with longer maturities are subject to greater interest-rate risk than those with shorter maturities. While floating rate securities generally are subject to less interest-rate risk than fixed-rate securities, floating-rate securities may produce less income than expected if interest rates decrease. Declines of interest rates over time will reduce our interest income from our cash, cash equivalents and marketable securities and, accordingly, could adversely affect our net income and earnings per share. For example, if interest rates were to instantaneously increase (decrease) by 100 basis points, the fair market value of our total investment portfolio would decrease (increase) by approximately $0.6 million.

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, 2005:

	Time to maturity
	One year or less			One to five years			Five to ten years			Greater than ten years			Total
	(in thousands, except percent data) (unaudited)
Cash and cash equivalents	$	34,940		—			—			—			$	34,940
Average interest rates	0.68		%	—			—			—			0.68		%
Marketable securities	$	62,150		$	30,893		$	2,207		$	50,062		$	145,312
Average interest rates	2.77		%	4.18		%	4.25		%	4.38		%	3.65		%

Marketable securities with a maturity date greater than one year and in a loss position as of December 31, 2005 are reported as long-term marketable securities on the balance sheet. All other marketable securities are reported as short-term marketable securities.

NetRatings historically adjusted its equity investments in Ibope eRatings.com and Red Sheriff S.r.l. based on its share of the net gains/losses recorded by these joint ventures. At December 31, 2004, Ibope eRatings.com and Red Sheriff S.r.l. were accounted for under the equity method. As a result of the losses incurred by Ibope eRatings.com, the balance in our investment in and our outstanding advances to Ibope eRatings.com were zero as of March 31, 2004, and therefore no losses have been recorded since the first quarter of 2004. We have no obligation to make additional investments in Ibope eRatings.com. On February 25, 2005, we purchased the remaining 50% of Red Sheriff S.r.l. (subsequently renamed NetRatings Italia S.r.l.) that we did not already own thereby increasing our ownership to 100% of the company. This resulted in NetRatings Italia’s operating results being reported in our consolidated results rather than in equity in earnings of joint ventures.

Revenues from outside of the United States accounted for approximately 53% of our total revenues in both 2005 and 2004. 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 2005 or 2004. 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.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

NETRATINGS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	36
Consolidated Balance Sheets	38
Consolidated Statements of Operations	39
Consolidated Statements of Stockholders’ Equity	40
Consolidated Statements of Cash Flows	41
Notes to Consolidated Financial Statements	42

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders,

NetRatings, Inc.

We have audited the accompanying consolidated balance sheets of NetRatings, Inc. as of December 31, 2005 and 2004, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005. 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 the standards of the Public Company Accounting Oversight Board (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, 2005 and 2004, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of NetRatings Inc.’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 9, 2006, expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Ernst & Young LLP

March 9, 2006

New York, New York

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of

NetRatings, Inc.

We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting, that NetRatings, Inc. maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). NetRatings, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that NetRatings, Inc. maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, NetRatings, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of NetRatings, Inc. as of December 31, 2005 and 2004, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years ended December 31, 2005 and our report dated March 9, 2006 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Ernst & Young LLP

March 9, 2006

New York, New York

37

NETRATINGS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

	December 31, 2005			December 31, 2004
ASSETS
Current assets:
Cash and cash equivalents	$	34,940		$	33,234
Short-term marketable securities	116,731			112,961
Accounts receivable, net	16,537			13,679
Due from related party	—			1,170
Prepaid expenses and other current assets	3,867			3,106
Total current assets	172,075			164,150
Long-term marketable securities	28,581			51,407
Property and equipment, net	7,827			5,977
Intangibles, net	13,278			16,039
Goodwill	76, 856			74,897
Other assets	1,637			1,987
Total assets	$	300,254		$	314,457
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,914		$	2,868
Accrued liabilities	11,436			8,727
Deferred revenue	12,666			11,435
Due to related parties	7,086			9,017
Restructuring liabilities	1,038			625
Total current liabilities	35,140			32,672
Restructuring liabilities, less current portion	418			799
Total liabilities	35,558			33,471
Minority interest	1,298			548
Commitments and contingencies	—			—
Stockholders’ equity:
Common stock, par value $0.001:
Authorized shares: 200,000;
Issued shares: 37,838 and 37,181 at December 31, 2005 and 2004, respectively; outstanding shares: 35,189 and 35,681 at December 31, 2005 and 2004, respectively	38			37
Additional paid-in capital	450,100			436,845
Deferred compensation	(3,984		)	—
Accumulated other comprehensive income	(1,441		)	1,079
Treasury stock	(36,028		)	(20,631		)
Accumulated deficit	(145,287		)	(136,892		)
Total stockholders’ equity	263,398			280,438
Total liabilities and stockholders’ equity	$	300,254		$	314,457

See accompanying notes to the consolidated financial statements.

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NETRATINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	For the years ended December 31,
	2005			2004			2003
Revenue	$	68,017		$	59,294		$	41,432
Cost of revenue	22,651			23,057			20,476
Gross profit	45,366			36,237			20,956
Operating expenses:
Research and development	11,580			12,029			9,998
Sales and marketing	25,718			22,801			17,125
General and administrative	12,130			12,588			10,539
Restructuring expenses	1,700			(525		)	—
Litigation settlement recovery	—			(1,800		)	—
Amortization of intangibles	2,761			3,742			3,898
Amortization of stock-based compensation*	3,377			7,587			9,105
Total operating expenses	57,266			56,422			50,665
Loss from operations	(11,900		)	(20,185		)	(29,709		)
Equity in earnings of joint ventures	56			129			66
Interest income, net	4,519			2,879			4,053
Minority interest in net (income) losses of consolidated subsidiaries	(750		)	(242		)	455
Net loss before provision for income taxes	(8,075		)	(17,419		)	(25,135		)
Provision for income taxes	(320		)	—			—
Net loss	$	(8,395	)	$	(17,419	)	$	(25,135	)
Basic and diluted net loss per common share	$	(0.23	)	$	(0.50	)	$	(0.74	)
Shares used to compute basic and diluted net loss per common share	35,985			34,637			33,792

*Amortization of stock-based compensation:
Cost of revenue	$	151	$	7,587	$	9,105
Research and development	429		—		—
Sales and marketing	1,381		—		—
General and administrative	1,416		—		—
Total	$	3,377	$	7,587	$	9,105

See accompanying notes to the consolidated financial statements.

39

NETRATINGS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

						Deferred			Accumulated
				Additional		Compensation			Other										Total
	Common Stock			Paid-In		and			Comprehensive			Treasury Stock				Accumulated			Stockholders’
	Shares	Amount		Capital		Other Costs			Income (Loss)			Shares	Amount			Deficit			Equity
Balances at December 31, 2002	35,114	$	35	$	418,779	$	(16,692	)	$	1,513		1,500	$	(20,631	)	$	(94,338	)	$	288,666
Net loss	—	—		—		—			—			—	—			(25,135		)	(25,135		)
Unrealized loss from short-term investments	—	—		—		—			(1,307		)	—	—			—			(1,307		)
Change in accumulated translation adjustment	—	—		—		—			1,332			—	—			—			1,332
Comprehensive loss																			(25,110		)
Issuance of common stock for employee benefit plans	328	—		1,393		—			—			—	—			—			1,393
Amortization of deferred service costs	—	—		—		9,105			—			—	—			—			9,105
Balances at December 31, 2003	35,442	35		420,172		(7,587		)	1,538			1,500	(20,631		)	(119,473		)	274,054
Net loss	—	—		—		—			—			—	—			(17,419		)	(17,419		)
Unrealized loss from short-term investments	—	—		—		—			(756		)	—	—			—			(756		)
Change in accumulated translation adjustment	—	—		—		—			297			—	—			—			297
Comprehensive loss																			(17,878		)
Issuance of common stock for employee benefit plans	1,739	2		16,547		—			—			—	—			—			16,549
Amortization of deferred service costs	—	—		—		7,587			—			—	—			—			7,587
Stock issued by majority owned subsidiary	—	—		126		—			—			—	—			—			126
Balances at December 31, 2004	37,181	37		436,845		—			1,079			1,500	(20,631		)	(136,892		)	280,438
Net loss	—	—		—		—			—			—	—			(8,395		)	(8,395		)
Unrealized gain from short-term investments	—	—		—		—			94			—	—			—			94
Change in accumulated translation adjustment	—	—		—		—			(2,614		)	—	—			—			(2,614		)
Comprehensive loss																			(10,915		)
Issuance of common stock for employee benefit plans	657	1		5,894		—			—			—	—			—			5,895
Stock repurchases	—	—		—		—			—			1,149	(15,397		)				(15,397		)
Deferred stock-based compensation	—	—		7,361		(7,361		)	—			—	—			—			—
Amortization stock based compensation	—	—				3,377			—			—	—			—			3,377
Balances at December 31, 2005	37,838	$	38	$	450,100	$	(3,984	)	$	(1,441	)	2,649	$	(36,028	)	$	(145,287	)	$	263,398

See accompanying notes to the consolidated financial statements.

40

NETRATINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	For the years ended December 31,
	2005			2004			2003
OPERATING ACTIVITIES
Net loss	$	(8,395	)	$	(17,419	)	$	(25,135	)
Adjustments to reconcile net loss to net cash used in operating activities, net of effects of acquired businesses:
Depreciation	3,565			2,763			2,132
Equity in earnings of joint ventures	(56		)	(129		)	(66		)
Provision for doubtful accounts	301			313			216
Stock-based compensation	3,377			7,587			9,105
Minority interest	750			242			(455		)
Amortization of intangibles	2,761			3,742			3,898
Utilization of acquired net operating loss carryforwards	107
Changes in current assets and liabilities:
Accounts receivable	(2,560		)	(3,807		)	2,880
Prepaids, other current assets and other assets	(287		)	(316		)	2,156
Accounts payable	201			(379		)	(5,884		)
Accrued liabilities	(320		)	(2,049		)	(1,282		)
Restructuring liabilities	32			(1,566		)	(3,558		)
Due to/from related parties	(1,860		)	(3,406		)	395
Deferred revenue	1,234			987			(1,545		)
Net cash used in operating activities	(1,150		)	(13,437		)	(17,143		)
INVESTING ACTIVITIES
Acquisition of property and equipment	(5,366		)	(4,798		)	(1,775		)
Purchase of investments	(121,508		)	(163,793		)	(379,737		)
Sale of investments	76,617			135,616			336,879
Maturities of investments	64,040			23,185			75,032
Loan to related parties	1,170			(712		)	376
Acquisitions, net of cash acquired of $215, $0 and $2,375 in 2005, 2004 and 2003, respectively, and investment in joint ventures	(1,806		)	(10,117		)	(14,500		)
Net cash provided by (used in) investing activities	13,147			(20,619		)	16,275
FINANCING ACTIVITIES
Proceeds from issuance of common stock	5,895			16,549			1,393
Proceeds from stock issued by majority owned subsidiary	—			247			—
Stock repurchases	(13,460		)	—			—
Net cash (used in) provided by financing activities	(7,565		)	16,796			1,393
Effect of exchange rate fluctuations	(2,726		)	585			1,584
Net increase (decrease) in cash and cash equivalents	1,706			(16,675		)	2,109
Cash and cash equivalents at beginning of period	33,234			49,909			47,800
Cash and cash equivalents at end of period	$	34,940		$	33,234		$	49,909
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	20		$	—		$	—

See accompanying notes to the consolidated financial statements.

41

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 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. Almost 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.

Certain reclassifications have been made to prior year balances to conform with current year reporting classifications. The reclassifications include reclassification of marketable securities with a maturity date greater than one year and in a loss position to long-term marketable securities, and the reclassification of due from joint ventures to other assets.

Cash and Cash Equivalents and Marketable Securities

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.

Marketable securities consist principally of corporate notes, auction rate securities, euro dollar bonds, commercial paper and U.S. government and agency securities, all of which are carried at fair market value. NetRatings uses the specific identification method to compute realized gains and losses on its short-term investments.

Restricted cash included in other assets was $0.7 million and $0.8 million at December 31, 2005 and 2004, respectively.

Interest income was $5.0 million, $3.2 million and $4.3 million for the years ended December 31, 2005, 2004 and 2003, 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.

Capitalized Software

The Company capitalizes certain internal and external costs incurred to acquire or create internal use software in accordance with AICPA Statement of Position 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use”. Capitalized software is included in property, plant and equipment and is depreciated when development is complete. Capitalized software costs for the years ended December 31, 2005, 2004 and 2003 were $1.7 million, $0.3 million and $0.2 million, respectively.

Impairment of Long-Lived Assets

The Company’s long lived assets include goodwill and other intangible assets. In accordance with Statement of Financial Accounting Standards (“SFAS”) No 142, “Goodwill and Other Intangible Assets”, goodwill and indefinite-lived

42

intangibles are not amortized, but are reviewed at least annually for impairment. NetRatings retains an independent appraisal firm which annually provides a valuation of the Company’s fair value, based on a discounted cash flow and comparable company analyses. The cash flow analysis requires significant judgment and estimates by management relating to assumptions about expected future operating performance and appropriate discount rates. An impairment loss is recorded if the estimated future cash flows plus net proceeds expected from disposition of the asset (if any) are less than the carrying value of the asset. The estimate of discounted cash flows may differ from actual cash flows due to, among other things, economic conditions, changes to the Company’s business model and changes in operating performance. The Company performed its annual evaluation of goodwill and intangibles as of October 1, 2005 at which time no impairment was indicated. There has been no indication of impairment since October 1, 2005.

Other Assets

Other assets include (i) receivables from joint ventures, (ii) restricted cash related to the Company’s office leases in Seattle, New York, London and Sydney, (iii) long-term security deposits, (iv) investments in joint ventures and (v) other assets. Receivables from joint ventures, before reserves, totaled $0.9 million at December 31, 2005 and 2004.

Foreign Currency Translation

The Company applies SFAS 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. The translation gain (loss) resulting from the process of remeasuring foreign currency financial statements into U.S. dollars is included as a component of accumulated other comprehensive income in stockholders’ equity. Gains (losses) resulting from foreign currency transactions were not material in 2005, 2004 or 2003.

Revenue Recognition

Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) services have been rendered, (iii) the price is fixed or determinable and (iv) collectibility is reasonably assured. Revenue from the Company’s syndicated and custom products are recognized ratably over the period in which the product or service is provided. Billings rendered in advance of services being performed are recorded as deferred revenue in the accompanying balance sheet. The Company will generate revenue in 2006 from the licensing of its patents and record the revenue in accordance with these four basic criteria.

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 consolidated 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 $0.4 million, $0.5 million and $0.1 million for the years ended December 31, 2005, 2004 and 2003, respectively.

Income Taxes

NetRatings accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes” (“SFAS 109”), which requires the use of the liability method in accounting for income taxes. Under SFAS 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. A valuation allowance is recorded when it is more likely than not that some or all of the deferred tax asset will not be realized.

Comprehensive Loss

Comprehensive loss includes net loss as well as other comprehensive income. At December 31, 2005, 2004 and 2003, NetRatings’ accumulated other comprehensive income included net unrealized losses from short-term investments of $0.8 million, $0.8 million and $0.1 million, respectively, and $0.6 million, $(1.9) million and $(1.6) million of losses (gains) on foreign currency translation adjustments, respectively.

43

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, 2005, the fair market value, cost and net unrealized loss of NetRatings’ short-term investments totaled $145.3 million, $146.1 million and $0.8 million, respectively. At December 31, 2004, the fair market value, cost and net unrealized loss of NetRatings’ short-term investments totaled $164.4 million, $165.2 million and $0.8 million, respectively. For the years ended December 31, 2005, 2004 and 2003, 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 year ended December 31, 2005, NetRatings had bad debt write-offs of $0.3 million and reclassified $0.4 million related to reserves for other assets to other assets. For the year ended December 31, 2004, NetRatings had bad debt write-offs of $0.5 million and reclassified $0.3 million related to bad debt from deferred revenue. For the year ended December 31, 2003, NetRatings had bad debt write-offs of $0.1 million. At December 31, 2005 and 2004, the allowance for doubtful accounts was $0.6 million and $1.0 million, respectively.

Stock-Based Compensation

NetRatings accounts for stock-based awards to employees under the intrinsic value method in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), and discloses the general and pro forma financial information required by SFAS No. 123, “Accounting for Stock-Based Accounting” (“SFAS 123”), and SFAS No. 148, “Accounting for Stock-Based Compensation -Transition and Disclosure — an amendment of FASB Statement No. 123” (“SFAS 148”).

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

Option value information(a)	2005			2004			2003
Fair value per option(b)	$	7.36		$	4.34		$	2.80
Valuation assumptions:
Expected option term (years)	2.38			2.32			2.36
Expected volatility	60		%	60		%	74		%
Expected dividend yield	0		%	0		%	0		%
Risk-free interest rate	3.38		%	2.77		%	1.31		%

(a)Weighted averages of option grants during each period

(b)Estimated using Black-Scholes option pricing model under the valuation assumptions indicated

For purposes of pro forma disclosures, the estimated fair value of the stock option and restricted stock awards is amortized to expense over the vesting period of the awards using the accelerated method. In connection with the Company’s Employee Stock Purchase Plan, the 15% discount to the share price on the date of purchase or the commencement of the purchase period, whichever is lower, and the fair value of the remainder of the purchase price, 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):

44

	2005			2004			2003
Net loss, as reported	$	(8,395	)	$	(17,419	)	$	(25,135	)
Add: Stock-based employee compensation expense included in reported net loss	3,377			—			—
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards	(5,658		)	(4,699		)	(6,141		)
Pro forma net loss	$	(10,676	)	$	(22,118	)	$	(31,276	)
Earnings per share:
Basic and diluted net loss per share, as reported	$	(0.23	)	$	(0.50	)	$	(0.74	)
Pro forma basic and diluted net loss per share	$	(0.30	)	$	(0.64	)	$	(0.93	)

The pro forma impact of compensation expense measured under SFAS 123 on the net loss for the years ended December 31, 2005, 2004 and 2003 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 grants.

Computation of Net Loss Per Common Share

NetRatings computes net loss per common share based on SFAS No. 128, “Earnings Per Share” (“SFAS 128”). In accordance with SFAS 128, basic net loss per share is calculated as net loss divided by the weighted-average number of common shares outstanding. 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):

	2005			2004			2003
Net loss	$	(8,395	)	$	(17,419	)	$	(25,135	)
Weighted-average shares of common stock outstanding used in computing basic and diluted net loss per share	35,985			34,637			33,792
Basic and diluted net loss per common share	$	(0.23	)	$	(0.50	)	$	(0.74	)

If NetRatings had reported net income, the calculation of historical diluted earnings per share would have included approximately an additional 1.0 million, 1.2 million and 0.2 million common equivalent shares related to outstanding stock awards not included above (determined using the treasury stock method) for the years ended December 31, 2005, 2004 and 2003, respectively.

Use of Estimates

The preparation of these consolidated financial statements in conformity with generally accepted accounting principles requires 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to the revenue recognition, collectibility of receivables, the valuation of fixed assets, goodwill, intangible assets, including depreciable lives assigned, marketable securities and income taxes, as well as the estimates and judgments relating to the valuation of certain liabilities, including restructuring liabilities, service periods for stock awards with performance criteria, and contingencies and litigation. NetRatings’ management bases its estimates and judgments about the carrying values of assets and liabilities on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123(R), “Share-Based Payment” (“SFAS 123(R)”). SFAS 123(R) revises SFAS 123 and supersedes APB 25. SFAS 123(R) requires all public

45

entities to recognize compensation expense for all share-based payments as measured by the fair value on the grant date over the requisite service period. The FASB required companies to adopt SFAS 123(R) no later than the first interim or annual period beginning after June 15, 2005.

The Company currently accounts for its stock-based awards to employees in accordance with APB 25 and disclose the general and pro forma financial information required by SFAS 123 and SFAS 148. Historically, the Company has used the Black-Scholes option pricing model to estimate the value of stock options granted to employees. SFAS 123(R) requires that all share-based payments granted prior to the adoption date that remain unvested at the adoption date be expensed over the remaining service period. The Company currently intends to adopt SFAS 123(R) using the modified-prospective method, and therefore the Company will begin expensing unvested options in the first quarter of 2006. The Company currently estimates the impact of adopting SFAS 123(R) for existing unvested options will be an expense of approximately $1.1 million for 2006.

In October 2005, the FASB issued FSP FAS 123(R)-2, “Practical Accommodation to the Application of Grant Date as Defined in FAS 123(R)” (“FSP 123(R)-2”). FSP 123(R)-2 provides guidance on the application of grant date as defined in SFAS 123(R). In accordance with this standard a grant date of an award exists if (i) the award is a unilateral grant and (ii) the key terms and conditions of the award are expected to be communicated to an individual recipient within a relatively short time period from the date of approval. The Company intends to adopt this standard when the Company adopts SFAS 123(R). The Company does not currently believe the adoption of FSP 123(R)-2 will have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In November 2005, the FASB issued FSP FAS 123(R)-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards” (“FSP 123(R)-3”). FSP 123(R)-3 provides an elective alternative method that establishes a computational component to arrive at the beginning balance of the accumulated paid-in capital pool related to employee compensation and a simplified method to determine the subsequent impact on the accumulated paid-in capital pool of employee awards that are fully vested and outstanding upon the adoption of SFAS 123(R). The Company is currently evaluating this transition method.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”). SFAS 154 is a replacement of APB No. 20, “Accounting Changes”, and SFAS No. 3,“Reporting Accounting Changes in Interim Financial Statements—an amendment of APB Opinion No. 28”. SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application as the required method for reporting a change in accounting principle. SFAS 154 provides guidance for determining whether retrospective application of a change in accounting principle is impracticable and for reporting a change when retrospective application is impracticable. SFAS 154 also addresses the reporting of a correction of an error by restating previously issued financial statements. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company intends to adopt this pronouncement beginning in 2006 and does not currently believe that it will have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In November 2005, the FASB issued FSP FAS 115-1 and FAS 124-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” (“FSP 115-1 and 124-1”), which clarifies when an investment is considered impaired, whether the impairment is other than temporary, and the measurement of an impairment loss. It also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. FSP 115-1 and 124-1 are effective for all reporting periods beginning after December 15, 2005. At December 31, 2005, the Company had no unrealized investment losses that had been recognized as other-than-temporary impairments in the Company’s available-for-sale securities. The Company does not anticipate that the implementation of these statements will have a significant impact on the Company’s consolidated financial position, results of operations or cash flows.

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Note 2: Balance Sheet Details

Details of balance sheet items as of December 31, 2005 and 2004 are as follows (in thousands):

The following is a summary of estimated fair value of cash and cash equivalents and available for sale investments based on quoted market prices as of December 31, 2005 and 2004:

	2005		2004
Cash and cash equivalents	$	34,940	$	33,234
Available for sale investments:
Auction rate securities	54,070		49,013
Corporate notes	26,644		19,331
Commercial paper	2,018		1,992
Euro dollar bonds	23,248		41,608
Floating rate bonds	2,008		—
U.S. government and agency securities	37,324		52,424
Total available for sale investments	145,312		164,368
Total cash and cash equivalents and marketable securities	$	180,252	$	197,602
Cash and cash equivalents and marketable securities reported as:
Cash and cash equivalents	$	34,940	$	33,234
Short-term marketable securities	116,731		112,961
Long-term marketable securities	28,581		51,407
Total cash and cash equivalents and marketable securities	$	180,252	$	197,602

Property and equipment, net:

Computer equipment and software	$	15,471		$	15,279
Office equipment, furniture and fixtures	298			1,556
Leasehold improvements	990			782
	16,759			17,617
Less accumulated depreciation	(8,932		)	(11,640		)
Property and equipment, net	$	7,827		$	5,977

Accrued liabilities:

Accrued compensation	$	5,981	$	4,846
Accrual for stock repurchases	1,937		—
Acquisition related transaction costs	362		368
Other accrued liabilities	3,156		3,513
Accrued liabilities	$	11,436	$	8,727

Marketable securities with a maturity date greater than one year and in a loss position as of December 31, 2005 are reported as long-term marketable securities on the balance sheet. All other marketable securities are reported as short-term marketable securities.

Note 3: Acquisitions

In 2002 NetRatings acquired 86% of the capital stock of NetValue, S.A. (“NetValue”), an international provider of Internet audience measurement services. 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.

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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 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. During the first half of 2004, NetRatings acquired the remaining shares of common stock in Red Sheriff thereby increasing its ownership to 100% of the company.

During the third quarter of 2004, NetRatings Japan sold a small ownership interest in NetRatings Japan to a third party for a total of $0.2 million. As a result of this transaction, the Company’s stockholders’ equity increased by $0.1 million, and its equity ownership in NetRatings Japan decreased from 58.2% to approximately 56.5%. On December 1, 2004, Red Sheriff K.K., a wholly-owned subsidiary of the Company, merged with and into NetRatings Japan, whereupon new shares of NetRatings Japan were issued to the Company. As a result, Red Sheriff K.K. became a wholly-owned subsidiary of NetRatings Japan. At the same time, NetRatings sold shares of NetRatings Japan to TransCosmos for a total of $0.8 million so that TransCosmos would maintain its existing stake in NetRatings Japan. As a result of these transactions, NetRatings increased its ownership of NetRatings Japan to 56.8%. These transactions resulted in a net decrease to goodwill of $0.8 million related to the acquisition of Red Sheriff.

On February 25, 2005, NetRatings acquired the remaining 50% of its Italian joint venture, Red Sheriff S.r.l., for approximately $2.0 million in cash, resulting in an increase to goodwill of approximately $1.9 million. Red Sheriff S.r.l. was subsequently renamed NetRatings Italia S.r.l.

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 of NetRatings Italia S.r.l., 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, November 2003 and February 2005, the financial results of NetRatings Japan, Mediametrie NetRatings and NetRatings Italia S.r.l., respectively, are consolidated into the Company’s consolidated financial statements.

Results of operations for each of the acquired companies are included prospectively from the date of acquisition. Pro forma results of operations reflecting the 2003-2005 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.

Note 4: Goodwill and Intangible Assets

During the first quarter of 2005, NetRatings finalized the purchase price allocation related to Red Sheriff, resulting in a net increase to goodwill of approximately $0.2 million. On February 25, 2005, NetRatings acquired the remaining 50% of its Italian joint venture, Red Sheriff S.r.l., for approximately $2.0 million in cash, resulting in an increase to goodwill of approximately $1.9 million. During 2005, NetRatings used net operating loss carryforwards of acquired companies, resulting in a decrease in goodwill of $0.1 million.

During the first half of 2004, NetRatings increased its ownership in Red Sheriff to 100% and made adjustments to its purchase accounting related to Red Sheriff, resulting in additional goodwill of approximately $11.0 million. In the fourth quarter of 2004, the Company finalized its valuation of Red Sheriff resulting in an increase in intangible assets of $0.7 million and a decrease to goodwill in the same amount. The Company made preliminary adjustments to its purchase price allocation for Red Sheriff in the fourth quarter of 2004 resulting in (i) adjustments to certain asset and liability balances existing at the acquisition dates and (ii) adjustments to acquisition related costs, both of which resulted in a net decrease to goodwill of $0.8 million. On December 1, 2004, Red Sheriff K.K. merged with and into NetRatings Japan and, at the same time, NetRatings received $0.8 million from one of NetRatings Japan’s minority shareholders, which was recorded as a reduction in goodwill. During 2004, NetRatings also finalized the purchase price allocation related to its other acquisitions in 2003, resulting in (i) adjustments to certain asset and liability balances existing at the acquisition dates and (ii) adjustments to acquisition related costs, both of which resulted in a net decrease to goodwill of $0.4 million.

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Goodwill and other intangible assets along with their weighted average life, at December 31, 2005 and 2004, consisted of the following (in thousands, except weighted average life):

	December 31, 2005
	Gross carrying amount		Accumulated amortization		Net		Weighted average life
Intangible assets continuing to be amortized:
Core technologies	$	5,482	$	2,691	$	2,791	7
Customer contracts	4,940		3,740		1,200		3
Patents and other	15,682		6,395		9,287		11
Total	$	26,104	$	12,826	13,278
Goodwill					76,856
Total goodwill and other intangible assets					$	90,134

	December 31, 2004
	Gross carrying amount		Accumulated amortization		Net		Weighted average life
Intangible assets continuing to be amortized:
Core technologies	$	5,482	$	1,908	$	3,574	7
Customer contracts	4,940		3,140		1,800		3
Patents and other	15,682		5,017		10,665		11
Total	$	26,104	$	10,065	16,039
Goodwill					74,897
Total goodwill and other intangible assets					$	90,936

Based on the current amount of intangibles subject to amortization, the estimated amortization expense for each of the succeeding five years is as follows: 2006: $2.4 million; 2007: $2.4 million; 2008: $1.8 million; 2009: $1.4 million; and 2010: $1.1 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 its acquisitions completed in 2002 and 2003, NetRatings established additional restructuring liabilities of approximately $8.6 million. These restructuring plans involved (i) the termination of 95 employees worldwide, all of whom were terminated as of December 31, 2004; (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 2003, the Company made adjustments to the purchase price allocation of the acquisitions made in 2002, resulting in a net decrease to goodwill of $0.6 million. During 2002 and 2003, $11.5 million of restructuring liabilities had been paid, resulting in a remaining balance of $3.4 million as of December 31, 2003.

During 2004, the Company made adjustments to the purchase price allocation for Red Sheriff and finalized the purchase price allocations of acquisitions made in 2003, resulting in net decreases in restructuring liabilities of approximately $0.4 million. These adjustments include decreases in severance related liabilities that will not be paid and adjustments to estimates relating to idle facility lease commitments, all of which were adjusted to goodwill.

During the first quarter of 2004, the Company negotiated an amendment to the lease for its offices in Milpitas, California, which included a release from its obligations for the abandoned portion of the facility. This resulted in a reversal of restructuring expense of $0.5 million, which is included in restructuring expenses in the accompanying consolidated statement of operations.

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In the third quarter of 2005, NetRatings’ management approved and initiated a restructuring plan primarily intended to streamline its European operations. The 2005 restructuring plan includes the termination of 10 employees related to relocating engineering operations in Europe to the United States and the elimination of certain management positions, all of which were terminated as of December 31, 2005. As a result of the 2005 restructuring plan, the Company recorded a restructuring charge of $1.7 million for severance costs in 2005.

The following tables summarize activity associated with the restructuring plans and other severance for the years ended December 31, 2005, 2004 and 2003 (in thousands):

	Balance December 31, 2004		Additions		Utilized Cash			Adjustments		Balance December 31, 2005
Employee severance benefits	$	—	$	1,700	$	(1,001	)	$	—	$	699
Lease commitments and related write-down of property and equipment	1,424		—		(667		)	—		757
Total	$	1,424	$	1,700	$	(1,668	)	$	—	$	1,456

	Balance December 31, 2003		Additions Related to Acquisitions		Utilized Cash			Adjustments			Balance December 31, 2004
Employee severance benefits	$	144	$	—	$	(144	)	$	—		$	—
Costs incurred due to discontinuation of certain services and other expenses	63		—		(63		)	—			—
Lease commitments and related write-down of property and equipment	3,184		—		(834		)	(926		)	1,424
Total	$	3,391	—		$	(1,041	)	$	(926	)	$	1,424

The long-term portion of restructuring liabilities on the consolidated balance sheet relates to idle facility lease commitments, which are estimated to be completed by the first quarter of 2008.

Note 6: Litigation Settlement Recovery

In 2002, NetRatings expensed costs related to the settlement in 2002 of a patent infringement lawsuit against the Company by Jupiter Media Metrix, Inc. In the second quarter of 2004, NetRatings received, net of legal fees, $1.8 million from the Company’s insurance company in reimbursement for these costs.

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, 2005, 37.8 million shares of common stock were issued and 35.2 million shares were outstanding. The Company issued 0.7 million and 1.7 million shares of common stock during 2005 and 2004, respectively, in connection with the Company’s stock compensation plans.

Common Stock Repurchases/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.

On November 3, 2005, the Company announced that its Board of Directors authorized a stock repurchase program. Under this program, the Company was authorized to repurchase up to $25 million of the Company’s common stock in the open market or in privately negotiated transactions. As of December 31, 2005, the Company repurchased approximately 1.1

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million shares of common stock for an aggregate cost, including commissions,  of $15.4 million, or an average of $13.40 per share. At December 31, 2005, $13.5 million of the stock repurchase was paid in cash and $1.9  million was included in accrued liabilities. During the first quarter of 2006, the Company repurchased an additional 0.8 million shares for an aggregate cost, including commissions, of $9.6 million.

Stock Plan

In 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. Subsequently, an additional 7.3 million shares of NetRatings’ common stock were reserved under the Plan. 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 in 2002 of the remaining 80.1% interest in eRatings.

In 2005, the Company’s Board of Directors and stockholders approved the Amended and Restated 1998 Stock Plan (the “Amended Plan”). Under the Amended Plan, the Company is authorized to issue restricted stock (as well as other equity-based compensation) to the Company’s employees and members of the Board of Directors. In 2005, the Company issued, net of forfeitures, approximately 492,000 shares of restricted stock with a fair market value at the time of issuance of approximately $7.4 million. The restricted stock issued to members of the Board of Directors vests ratably in equal annual installments over 2 years, while the restricted stock issued to the Company’s non-executive employees vests ratably in equal annual installments over 3 years. The restricted stock issued to the Company’s executive officers vests in its entirety on the third anniversary of the date of grant but vesting can be accelerated if specific performance criteria are achieved. The restricted stock has voting rights until canceled. The compensation expense related to these restricted stock awards is amortized over the term of the restricted stock awards using the accelerated graded vesting method in accordance with APB No. 25 and FASB Interpretation No. 28.

Information with respect to the Plan and Amended Plan activity is summarized as follows:

					Stock Options Outstanding
	Available for Grant		Number of Restricted Stock Awards		Number of Stock Options		Price Per Share					Weighted-Average Exercise Price
Balance at December 31, 2002	1,187,000		—		4,476,000		$	0.10	-	$	106.83	$	11.66
Authorized	1,000,000		—		—		—			—		—
Granted	(1,692,000	)	—		1,692,000		$	5.82	-	$	11.39	$	6.16
Exercised	—		—		(232,000	)	$	0.10	-	$	10.31	$	4.20
Canceled	903,000		—		(903,000	)	$	0.10	-	$	106.83	$	11.03
Balance at December 31, 2003	1,398,000		—		5,033,000		$	0.10	-	$	106.83	$	10.00
Granted	(1,208,000	)	—		1,208,000		$	10.72	-	$	20.00	$	11.29
Exercised	—		—		(1,649,000	)	$	0.10	-	$	17.13	$	9.63
Canceled	481,000		—		(481,000	)	$	5.40	-	$	106.83	$	10.81
Balance at December 31, 2004	671,000		—		4,111,000		$	0.10	-	$	106.83	$	10.43
Granted	(647,000	)	545,000		102,000		$	18.25		$	18.25	$	18.25
Exercised	—		—		(581,000	)	$	0.10	-	$	15.68	$	8.73
Released from restriction	—		(7,000	)	—		—			—		$	—
Canceled	575,000		(53,000	)	(522,000	)	$	5.40	-	$	106.83	$	12.66
Balance at December 31, 2005	599,000		485,000		3,110,000		$	0.10	-	$	106.83	$	10.64
Options exercisable at:
December 31, 2003					2,023,000							$	11.62
December 31, 2004					1,618,000							$	11.09
December 31, 2005					2,176,000							$	11.19

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The following table summarizes information concerning options outstanding and exercisable at December 31, 2005:

	Options Outstanding				Options Exercisable
Exercise Price	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Term (in years)	Number of Shares	Weighted- Average Exercise Price
$0.10 - $5.40	62,000	$	4.37	5.55	50,000	$	4.13
$5.82 - $5.82	548,000	$	5.82	7.19	273,000	$	5.82
$5.84 - $9.15	343,000	$	7.44	6.65	216,000	$	7.65
$9.29 - $11.02	166,000	$	10.39	6.26	137,000	$	10.49
$11.05 - $11.05	684,000	$	11.05	8.24	255,000	$	11.05
$11.20 - $12.08	361,000	$	11.65	6.03	339,000	$	11.65
$12.12 - $12.375	89,000	$	12.32	5.67	85,000	$	12.33
$12.51 - $12.51	456,000	$	12.51	5.83	456,000	$	12.51
$12.60 - $15.68	327,000	$	13.87	5.88	311,000	$	13.87
$16.29 - $106.83	74,000	$	30.32	6.09	54,000	$	30.34
$0.10 - $106.83	3,110,000	$	10.64	6.74	2,176,000	$	11.19

Shares Reserved for Future Issuance

NetRatings has reserved shares of common stock for future issuance as of December 31, 2005 and December 31, 2004 as follows:

	2005	2004
Stock options outstanding	3,110,000	4,111,000
Stock options and restricted stock available for grant	599,000	671,000
Employee stock purchase plan	181,000	250,000

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-based awards under the fair value method of accounting is presented in Note 1 to these consolidated financial statements.

1999 Employee Stock Purchase Plan

In 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 212,297 shares in November 2004. 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. Shares issued under the employee stock purchase plan totaled 68,656 and 90,783 in 2005 and 2004, respectively.

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 was amortized to operating expense through December 31, 2004. Amortization expense was $7.6 million and  $9.1 million for the years ended December 31, 2004 and 2003, respectively, and is included in stock-based compensation in the accompanying consolidated statements of operations. As of December 31, 2004, the deferred service costs had been fully amortized.

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Note 8: Joint Ventures

In June 1999, NetRatings granted a 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 30% ownership interest. On May 7, 2002, NetRatings increased its ownership in Mediametrie NetRatings to 50% as a result of the Company’s acquisition of ACNielsen eRatings.com, which held a 20% ownership interest in Mediametrie NetRatings. Mediametrie NetRatings is responsible for building and maintaining a French audience measurement panel. 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 accounted 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, its Latin America joint venture, through the acquisition of ACNielsen eRatings.com and recorded this investment using the equity method. In accordance with APB 18, the Company recorded losses to the extent of its investments and outstanding advances, thereby reducing its investment in Ibope eRatings.com to zero in the first quarter of 2004. In addition, NetRatings has no financial support commitments to Ibope eRatings.com and therefore do not presently recognize its share of Ibope eRatings.com’s net losses in NetRatings’ consolidated financial statements.

In connection with NetRatings acquisition of Red Sheriff in December 2004, NetRatings acquired a 50% stake in NetRatings Italia S.r.l. At the end of the first quarter in 2005, the Company purchased the remaining 50% interest in NetRatings Italia S.r.l., which resulted in its results of operations being reported in NetRatings’ consolidated results rather than in equity in earnings of joint ventures. As a result, the Company’s sole remaining joint venture relationship is Ibope eRatings.com.

The transactions between the Company and Ibope eRatings.com, as well as the Company’s majority owned subsidiaries prior to consolidation, involve the allocation of revenue and expense. Revenue from Internet audience measurement services, which can either be sold by NetRatings or the joint venture partner, is allocated between the two parties based on the location of the customer and the location of the panel whose data is used in the service. NetRatings records commission revenue and expense related to these sales ratably over the period of the contract in the revenue and cost of revenue lines in its statement of operations.

•The joint venture retains 100% of any revenue from services that the joint venture sells to customers within their own country based on data from their panels;

•NetRatings and the joint venture each record a 50% international panel fee from services that NetRatings sells to customers based on data from the joint venture’s panels or services that the joint venture sells to customers within their country based on NetRatings’ panel data; and

•If either NetRatings or the joint venture sells services based on data from a combination of the NetRatings and joint venture’s panels, the allocation of revenues is determined by an operating committee consisting of two representatives of each company, with any decisions requiring a unanimous vote of those present, which must include at least one representative of each company.

The Company’s joint ventures pay the Company a royalty for the use of its technology. This royalty revenue is based on a percentage of each sale made by the Company’s equity method investees pursuant to each joint venture’s operating agreement. This revenue is recognized ratably over the period of the contract in the Company’s consolidated statement of operations.

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NetRatings also provides data hosting and support services to the joint ventures, including data center operations and engineering expertise. Reimbursements from joint ventures related to these services, and such reimbursements have been netted against the respective expense categories in the accompanying consolidated statements of operations.

For the years ended December 31, 2005, 2004 and 2003, the Company recorded the following transactions related to its equity owned joint ventures:

	2005		2004		2003
	(in thousands)
Revenue	$	91	$	73	$	298
Commission expense	58		52		191
Royalty revenue	36		79		190
Reimbursement for data hosting and support services	135		135		447

The transactions between the Company and its joint ventures relating to allocation of revenue, payment of a technology royalty and data hosting and support services described in this Note 8 are included in the operating statement of the Company’s equity method joint ventures as well. The Company records its percentage of the joint venture’s net profit (loss) in the net equity in earnings (losses) of joint ventures line of the accompanying statement of operations.

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. 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 $0.3 million, $0.5 million, and $1.0 million for the years ended December 31, 2005, 2004 and 2003, respectively.

NetRatings is also charged by Nielsen Media Research for the costs of maintaining the U.S. home and at-work NetView panels. These costs totaled $2.5 million, $3.1 million and $4.1 million for the years ended December 31, 2005, 2004 and 2003, respectively, and are included in cost of revenue in the accompanying consolidated statements of operations.

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 was $2.4 million, $2.2 million and $0.6 million for the years ended December 31, 2005, 2004 and 2003, respectively, and is included in cost of revenue in the accompanying consolidated statement of operations.

In March 2004, NetRatings engaged Nielsen Media Research to provide technology hosting services for its U.S. data center operations. The cost incurred in 2005 and 2004 for these services was $0.6 and $0.3 million, respectively, and is included in cost of revenue in the accompanying consolidated statement of operations.

As of December 31, 1999, Nielsen Media Research became a wholly owned subsidiary of VNU N.V. (“VNU”). As Nielsen Media Research is a majority stockholder of NetRatings, its parent company, VNU, is required to consolidate NetRatings’ operating results with its own for financial reporting purposes. As of December 31, 2005 and 2004, VNU owned, through its subsidiaries, approximately 60% of the outstanding common stock of NetRatings.

The Company obtains its directors and officers, property, general and workers compensation insurance through VNU. The cost incurred for these services was approximately $0.2 million for each of the three years ended December 31, 2005, 2004 and 2003.

Since May 2002, ACNielsen has provided back office services for the Company’s international operations, other than those previously operated by Red Sheriff. These services include payment of all international operating expenses for which NetRatings reimburses ACNielsen on a quarterly basis. Fees related to these back office services were approximately $0.9 million, $0.8 million and $1.6 million for the years ended December 31, 2005, 2004 and 2003, respectively. The Company is currently in the process of transitioning these services out of ACNielsen and it expects to complete the transition by the end of 2006. NetRatings also rents office space in ACNielsen offices for some of its international sales offices. Charges related to this office space and related office expenses approximated $0.4 million for each of the years ended December 31, 2005, 2004 and 2003.

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Mediametrie is the minority shareholder of Mediametrie NetRatings. In January 2005, Mediametrie started performing custom research services for Mediametrie NetRatings. The cost incurred for these services was $0.4 million for the year ended December 31, 2005.

As of December 31, 2004, the Company was owed $1.2 million from related parties, which represented a loan made by NetRatings Japan to TransCosmos, one of its minority shareholders. The $1.2 million loan was paid in the second quarter of 2005. The loan receivable of $0.5 million from TransCosmos at December 31, 2003 was paid in full in the second quarter of 2004.

The following is a summary of amounts due to related parties as of December 31, 2005 and 2004 (in thousands):

	2005		2004
Due to VNU and its affiliates	$	6,317	$	8,599
Due to joint venture partners	549		418
Due to Mediametrie	220		—
Due to related parties	$	7,086	$	9,017

Note 10: Commitments and Contingencies

Leases

As of December 31, 2005, non-cancelable operating lease agreements with terms in excess of one year were as follows (in thousands):

Year ending December 31:
2006	$	3,150
2007	3,045
2008	2,081
2009	1,706
2010 and thereafter	516
Total minimum lease payments	$	10,498

Future rent payments related to idle facility space, net of sub-lease income, of $0.8 million are included in restructuring liabilities (Note 5). Sub-lease rental payments were $0.1 million, $0 and $0, for the years ended December 31, 2005, 2004 and 2003, respectively.

Rent expense was $3.1 million, $3.1 million and $1.5 million for the years ended December 31, 2005, 2004 and 2003, respectively.

Litigation

Securities Class Action

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 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.

Similar allegations were made in lawsuits relating to more than 300 other initial public offerings conducted in 1999 and 2000. The cases were 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

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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. In July 2004, we and the individual defendants accepted a settlement proposal made to all of the issuer defendants. Under the terms of the settlement, the plaintiffs will dismiss and release all claims against participating defendants in exchange for a contingent payment guaranty by the insurance companies collectively responsible for insuring the issuers in all related cases, and the assignment or surrender to the plaintiffs of certain claims the issuer defendants may have against the underwriters. Under the guaranty, the insurers will be required to pay the amount, if any, by which $1 billion exceeds the aggregate amount ultimately collected by the plaintiffs from the underwriter defendants in all the cases. The settlement is subject to approval of the Court, which cannot be assured. If the settlement is not approved by the Court, we intend to defend the lawsuit vigorously. However, the litigation is in the preliminary stage, and we cannot predict its outcome. The litigation process is inherently uncertain. If litigation proceedings and its outcome is adverse to us and if we are required to pay significant monetary damages, an adverse outcome could materially affect our results of operations and financial position.

Patent Litigation

In the first half of 2005, NetRatings decided to launch a coordinated program to enforce its intellectual property rights against various companies that operate in the Web analytics, online advertising and related Internet technology fields. The patent enforcement program contemplates both negotiating patent licensing deals outside the litigation context and initiating patent infringement lawsuits where it is believed such a step is necessary to enforce our intellectual property rights. Pursuant to this patent enforcement program, in 2005 and 2006 NetRatings filed patent infringement lawsuits against six Web analytics companies (Omniture, Inc., Coremetrics, Inc., SageMetrics, Corp., Sane Solutions, LLC, Visual Sciences, LLC and WebSideStory, Inc.). Each of the complaints filed in these lawsuits alleged that the defendant infringes multiple patents owned or controlled by NetRatings which relate generally to the collection, analysis and reporting of information concerning computer usage activity. Each of the complaints seeks, among other things, injunctive relief enjoining further infringement of such patents as well as compensatory and other damages. In the fourth quarter of 2005, NetRatings and Visual Sciences settled their patent infringement litigation, and in the first quarter of 2006 NetRatings settled the actions it had brought against Omniture and SageMetrics. Under each of these settlements, NetRatings has licensed certain of its patents in exchange for license or royalty fees payable to NetRatings.

In February 2006, WebSideStory filed a patent infringement lawsuit against NetRatings in the United States District Court for the Southern District of California. This lawsuit alleges that NetRatings infringes a patent owned by WebSideStory and is seeking unspecified monetary damages and injunctive relief. While NetRatings believes this lawsuit is without merit, it cannot assure you that it will prevail in this litigation. NetRatings also cannot estimate the financial impact to the company in the event that it does not prevail in defending this lawsuit.

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. The Company’s geographic regions include the United States (US), Europe, Middle East and Africa (EMEA), and Asia Pacific and Latin America (APLA). 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 revenue and property and equipment by geographic region:

	For the year ended December 31, 2005 *
	US		EMEA		APLA		Total
Revenue	$	31,734	$	21,551	$	14,732	$	68,017
Property and equipment*	4,394		1,153		2,280		7,827

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	For the year ended December 31, 2004 *
	US		EMEA		APLA		Total
Revenue	$	28,059	$	19,432	$	11,803	$	59,294
Property and equipment*	2,534		1,712		1,731		5,977

	For the year ended December 31, 2003 *
	US		EMEA		APLA		Total
Revenue	$	25,651	$	12,719	$	3,062	$	41,432
Property and equipment*	1,814		1,164		965		3,943

* The amounts indicated for property and equipment are as of December 31, 2005, 2004 and 2003, respectively.

Note 12: Income Taxes

No income tax expense was recorded for the years ended December 31, 2004 and 2003. The components of the provision for income taxes for the year ended December 31, 2005 are as follows (in thousands):

	2005
Current:
Federal	$	—
State	—
Foreign	320
	320
Deferred:
Federal	—
State	—
Foreign	—
	—
Total tax provision	$	320

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:

	2005			2004			2003
	(in thousands)
Income tax benefit at federal statutory rate	$	(3,291	)	$	(6,097	)	$	(8,819	)
Amortization of deferred stock compensation	—			2,655			3,058
Losses on joint ventures	—			5			23
Net operating losses and other	5,064			6,510			5,866
Stock option deductions	(1,773		)	(3,073		)	(128		)
Foreign taxes	320			—			—
Total	$	320		$	—		$	—

Significant components of NetRatings’ net deferred tax assets are as follows:

	2005			2004
Deferred tax assets:
Net operating loss carryforwards	$	33,185		$	31,313
Tax credit carryforwards	1,061			1,061
Reserves and accrued costs and expenses not currently deductible	2,535			(192		)
Asset write-offs not currently deductible	1,834			1,834
	38,615			34,016
Deferred tax liabilities:
Fixed assets and intangibles	(773		)	1,047
Total deferred tax assets	37,842			32,969
Valuation allowance for deferred tax assets	(37,842		)	(32,969		)
Net deferred tax assets	$	—		$	—

SFAS 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 $4.9 million, $2.0 million and $5.8 million during the years ended December 31, 2005, 2004 and 2003, respectively. Approximately $8.9 million and $7.2 million of the valuation allowance at

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December 31, 2005 and 2004, 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, 2005, NetRatings had net operating loss carryforwards for federal and state tax purposes of approximately $87.3 million and $45.7 million, respectively, and federal and state research and development tax credit carryforwards of approximately $0.6 million. 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 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. Other-Than-Temporary Impairment and Its Application to Certain Investments

The gross unrealized losses related to NetRatings’ portfolio of available-for-sale securities were primarily due to a decrease in the fair value of debt securities as a result of an increase in interest rates during 2005. The Company has determined that the gross unrealized losses on its available-for-sale securities as of December 31, 2005 are temporary in nature. NetRatings has reviewed its investment portfolio to identify and evaluate investments that have indications of possible impairment. Factors considered in determining whether a loss is temporary include the magnitude of the decline in market value, the length of time the market value has been below cost (or adjusted cost), credit quality, and NetRatings’ ability and intent to hold the securities for a period of time sufficient to allow for any anticipated recovery in market value.

There were no unrealized gains as of December 31, 2005. The following table sets forth the unrealized losses for NetRatings investments as of December 31, 2005 (in thousands, except percentage data):

	In Loss Position Less than 12 Months							In Loss Position 12 Months or Longer					Total In Loss Position
Description of Securities	Fair Value			Unrealized Losses				Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Commercial paper	$	1,995		$	(5		)	$	—	$	—		$	1,995	$	(5	)
Corporate notes			8,103			(52	)	17,123		(179		)	25,226		(231		)
Auction rate securities	—			—				999		(1		)	999		(1		)
Euro dollar bonds	17,287			(124			)	5,538		(103		)	22,825		(227		)
Floating rate bonds	2,003			(2			)	—		—			2,003		(2		)
Government securities	32,256			(244)				4,921		(78		)	37,177		(322		)
Total temporarily impaired securities	$		61,644	$		(427	)	$	28,581	$	(361	)	$	90,225	$	(788	)
Securities unrealized loss percent to fair value				0.70			%			1.26		%			0.87		%

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There were no unrealized gains as of December 31, 2004. The following table sets forth the unrealized losses for NetRatings investments as of December 31, 2004 (in thousands, except percentage data):

	In Loss Position Less than 12 Months					In Loss Position 12 Months or Longer					Total In Loss Position
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Commercial paper	—		—			$	1,976	$	(24	)	$	1,976	$	(24	)
Corporate notes	$	12,410	$	(101	)	6,582		(34		)	18,992		(135		)
Euro dollar bonds	28,773		(172		)	11,727		(86		)	40,500		(258		)
Government securities	21,086		(109		)	31,122		(378		)	52,208		(487		)
Total temporarily impaired securities	$	62,269	$	(382	)	$	51,407	$	(522	)	$	113,676	$	(904	)
Securities unrealized loss percent to fair value			0.61		%			1.01		%			0.79		%

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, 2005:

	Time to maturity
	One year or less			One to five years			Five to ten years				Greater than ten years			Total
	(in thousands, except percent data) (unaudited)
Cash and cash equivalents	$	34,940		—				—			—			$	34,940
Average interest rates	0.68		%	—				—			—			0.68		%
Short term investments	$	62,150		$	30,893			$	2,207		$	50,062		$	145,312
Average interest rates	2.77		%	4.18		%		4.25		%	4.38		%	3.65		%

Marketable securities with a maturity date greater than one year and in a loss position as of December 31, 2005 are reported as long-term marketable securities on the balance sheet. All other marketable securities are reported as short-term marketable securities.

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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.

Except as described below, there have not been any changes in the Company’s internal control over financial reporting during the fourth quarter of 2005 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

As disclosed in our quarterly report on Form 10-Q filed on November 9, 2005, the Company determined that its consolidated financial results for the three and six month periods ended June 30, 2005 required restatement due to errors in calculating the amount of the amortization of stock-based compensation for such periods. As a result of these errors, the Company determined that it had an internal control deficiency that constituted a “material weakness,” as defined by the Public Company Accounting Oversight Board’s Auditing Standard No. 2. During the fourth quarter of 2005, the Company revised its internal control over financial reporting and has concluded that the appropriate remedial steps to address the material weakness have been implemented.

Internal Control over Financial Reporting

MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2005.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our independent registered public accounting firm, Ernst & Young LLP, audited management’s assessment of the Company’s internal control over financial reporting as stated in their report.

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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 AND RELATED STOCKHOLDER MATTERS

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 ACCOUNTING FEES AND SERVICES

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

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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

(1)Financial Statements:

See Index to Consolidated Financial Statements at page 35 of this report.

(2)Financial Statement Schedules:

All financial statement schedules are omitted because they are not applicable or not required, or because the required information is included in the Financial Statements and Notes thereto which are included herein.

(3)Exhibits:

The exhibits listed on the accompanying Exhibit Index are filed as part of, or are incorporated by reference into, this report.

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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:	/s/ Todd Sloan
	Todd Sloan Executive Vice President Corporate Development, Chief Financial Officer and Secretary

Date: March 16, 2006

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 Pulver	Chief Executive Officer, President and Director (Principal Executive Officer)	March 16, 2006
William Pulver
/s/ Todd Sloan	Executive Vice President Corporate Development, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer)	March 16, 2006
Todd Sloan
/s/ John Dimling	Chairman of the Board	March 16, 2006
John A. Dimling
/s/ David H. Harkness	Director	March 16, 2006
David H. Harkness
/s/Arthur F. Kingsbury	Director	March 16, 2006
Arthur F. Kingsbury
/s/ Thomas A. Mastrelli	Director	March 16, 2006
Thomas A. Mastrelli
/s/ D. Scott Mercer	Director	March 16, 2006
D. Scott Mercer
/s/ James M. O’Hara	Director	March 16, 2006
James M. O’Hara
/s/ Jerrell W. Shelton	Director	March 16, 2006
Jerrell W. Shelton
/s/ Susan D. Whiting	Director	March 16, 2006
Susan D. Whiting

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EXHIBIT INDEX

Exhibit Number	Exhibit Title
2.7(1)	Form of Share Purchase Agreement between NetRatings, Inc. and certain Red Sheriff shareholders.
3.1(2)	Restated Certificate of Incorporation of Registrant.
3.2(3)	Amended and Restated By-Laws of Registrant.
*10.1(4)	Amended and Restated 1998 Stock Plan, including form of restricted stock agreement.
*10.2(5)	1999 Employee Stock Purchase Plan.
*10.3(6)	Form of Director Retention Agreement.
*10.4(7)	Employment Offer Letter with Bill Pulver dated November 1, 2001.
*10.5(8)	Employment Offer Letter with Todd Sloan dated February 28, 2002.
10.10(9)	Operating Agreement between Registrant and Nielsen Media Research dated as of August 15, 1999.
10.11(10)	Software License Agreement between Registrant and Nielsen Media Research, dated as of August 15, 1999.
10.12(11)	Panel Maintenance Agreement between Registrant and Nielsen Media Research, dated as of August 15, 1999.
10.13(12)	NMR Commissions Agreement by and between NetRatings, Inc. and Nielsen Media Research, Inc., dated as of May 7, 2002.
10.14(13)	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(17)	Agreement of Reimbursement by and between NetRatings, Inc. and VNU, Inc., dated as of May 7, 2002.
10.19(18)	Sub-sublease dated September 13, 2002.
*10.20(19)	Employment Offer Letter with Forrest Didier dated April 29, 2005.
*10.21 (20)	Employment Offer Letter with John Kleine dated August 5, 2005.
*10.22	Separation Agreement and Mutual Release, dated January 1, 2006, between NetRatings, Inc. and George Durney.
*10.23	Compromise Agreement, dated February 17, 2006, between NetRatings UK Limited and David Day.
21	Subsidiaries.
23	Consent of Independent Registered Public Accounting Firm.
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.

*Constitutes a management contact or compensatory plan required to be filed pursuant to Item 15(c) of Form 10-K.

(1)Incorporated by reference to exhibit number 2.7 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003.

(2)Incorporated by reference to exhibit number 3.1 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003.

(3)Incorporated by reference to Exhibit 3.4 to Registrant’s Form S-1 Registration Statement (No. 333-87717), which

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became effective on December 8, 1999 (the “1999 Registration Statement”).

(4)Incorporated by reference to exhibit number 10.1 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004.

(5)Incorporated by reference to exhibit number 10.2 to the 1999 Registration Statement.

(6)Incorporated by reference to exhibit number 10.3 to the 1999 Registration Statement.

(7)Incorporated by reference to exhibit number 10.24 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001.

(8)Incorporated by reference to exhibit number 10.40 to Registrant’s Quarterly Report on Form 10-Q for the fiscal period ended June 30, 2002.

(9)Incorporated by reference to exhibit number 10.9 to the 1999 Registration Statement.

(10)Incorporated by reference to exhibit number 10.16 to the 1999 Registration Statement.

(11)Incorporated by reference to exhibit number 10.17 to the 1999 Registration Statement.

(12)Incorporated by reference to exhibit number 10.38 to Registrant’s Quarterly Report on Form 10-Q for the fiscal period ended March 31, 2002.

(13)Incorporated by reference to exhibit number 10.21 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999.

(14)Incorporated by reference to exhibit number 10.35 to Registrant’s Quarterly Report on Form 10-Q for the fiscal period ended March 31, 2002.

(15)Incorporated by reference to exhibit number 10.36 to Registrant’s Quarterly Report on Form 10-Q for the fiscal period ended March 31, 2002.

(16)Incorporated by reference to exhibit number 10.37 to Registrant’s Quarterly Report on Form 10-Q for the fiscal period ended March 31, 2002.

(17)Incorporated by reference to exhibit number 10.39 to Registrant’s Quarterly Report on Form 10-Q for the fiscal period ended March 31, 2002.

(18)Incorporated by reference to exhibit number 10.42 to Registrant’s Quarterly Report on Form 10-Q for the fiscal period ended September 30, 2002.

(19)Incorporated by reference to exhibit number 99.2 to Registrant’s Current Report on Form 8-K dated May 5, 2005.

(20)Incorporated by reference to exhibit number 99.1 to Registrant’s Current Report on Form 8-K dated September 7, 2005.

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EX-10.22

Exhibit 10.22

SEPARATION AGREEMENT AND MUTUAL RELEASE

This Settlement Agreement and Mutual Release (“Agreement”) is made by and between NetRatings, Inc. (the “Company”) and George Durney (“Employee”).

WHEREAS, Employee was employed by the Company;

WHEREAS, in exchange for the severance and other benefits provided for herein, Employee has agreed to the terms and conditions of this Agreement and to release the Company from any and all claims arising from or related to the employment relationship;

NOW THEREFORE, in consideration of the mutual promises made herein, the Company and Employee (collectively referred to as the “Parties”) hereby agree as follows:

1.Termination. Employee’s employment with the Company is terminated effective as of January 1, 2006 (the “Effective Date”)

2.Company Payments and Benefits.

(a)Upon the Effective Date, the Company will pay (or will have already paid) to Employee all salary, wages, bonuses, accrued vacation, commissions and expenses incurred on behalf of the Company and any and all other benefits due to Employee through the Effective Date. Employee acknowledges and represents that the Company has paid all salary, wages, bonuses, accrued vacation, commissions and any and all other benefits due to the Employee as of the Effective Date. Notwithstanding the foregoing, the parties agree and acknowledge that (i) the commissions owed to Employee for the fourth quarter of 2005 and (ii) the reimbursement of expenses incurred by Employee during December 2005 shall be paid by Company by January 31, 2006.

(b)In consideration of the mutual promises and agreements described herein, the Company will provide the following to Employee: (i) the Company shall make a lump sum payment to Employee in the amount of $87,550.00 (which is equal to six months of base salary), less applicable taxes and withholding amounts, within five business days after the revocation period indicated in paragraph 5 of this Agreement has expired;  (ii) The Company shall make a lump sum payment to Employee in the amount of $47,277.00  (90% of the bonus target) less applicable taxes and withholding amounts on the same day that the bonus payments are made to the Company’s employees; (iii) in the event that the company achieves profitability for the fourth quarter of 2005, calculated on an EBITDA basis and evidenced by the publication of the Company’s financial results press release previously approved by the Company’s Audit Committee, Employee will receive a net issuance of one-third of the restricted shares granted to Employee in the 2005  at the same time as the US-based executives receive their net issuance of restricted shares; (iv) following the expiration of the revocation period indicated in paragraph 5 of this Agreement and continuing until 90 days after the Effective Date, Employee shall be entitled to exercise any and all stock options that would have vested between the Effective Date and June 30, 2006; (v) following the expiration of the revocation period indicated in paragraph 5 of this Agreement, the Company shall pay for healthcare coverage for Employee and his immediate family pursuant to COBRA through June 30, 2006;  and (vi) following the expiration of the revocation period indicated in paragraph 5 of this Agreement, Employee shall be entitled to retain the laptop computer used by Employee following the transfer to the Company of all Company materials. From and after the Effective Date, Employee will not be entitled to accrual of any employee benefits, including but not limited to, vacation benefits or bonuses, and Employee will not participate in any executive incentive compensation or bonus plan, or any other officer or employee compensation program.

3.Confidential Information and Noncompetition. Employee agrees and acknowledges that Sections 1, 2, 3 and 4 of the Employee Nondisclosure, Noncompetition and Invention Assignment Agreement, dated April 19, 1999 (the “Nondisclosure Agreement”), are binding on Employee, and Employee shall comply with all of the terms of Sections 1, 2, 3 and 4 of the Nondisclosure Agreement. Employee represents to the Company that Employee has returned to the Company all of the Company property and confidential and proprietary information in his possession as of the Effective Date.

4.Release of Claims. Employee agrees that the foregoing consideration represents settlement in full of all outstanding obligations owed to Employee by the Company. Employee and the Company, on behalf of themselves, and their respective heirs, family members, executors, officers, directors, employees, investors, shareholders, administrators, affiliates, divisions, subsidiaries, predecessor and successor corporations, and assigns, hereby fully and forever release each other and their respective heirs, family members, executors, officers, directors, employees, investors, shareholders, administrators, affiliates, divisions, subsidiaries, predecessor and successor corporations, agents, and assigns, from, and agree not to sue concerning, any claim, duty, obligation or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that any of them may possess arising from any omissions, acts or facts that have occurred up until and including the Separation Date including, without limitation,

(a)any and all claims relating to or arising from Employee’s employment relationship with the Company and the termination of that relationship;

(b)any and all claims relating to, or arising from, Employee’s right to receive, exercise or purchase, or actual receipt, exercise or purchase of, equity in the Company, including, without limitation any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable state corporate law, and securities fraud under any state or federal law;

(c)any and all claims for wrongful discharge of employment; termination in violation of public policy; discrimination; breach of contract, both express and implied; breach of a covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent or intentional infliction of emotional distress; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy; false imprisonment; and conversion;

(d)any and all claims for violation of any federal, state or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, The Worker Adjustment and Retraining Notification Act, Older Workers Benefit Protection Act; the California Fair Employment and Housing Act, and Labor Code section 201, et seq. and section 970, et seq., the New York Human Rights Law, as amended, Rev. Code of Wash. Ch. 49.60.010 et seq.;

(e)any and all claims for violation of the federal, or any state, constitution;

(f)any and all claims arising out of any other laws and regulations relating to employment or employment discrimination;  and

(g)any and all claims for attorneys’ fees and costs.

The Company and Employee agree that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the matters released. This release does not extend to any obligations incurred under this Agreement. Employee acknowledges and agrees that any breach of this paragraph shall constitute a material breach of the Agreement and in the case of a breach by Employee, shall entitle the Company immediately to recover the monetary consideration discussed in paragraph 2 above. Employee shall also be responsible to the Company for all costs, attorneys’ fees and any and all damages incurred by the Company (a) enforcing the obligation, including the bringing of any suit to recover the monetary consideration, and (b) defending against a claim or suit brought or pursued by Employee in violation of this provision.

5.Acknowledgment of Waiver of Claims under ADEA. Employee acknowledges that he is waiving and releasing any rights he may have under the Age Discrimination in Employment Act of 1967 (“ADEA”) and that this waiver and release is knowing and voluntary. Employee and the Company agree that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Separation Date of this Agreement. Employee acknowledges that the consideration given for this waiver and release Agreement is in addition to anything of value to which Employee was already entitled. Employee further acknowledges that s/he has been advised by this writing that (a) he should consult with an attorney prior to executing this Agreement; (b) he has forty-five (45) days within which to consider this Agreement; (c) he has seven (7) days following the execution of this Agreement by the parties to revoke the Agreement; and (d) this Agreement shall not be effective until the revocation period has expired. Any revocation should be in writing and delivered to the Company’s General Counsel at NetRatings, 120 West 45^th Street, 35^th Floor, New York NY 10036, by close of business on the seventh day from the date that Employee signs this Agreement.

6.Civil Code Section 1542. The Parties represent that they are not aware of any claim by either of them other than the claims that are released by this Agreement. Employee and the Company acknowledge that they have been advised by legal counsel and are familiar with the provisions of California Civil Code Section 1542, which provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HER MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

Employee and the Company, being aware of said code section, agree to expressly waive any rights they may have thereunder, as well as under any other statute or common law principles of similar effect.

7.No Pending or Future Lawsuits. Employee represents that s/he has no lawsuits, claims, or actions pending in his/her name, or on behalf of any other person or entity, against the Company or any other person or entity referred to herein. Employee also represents that s/he does not intend to bring any claims on his/her own behalf or on behalf of any other person or entity against the Company or any other person or entity referred to herein.

8.No Cooperation. Employee agrees s/he will not act in any manner that might damage the business of the Company. Employee agrees that s/he will not counsel or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any third party against the Company and/or any officer, director, employee, agent, representative, shareholder or attorney of the Company, unless under a subpoena or other court order to do so.

9.Non-Disparagement. Each Party agrees to refrain from any defamation, libel or slander of the other, or tortuous interference with the contracts and relationships of the other. All inquiries by potential future employers of Employee will be directed to the Company’s Human Resources Department. Upon inquiry, unless otherwise agreed to by the Company and Employee, the Company shall only state the following:  Employee’s last position and dates of employment.

10.No Admission of Liability. The Parties understand and acknowledge that this Agreement constitutes a compromise and settlement of any and all disputed claims. No action taken by the Parties hereto, or either of them, either previously or in connection with this Agreement shall be deemed or construed to be (a) an admission of the truth or falsity of any claims heretofore made or (b) an acknowledgment or admission by either Party of any fault or liability whatsoever to the other Party or to any third party.

11.Costs. The Parties shall each bear their own costs, expert fees, attorneys’ fees and other fees incurred in connection with this Agreement.

12.Mediation. Employee and the Company agree that any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach or termination thereof, shall first be submitted to mediation. The mediation shall be conducted within forty-five (45) days of Employee notifying the Company of a dispute or controversy regarding this Agreement or Employee’s employment relationship with the Company. Unless otherwise provided for by law, the Company and Employee shall each pay half the costs and expenses of the mediation.

13.Arbitration.

(a)In the event that mediation pursuant to Section 12 fails to resolve a dispute or controversy, Employee and the Company agree that any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof, shall be finally settled by binding arbitration, unless otherwise required by law, to be held in New York County, New York before the American Arbitration Association under its National Rules for the Resolution of Employment Disputes, or by a judge to be mutually agreed upon. The decision of the arbitrator shall be final, conclusive and binding on the Parties to the arbitration. Judgment may be entered on the arbitrator’s decision in any court having jurisdiction.

(b)The arbitrator(s) shall apply New York law to the merits of any dispute or claim, without reference to rules of conflicts of law.

(c)Unless otherwise provided for by law, the Company shall pay the costs and expenses unique to such arbitration.

(d)EMPLOYEE HAS READ AND UNDERSTANDS THIS SECTION DISCUSSING ARBITRATION. EMPLOYEE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EMPLOYEE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, UNLESS OTHERWISE REQUIRED BY LAW, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EMPLOYEE’S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP.

14.Authority. The Company represents and warrants that the undersigned has the authority to act on behalf of the Company and to bind the Company and all who may claim through it to the terms and

conditions of this Agreement. Employee represents and warrants that s/he has the capacity to act on his/her own behalf and on behalf of all who might claim through her to bind them to the terms and conditions of this Agreement. Each Party warrants and represents that there are no liens or claims of lien or assignments in law or equity or otherwise of or against any of the claims or causes of action released herein.

15.No Representations. Each Party represents that it has had the opportunity to consult with an attorney, and has carefully read and understands the scope and effect of the provisions of this Agreement. Neither Party has relied upon any representations or statements made by the other Party hereto which are not specifically set forth in this Agreement.

16.Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision.

17.Entire Agreement. This Agreement, the terms of the stock option agreement issued to Employee (which terms are amended hereby), and any confidentiality agreement entered into by and between the Company and the Employee, represent the entire agreement and understanding between the Company and Employee concerning Employee’s separation from the Company, and supersedes and replaces any and all prior agreements and understandings concerning Employee’s relationship with the Company and his/her compensation by the Company, including, but not limited to, Retention Agreements or Change in Control Agreements.

18.No Oral Modification. This Agreement may only be amended in writing signed by Employee and either the Chief Executive Officer of the Chief Financial Officer of the Company.

19.Governing Law. This Agreement shall be governed by the internal substantive laws but not the choice of law rules of the State of New York.

20.Counterparts. This Agreement may be executed in counterparts, and each counterpart shall have the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned.

21.Voluntary Execution of Agreement. This Agreement is executed voluntarily and without any duress or undue influence on the part or behalf of the Parties hereto, with the full intent of releasing all claims. The Parties acknowledge that:

(a)They have read this Agreement;

(b)They have been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of their own choice or that they have voluntarily declined to seek such counsel;

(c)They understand the terms and consequences of this Agreement and of the releases it contains;

(d)They are fully aware of the legal and binding effect of this Agreement.

IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below.

		NETRATINGS, INC.
Dated:	January 1, 2006	By	/s/ William R. Pulver
		Title		Chief Executive Officer
		GEORGE DURNEY
Dated:	January 1, 2006	/s/ George Durney

EX-10.23

Exhibit 10.23

NetRatings UK Limited

David Day

Compromise Agreement

CONTENTS

		Page No
1.	Termination Date and Reason for Dismissal	1
2.	Continuing Duties	1
3.	Consideration	1
4.	Resignation of Directorships	2
5.	Return of Property	2
6.	Post Termination Obligations and Confidential Information	2
7.	Confidentiality	3
8.	Retention of Confidential Information	3
9.	Announcements	4
10.	Waiver of Claims Against Company	4
11.	Independent Legal Advice	4
12.	Full and Final Settlement	5
13.	Reliance	6
14.	Satisfaction of Conditions Regarding Compromise Agreements	7
15.	Enforcement	7
16.	Severability	7
17.	Jurisdiction	7
18.	Headings	7
19.	Counterparts	7
20.	Whole Agreement	7
Appendix 1 Letter of Resignation		9
Appendix 2 Adviser’s Certificate		10

SUBJECT TO CONTRACT AND WITHOUT PREJUDICE

COMPROMISE AGREEMENT

Dated:   17 February 2006

BETWEEN:

(1)           DAVID DAY of 1 Morlands, East Hanney, Oxfordshire, OX12 0JW (“you”); and

(2)NETRATINGS UK LIMITED (company number 05564009) whose registered office is at 77 St John Street, London EC1M 4NN (the “Company”).

WHEREAS:

(A)You have been employed by the Company and AC Nielsen Co. Ltd since 27 April 1997.

(B)You and the Company have agreed the terms upon which your employment with the Company will terminate, following an intimation by the Company of potential serious disciplinary matters and your indication that you would take issue with those matters.

(C)The Company is entering into this Agreement for itself and as agent for each and every company which is a holding company or subsidiary of the Company and each and every subsidiary of any such holding company, whether in the United Kingdom or elsewhere (“Group Company”) and is duly authorised in that behalf.

IT IS AGREED as follows:

1.Termination Date and Reason for Dismissal

Your employment will terminate on 15 May 2006 (the “Termination Date”) following your resignation which is deemed effective as at 14 February 2006. The reason for the termination of your employment is your resignation. You will continue to receive your normal salary and contractual benefits up to and including the Termination Date.

2.Continuing Duties

You will continue to perform your normal duties until 28 February 2006. After this date, until 15 May 2006,  you will be on garden leave and will not be required to perform any services for the Company. During the garden leave period you should not contact clients or colleagues save when specifically requested to do so or enter any premises of the Company and you are expected to remain contactable at all times. You are required to use up any accrued holiday during the garden leave period. You should inform us of any days that you intend to take as holiday. Save for the requirement to provide services, you remain bound by your continuing obligations as an employee, including your duty of fidelity,  until the Termination Date.

3.Consideration

3.1As consideration for this Agreement, the Company will pay the sum of £35,320 (thirty five thousand three hundred and twenty pounds) to you as a severance payment, less appropriate statutory deductions. The severance payment will be paid to you within 21

days of the Termination Date. You and the Company declare the common view that this payment may be made free of tax and national insurance to the extent of the first £30,000.00.

3.2The terms of the Amended and Restated 1998 NetRatings Stock Plan will apply in all respects including the 90-day post-termination limitation for the exercise of vested stock options, which in your case will run from 15 May 2006.

3.3The Company will also procure the following provisions in relation to restricted stock: If the Company meets its defined financial targets, in accordance with the terms of the Executive Team Restricted Stock Award Performance Vesting Terms (“Restricted Stock Terms”), you will receive 6,666 (six thousand, six hundred and sixty six) shares of NetRatings common stock, available following the public release of NetRatings’ full year 2005 financial results, currently scheduled for 9 March 2005, after the close of the Nasdaq market. The balance of the restricted stock that you might otherwise have received under the Restricted Stock Terms, is forfeited.

3.4You should note that the Company is under no obligation to provide any of the benefits or payments detailed at 3.1 to 3.3 above, in the circumstances of the termination of your employment, and it agrees to the above terms without any admission of liability.

4.Resignation of Directorships

You shall resign as a director of the Company and any Group Company of which you are a director or officer, with effect from 14 February 2006, by delivering to the Company a letter of resignation in the terms of the draft attached at Appendix 1 and do any other act required by the Company to effect such resignations from such offices.

5.Return of Property

You agree to return all books, documents, papers (including copies), material, credit cards, keys, mobile communication devices or other property of or relating to the business of the Company or any Group Company, its or their customers, clients or suppliers to the Company’s premises on or before 28 February 2006.

6.Post Termination Obligations and Confidential Information

6.1At no time after 28 February 2006 shall you directly or indirectly represent yourself as being interested in or employed by or in any way connected with the Company or any Group Company, other than as a former employee of the Company.

6.2In consideration of a payment of £10,000 (ten thousand pounds)  (less appropriate statutory deductions), which payment will be made to you within 21 days of the Termination Date,

6.2.1you agree that for a period of nine months after the Termination Date you will not, directly or indirectly

(a)solicit from any clients of the Company with whom you have dealt at any time in the 12 months prior to the Termination Date, any business that is the same as or which would compete with any business carried on by the Company as at the Termination Date

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(b)be involved with in any capacity, or carry on, any business that competes directly with any of the Company’s current products, including but not limited to Internet Audience Measurement, Web Analytics and Advertising Effectiveness

(c)solicit any employees of the Company, who are senior managers or sales staff, to work in a business which competes or is preparing to compete with the business of the Company

6.2.2you agree that you will not (except with the express written consent of the Board of the Company or in compliance with an order of a competent court) at any time (without limit) before or after the Termination Date:

(a)divulge or communicate to any person, company, business entity or other organisation; or

(b)use for your own purposes or for any purposes other than those of the Company or any Group Company; or

(c)through any failure to exercise due care and diligence, permit or cause any unauthorised disclosure of

any information including but not limited to terms of contracts or arrangements, existing and potential projects,  information regarding customers, clients or suppliers, disputes, business development and/or marketing programmes and plans, the business, products, affairs and finances of the Company or of any Group Company for the time being confidential to it or to them or treated by it or them as such and trade secrets (including, without limitation, technical data and know-how) relating to the business of the Company or of any Group Company or of any of its or their suppliers, clients or customers (“Confidential Information”).

6.3Without Prejudice to Clause 6.2.2 above and any other terms of this Agreement,  both before and after the Termination Date,  you will abide by the terms of the Company Trade Secrets Agreement dated 29 June 2000 and communicated to you on your joining AC Nielsen eRatings.com, save that Paragraph 3 of the Trade Secrets Agreement is expressly replaced by clause 6.2.1(c) of this Agreement.

7.Confidentiality

You agree that your resignation and the existence of and terms of this Agreement will be confidential and you will not disclose them to any other person unless specifically authorised by the Board of the Company to do so (save for the purpose of seeking legal advice in relation to them, or to the relevant tax authorities or as otherwise required by law to disclose), save that after William Pulver, President and CEO of NetRatings has made a formal announcement to employees (which is expected to be on or after 24 February 2006) you may also disclose the fact that you have resigned from the Company

8.Retention of Confidential Information

You undertake that as at the Termination Date no Confidential Information belonging to the Company or any Group Company (including, without limitation, any software programs or codes) whether belonging to the Company or provided to you by them, in

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connection with your employment, will be stored in any manner where such information is electronically recoverable by any means, on any electronic device, including all devices on which you may have stored any such confidential information and where any copy has been delivered by you to any third party, including all devices of such third party.

9.Announcements

9.1You and the Company (on the basis that the Company’s obligations are deliverable via Directors and Senior Executives) undertake not to make nor publish nor cause to be made or published to anyone, whether orally or in writing, in any circumstances any disparaging remarks concerning the other (and in your case concerning any Group Company,  the Directors, officers, shareholders or employees of the Company or any Group Company) or make or publish or cause to be made or published,  or do any act or thing which might reasonably be expected to damage the business interests or reputation of the other (and in your case, of any Group Company, the Directors, officers, shareholders or employees of the Company or any Group Company).

9.2The Company will provide an employment reference for you in accordance with its usual policy, stating only position held, period of service and (if you consent) your level of remuneration. Any request for an employment reference must be sent in writing to the Company addressed to NetRatings UK Ltd, Attention: HR Manager, 2^nd Floor West, Unipart House, Garsington Road Oxford OX4 2PG.

10.Waiver of Claims Against Company

This Agreement is in full and final settlement of all and any claims that you may have against the Company or any Group Company, in any jurisdiction, relating to your employment or the holding of any office, the termination of your employment or the loss of any office or any other matter including any common law, contractual or statutory claims that you have against such companies save for the sums and benefits due to you as set out in this Agreement, and save in respect of any claim in respect of accrued pension rights and or any claim in respect of personal injury, the circumstances relating to which are unknown or could not reasonably be known to you as at the date of this Agreement (“the Excluded Claims”).

11.Independent Legal Advice

11.1It is a condition of this Agreement that you have received legal advice from a “relevant independent adviser” (within the meaning of section 203 of the Employment Rights Act 1996) as to the terms and effect of this Agreement and in particular on its effect on your ability to pursue a complaint or proceeding in an Employment Tribunal or civil court. You hereby represent, warrant and undertake that:

11.1.1you have taken the advice described in clause 12.1 from Colin Henney of Henmans Solicitors, 116 St Aldates, Oxford, OX1 1HA and Colin Henney has supplied to the Company, a letter in the terms of Appendix 2 to this Agreement;

11.1.2you have been advised by your adviser that there is, and was at the time you received the advice referred to above, in force a contract of insurance or an indemnity provided for members of a profession or professional body covering the risk of a claim by you in respect of loss arising in consequence of that advice;

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11.1.3you have instructed your adviser to advise as to whether you have or may have any claims, including statutory claims, against the Company or any Group Company arising out of or in connection with your employment or directorship(s) and its or their termination; and

11.1.4you have provided your adviser with all available information which your adviser requires or may require in order to advise whether you have any such claims and your adviser has advised you that on the basis of the information available to your adviser:

(a)your only claims or potential complaints against the Company or any Group Company, whether statutory, contractual, at common law or otherwise, are those listed in Clause 12.1 of this Agreement; and

(b)you have no other claim against the Company or any Group Company whether statutory, contractual, at common law or otherwise Except in respect of the Excluded Claims (if any)

12.Full and Final Settlement

12.1You agree the terms of this Agreement are without admission of liability on the part of the Company or any Group Company in full and final settlement of all claims (if any) (except in respect of the Excluded Claims), in any legal jurisdiction, whether contractual, statutory or otherwise whether contemplated or not which you have or may have against the Company or any Group Company or their respective shareholders, officers or employees arising out of or in connection with your employment or directorships and its or their termination, including but not limited to the following claims under English and/or European Union law which are the complaints to which this Agreement relates and which may be contemplated by you in the current circumstances or which are the subject of commenced proceedings. [EMPLOYEE’S ADVISER TO DELETE CLAIMS THAT ARE NOT CONTEMPLATED BY EMPLOYEE OR THE SUBJECT OF COMMENCED PROCEEDINGS]

12.1.1any claim for unfair dismissal;

12.1.2intentionally deleted;

12.1.3any claim arising out of a contravention or an alleged contravention of the Employment Act 2002 and/or the Employment Act 2002 (Dispute Resolution) Regulations 2004 (statutory dismissal, disciplinary and grievance procedures);

12.1.4any claim arising out of a contravention or an alleged contravention of Part II of the Employment Rights Act 1996 (protection of wages);

12.1.5intentionally deleted;

12.1.6any claim arising out of a contravention or alleged contravention of Regulation 10 (duty to inform and consult) or Regulation 11 (entitlement to compensation) of the Transfer of Undertakings (Protection Employment) Regulations 1981;

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12.1.7intentionally deleted;

12.1.8intentionally deleted;

12.1.9intentionally deleted;

12.1.10any claim of disability discrimination;

12.1.11any claims under the Working Time Regulations 1998;

12.1.12intentionally deleted;

12.1.13any claim for breach of contract;

12.1.14intentionally deleted;

12.1.15intentionally deleted;

12.1.16intentionally deleted;

12.1.17intentionally deleted;

12.1.18any claims arising out of or in connection with any entitlement to stock options or restricted stock.

12.1.19any claims in relation to a bonus or other incentive payment or award

12.2You warrant to the best of your information and belief that you are not aware of the circumstances of any personal injury claim that you might have against the Company or any other Group Company and that as at the date of this Agreement you have not received any social security benefits in respect of any injury, accident or disease alleged to have occurred in connection with, as a result of or been caused by any claim referred to in this clause 12.

You confirm that you have not instituted any complaint to or proceedings in the High Court, a County Court or an Employment Tribunal and agree to refrain from bringing or instituting any claims against the Company or any shareholder, officer or employee of the Company including but not limited to those claims specified in clause 13.

13.Reliance

You acknowledge that the Company has entered into this Agreement in reliance on the warranties, representations, acknowledgments and undertakings given by you herein. In the event of any breach by you of the warranties, representations, acknowledgements and undertakings and/or in the event of you bringing any claims set out in clause 13, without prejudice to any other remedy the Company may have, an amount in respect of the total Consideration at clause 3.1 shall be repaid to you to the Company forthwith and shall be recoverable by the Company as a debt.

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14.Satisfaction of Conditions Regarding Compromise Agreements

It is agreed and acknowledged that the conditions regulating Compromise Agreements contained in Section 77 of the Sex Discrimination Act 1975, Section 72 of the Race Relations Act 1976, Section 288 of the Trade Union and Labour Relations (Consolidation) Act 1992, Section 9 of the Disability Discrimination Act 1995, Section 203 of the Employment Rights Act 1996, Section 49 of the National Minimum Wage Act 1998, Regulation 35 of the Working Time Regulations 1998, Regulation 41 of the Transnational Information and Consultation of Employees Regulations 1999, Schedule 4 of the Employment Equality (Religion or Belief) Regulations 2003 and Schedule 4 of the Employment Equality (Sexual Orientation) Regulations 2003 are intended to be and have been satisfied.

15.Enforcement

Any Group Company and any person being a director, officer, agent or employee,( but not you) of the Company or any Group Company at the date of this Agreement may enforce any of the terms of this Agreement in such person’s own right and the Contracts (Rights of Third Parties) Act 1999 shall apply only to this extent.

16.Severability

Should any provision of this Agreement become legally unenforceable, no other provision of this Agreement shall be affected and this Agreement shall be construed as if the Agreement had never included the unenforceable provision.

17.Jurisdiction

This Agreement shall be governed by and construed in accordance with English law and you and the Company hereby submit to the exclusive jurisdiction of the English Courts. This Agreement may, however, be enforced by the Company in any court of competent jurisdiction.

18.Headings

The headings to clauses in this Agreement are for convenience only and have no legal effect.

19.Counterparts

This Agreement may be executed in one or more parts by the parties on separate counterpart or facsimile copies each of which when so executed by any party shall be an original but all executed counterpart or facsimile copies shall together when delivered constitute but one agreement. This Agreement shall not be completed delivered or dated until each party has received counterpart or facsimile copies validly executed by all other parties. The date of this Agreement shall be the date in the United Kingdom on which validly executed copies were received by all parties.

20.Whole Agreement

This Agreement sets out the entire agreement between the Company and you and supersedes all prior discussions between the parties or their advisers and all statements,

7

representations, terms and conditions, warranties, guarantees, proposals, communications and understandings whenever given and whether orally or in writing.

Signed by:	/s/ David Day
	David Day
In the presence of a witness
Signed by:	/s/ Oona Phipps
Witness name:	Oona Phipps
Witness address:	116 St Aldates
	Oxford OX1 H1A
Signed by	/s/ Alan Shapiro
	For and on behalf of NetRatings UK Ltd

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EX-21

Exhibit 21

Subsidiaries

ACNielsen eRatings.com (Delaware)

Mediametrie NetRatings (France)

MMXI Switzerland GmbH (Switzerland)

Netcrawling Deutschland GmbH (Germany)

Netcrawling UK Limited (United Kingdom)

NetRatings Australia Pty Ltd (Australia)

NetRatings France SARL (France)

NetRatings Italia S.r.l. (Italy)

NetRatings Japan (Japan)

NetRatings (Shanghai) Company, Ltd. (China)

NetRatings Spain, S.L. (Spain)

NetRatings UK Ltd (United Kingdom)

NetValue Internet Measurement SA (Spain)

NetValue USA, Inc. (Delaware)

Nielsen-NetRatings Pty Ltd (Australia)

NTRT eRatings India Private Limited (India)

Red Sheriff Australian Pty Ltd (Australia)

Red Sheriff BV (The Netherlands)

Red Sheriff Europe Pty Ltd (Australia)

Red Sheriff Inc. (Delaware)

Red Sheriff Ltd (United Kingdom)

Red Sheriff Ltd (Bermuda)

Red Sheriff New Zealand Limited (New Zealand)

Red Sheriff Pte Ltd (Singapore)

Traffion Technologies Pty Limited (Australia)

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-38030) pertaining to the 1998 Stock Plan of NetRatings, Inc. and 1999 Employee Stock Purchase Plan of NetRatings, Inc., the Registration Statement (Form S-8 No. 333-98857) pertaining to the 1998 Stock Plan of NetRatings, Inc., 1999 Employee Stock Purchase Plan of NetRatings, Inc. and Options Assumed by NetRatings, Inc. and Granted Under the ACNielsen eRatings.com 2002 Option Plan, the Registration Statement (Form S-3 No. 333-90160) dated June 10, 2002, the Registration Statement (Form S-3 No. 333-99283) dated September 6, 2002, the Registration Statement (Form S-8 No. 333-113133) dated February 27, 2004, the Registration Statement (Form S-8 No. 333-121058) dated December 7, 2004 and in the related Prospectuses, of our report dated March 9, 2006, with respect to the consolidated financial statements of NetRatings, Inc. included in the Annual Report (Form 10-K) for the year ended December 31, 2005.

	/s/ Ernst & Young LLP
New York, New York
March 13, 2006

EX-31.1

Exhibit 31.1

CERTIFICATION

I, William Pulver, President and Chief Executive Officer of NetRatings, Inc., certify that:

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

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

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

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and we have:

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

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 16, 2006

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

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Todd Sloan, Executive Vice President of Corporate Development and Chief Financial Officer of NetRatings, Inc., certify that:

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

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

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

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and we have:

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

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 16, 2006

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

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, William Pulver, President and Chief Executive Officer of NetRatings, Inc. (the “Registrant”), do hereby certify in accordance with 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, that, to the best of my knowledge:

(1)the Annual Report on Form 10-K of the Registrant, to which this certification is attached as an exhibit (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Dated: March 16, 2006

/s/ William Pulver

William Pulver

President and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to NetRatings and will be retained by NetRatings and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Todd Sloan, Executive Vice President of Corporate Development and Chief Financial Officer of NetRatings, Inc. (the “Registrant”), do hereby certify in accordance with 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, that, to the best of my knowledge:

(1)the Annual Report on Form 10-K of the Registrant, to which this certification is attached as an exhibit (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934(15 U.S.C. 78m); and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Dated: March 16, 2006

/s/ Todd Sloan

Todd Sloan

Executive Vice President of Corporate

Development and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to NetRatings and will be retained by NetRatings and furnished to the Securities and Exchange Commission or its staff upon request.