UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2005
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

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

For the quarterly period ended March 31, 2007

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 of incorporation or organization)		(I.R.S. Employer 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

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 x No o

Indicate by check mark whether the ~~Registrant~~registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer ~~(as~~and ~~defined~~large accelerated filer” in Rule 12b-2 of the Exchange Act). ~~Yes ý No o~~ (Check one):

~~The~~Large ~~number~~accelerated offiler ~~shares~~o ofAccelerated ~~the~~filer ~~Registrant’s~~x ~~Common~~Non-accelerated ~~Stock outstanding~~filer ~~as of October 31, 2005, was 36,786,803.~~o

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

The number of shares of the Registrant’s Common Stock outstanding as of April 30, 2007, was 36,078,892.

NETRATINGS, INC. FORM 10-Q INDEX

Part I.	~~FINANCIAL INFORMATION~~	FINANCIAL INFORMATION	3
Item 1.	~~Financial Statements~~	Financial Statements	3
	Condensed Consolidated Balance Sheets – September 30, 2005 (Unaudited) and December 31, 2004
		Condensed Consolidated Balance Sheets—March 31, 2007 (Unaudited) and December 31, 2006	3
	Condensed Consolidated Statements of Operations - Three and Nine months ended September 30, 2005 and 2004 (Unaudited)
		Condensed Consolidated Statements of Operations—Three months ended March 31, 2007 and 2006 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows - Nine months ended September 30, 2005 and 2004 (Unaudited)
		Condensed Consolidated Statements of Cash Flows—Three months ended March 31, 2007 and 2006 (Unaudited)	5
	~~Notes to Condensed Consolidated Financial Statements~~	Notes to Condensed Consolidated Financial Statements	6
Item 2.	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	~~Quantitative and Qualitative Disclosures About Market Risk~~	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4.	~~Controls and Procedures~~	Controls and Procedures	18
Part II.	~~OTHER INFORMATION~~	OTHER INFORMATION	20
Item 1.	~~Legal Proceedings~~	Legal Proceedings	20
Item 6.	Exhibits
Item 1A.		Risk Factors	20
	Signatures
Item 6.		Exhibits	20
		Signatures	21

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

NETRATINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share data)

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2007				December 31, 2006
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	57,251			$	52,180
Short-term marketable securities		115,560				119,513
Accounts receivable, net		26,070				26,329
Prepaid expenses and other current assets		4,004				3,544
Total current assets		202,885				201,566
Long-term marketable securities		12,927				15,320
Property and equipment, net		9,413				9,582
Intangibles, net		10,307				10,901
Goodwill		76,151				76,301
Other assets		1,848				1,803
Total assets		$	313,531			$	315,473
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	3,220			$	3,600
Accrued liabilities		11,966				13,444
Deferred revenue		19,100				17,632
Due to related parties		3,431				5,947
Restructuring liabilities		331				354
Total current liabilities		38,048				40,977
Restructuring liabilities, less current portion		—				64
Total liabilities		38,048				41,041
Minority interest		2,250				2,221
Commitments and contingencies
Stockholders’ equity:
Common stock, par value $0.001:
Authorized shares: 200,000
Issued shares: 39,063 and 38,723 at March 31, 2007 and December 31, 2006, respectively; outstanding shares: 35,563 and 35,277 at March 31, 2007 and December 31, 2006, respectively		39				39
Additional paid-in capital		459,931				457,926
Accumulated other comprehensive income		2,935				2,858
Treasury stock		(47,282		)		(46,154		)
Accumulated deficit (Note 11)		(142,390		)		(142,458		)
Total stockholders’ equity		273,233				272,211
Total liabilities and stockholders’ equity		$	313,531			$	315,473

(in thousands, except per share data)

	September 30, 2005			December 31, 2004
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	32,026		$	33,234
Short-term investments	162,162			164,368
Accounts receivable, net	16,373			13,679
Trade receivables from joint ventures	903			870
Due from related parties	—			1,170
Prepaid expenses and other current assets	3,758			3,106
Total current assets	215,222			216,427
Property and equipment, net	7,738			5,977
Intangibles, net	13,872			16,039
Goodwill	76,963			74,897
Other assets	1,099			1,117
Total assets	$	314,894		$	314,457
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,660		$	2,868
Accrued liabilities	8,564			8,727
Deferred revenue	13,627			11,435
Trade payables to joint venture	549			400
Due to related parties	6,261			8,617
Restructuring liabilities	2,035			625
Total current liabilities	34,696			32,672
Restructuring liabilities, less current portion	503			799
Total liabilities	35,199			33,471
Minority interest	1,106			548
Commitments and contingencies
Stockholders’ equity:
Common stock, par value $0.001:
Authorized shares: 200,000
Issued shares: 38,208 and 37,181 at September 30, 2005 and December 31, 2004, respectively; outstanding shares: 36,708 and 35,681 at September 30, 2005 and December 31, 2004, respectively	38			37
Additional paid-in capital	449,105			436,845
Deferred stock-based compensation	(4,880		)	—
Accumulated other comprehensive income (loss)	(469		)	1,079
Treasury stock	(20,631		)	(20,631		)
Accumulated deficit	(144,574		)	(136,892		)
Total stockholders’ equity	278,589			280,438
Total liabilities and stockholders’ equity	$	314,894		$	314,457

See accompanying notes to the condensed consolidated financial statements.

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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended March 31,
	2007			2006
Revenue	$	21,958		$	18,280
Cost of revenue(1)	6,159			5,632
Gross profit	15,799			12,648
Operating expenses:
Research and development(1)	3,516			2,931
Sales and marketing(1)	6,671			6,790
General and administrative(1)	4,111			3,817
Acquisition related expenses	1,888			—
Amortization of intangible assets(2)	594			594
Total operating expenses	16,780			14,132
Loss from operations	(981		)	(1,484		)
Interest income, net	1,956			1,161
Minority interest in net income of consolidated subsidiaries	(29		)	(163		)
Net income (loss) before provision for income taxes and cumulative effect of change in accounting principle	946			(486		)
Provision for income taxes	(753		)	(138		)
Net income (loss) before cumulative effect of change in accounting principle	193			(624		)
Cumulative effect of change in accounting principle	—			369
Net income (loss)	$	193		$	(255	)
Net income (loss) per share—basic:
Before cumulative effect of change in accounting principle	$	0.01		$	(0.02	)
Cumulative effect of change in accounting principle	—			0.01
Net income (loss) per common share—basic	$	0.01		$	(0.01	)
Net income (loss) per share—diluted:
Before cumulative effect of change in accounting principle	$	0.01		$	(0.02	)
Cumulative effect of change in accounting principle	—			0.01
Net income (loss) per common share—diluted	$	0.01		$	(0.01	)
Shares used to compute net income (loss) per common share—basic	35,397			34,705
Shares used to compute net income (loss) per common share—diluted	36,892			34,705

(~~UNAUDITED~~1) Includes the following amounts of amortization of stock-based compensation:

(in thousands, except per share data)

Cost of revenue	$	39	$	66
Research and development	463		288
Sales and marketing	201		443
General and administrative	365		367
Total amortization of stock-based compensation	$	1,068	$	1,164

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
Revenue	$	16,796		$	15,623		$	50,334		$	43,362
Cost of revenue	5,518			5,653			17,104			17,590
Gross profit	11,278			9,970			33,230			25,772
Operating expenses:
Research and development	3,164			3,100			8,848			9,405
Sales and marketing	6,277			5,888			19,327			17,114
General and administrative	3,082			2,889			9,103			8,912
Restructuring expenses	1,700			—			1,700			(525		)
Litigation settlement recovery	—			—			—			(1,800		)
Amortization of intangibles	634			874			2,167			2,961
Amortization of stock-based compensation*	1,162			2,276			2,331			6,828
Total operating expenses	16,019			15,027			43,476			42,895
Loss from operations	(4,741		)	(5,057		)	(10,246		)	(17,123		)
Equity in earnings of joint ventures	—			43			56			81
Interest income, net	1,161			737			3,066			2,103
Minority interest in net profit of consolidated subsidiaries	(152		)	(69		)	(558		)	(169		)
Net loss	$	(3,732	)	$	(4,346	)	$	(7,682	)	$	(15,108	)
Basic and diluted net loss per common share	$	(0.10	)	$	(0.12	)	$	(0.21	)	$	(0.44	)
Shares used to compute basic and diluted net loss per common share	36,180			34,808			35,987			34,421

(2) Amortization of intangible assets:

*Amortization of stock-based compensation:
Cost of revenue	$	444	$	444
Cost of revenue	$	50	$	2,276	$	100	$	6,828
Sales and marketing	150		150
Research and development	134		—		259		—
Total amortization of intangible assets	$	594	$	594
Sales and marketing	507		—		1,036		—
General and administrative	471		—		936		—
Total amortization of stock-based compensation	$	1,162	$	2,276	$	2,331	$	6,828

See accompanying notes to the condensed consolidated financial statements.

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended March 31,
	2007			2006
OPERATING ACTIVITIES
Net cash (used in) provided by operating activities	$	(1,226	)	$	1,761
INVESTING ACTIVITIES
Acquisition of property and equipment	(1,039		)	(1,845		)
Purchase of investments	(30,644		)	(23,735		)
Sale of investments	10,289			23,003
Maturity of investments	26,700			18,850
Net cash provided by investing activities	5,306			16,273
FINANCING ACTIVITIES
Proceeds from issuance of common stock	905			1,126
Stock repurchases	—			(11,588		)
Net cash provided by (used in) financing activities	905			(10,462		)
Effect of exchange rate fluctuations	86			316
Net increase in cash and cash equivalents	5,071			7,888
Cash and cash equivalents at beginning of period	52,180			34,940
Cash and cash equivalents at end of period	$	57,251		$	42,828

(UNAUDITED)

(in thousands)

	Nine Months Ended September 30,
	2005			2004
OPERATING ACTIVITIES
Net cash used in operating activities	$	(1,955	)	$	(8,677	)
INVESTING ACTIVITIES
Acquisition of property and equipment	(4,292		)	(3,608		)
Purchase of short term investments	(89,694		)	(138,656		)
Sale of short term investments	91,899			132,772
Acquisitions, net of cash acquired and investments in joint ventures	(1,806		)	(10,815		)
Net cash used in investing activities	(3,893		)	(20,307		)
FINANCING ACTIVITIES
Proceeds from stock issued by majority owned subsidiary	—			245
Proceeds from stock issuances	5,049			8,775
Net cash provided by financing activities	5,049			9,020
Effect of exchange rate fluctuations	(409		)	(1,183		)
Net decrease in cash and cash equivalents	(1,208		)	(21,147		)
Cash and cash equivalents at beginning of period	33,234			49,909
Cash and cash equivalents at end of period	$	32,026		$	28,762

See accompanying notes to the condensed consolidated financial statements.

NETRATINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements of NetRatings, Inc. ("“NetRatings"” or the "“Company"”) have been prepared in accordance with U.S. generally accepted accounting principles ("“GAAP"”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in ~~financial~~ financial statements prepared in accordance with GAAP have been condensed or ~~omitted~~ omitted pursuant to such rules and regulations. The accompanying financial statements should be read in conjunction with the audited financial statements and notes thereto included in ~~NetRatings~~the Company’s ~~annual~~Annual ~~report~~Report on Form 10-K ~~for~~ for the year ended December 31, ~~2004~~2006.

~~The~~As ~~accompanying interim condensed consolidated financial statements reflect all adjustments (consisting~~ of ~~normal~~March 31, ~~recurring adjustments~~2007, ~~except~~ asthe ~~described~~Company’s insignificant accounting ~~Notes 2~~policies and 7)estimates, which are, detailed in the ~~opinion of management, necessary for a fair presentation of the~~ Company'’s ~~consolidated~~Annual ~~financial~~Report ~~position,~~on ~~results~~Form 10-K ~~of operations and cash flows. Operating results~~ for the ~~three~~year ~~and nine months~~ ended ~~September~~December 3031, ~~2005~~2006, ~~are~~ have not ~~necessarily indicative~~changed offrom ~~the results that may be expected for the year ending~~ December 31, ~~2005~~ 2006.

~~Certain~~The ~~reclassifications~~accompanying ~~have~~interim condensed ~~been~~consolidated ~~made~~financial tostatements reflect all adjustments (consisting ~~prior~~of ~~year~~normal ~~balances~~recurring toadjustments) ~~conform~~which ~~with~~are, ~~current~~in the opinion of management, necessary for a fair presentation of the Company’s consolidated financial position, results of operations and cash flows. Operating results for the three months ended March 31, 2007 are not necessarily indicative of the results that may be expected for the year ~~reporting~~ending ~~classifications~~December 31, 2007.

~~2. RESTATEMENT~~Recent Accounting Pronouncements

~~The~~In ~~Company~~February 2007, ~~has~~the Financial ~~restated~~Accounting ~~its~~Standards ~~condensed~~Board ~~consolidated~~(“FASB”) issued Statement of Financial ~~financial~~Accounting ~~statements~~Standards ~~for~~(“SFAS”) ~~the~~No. 159, ~~three~~“The Fair Value Option for Financial Assets and ~~six~~Financial ~~month~~Liabilities” ~~periods~~(“SFAS ~~ended~~159”). ~~June 30,~~SFAS 159 permits ~~2005~~companies asto achoose ~~result~~to ofmeasure ancertain ~~error~~financial ininstruments ~~accounting~~and ~~for~~certain ~~restricted~~other items ~~stock~~at ~~grants~~fair value. In ~~its~~The ~~condensed~~standard ~~consolidated~~requires ~~statements~~that ofunrealized gains and losses on ~~operations~~items for which the ~~three~~fair ~~and~~value ~~six~~option ~~months~~has ~~ended~~been ~~June 30,~~elected ~~2005,~~be ~~the~~reported ~~Company~~in earnings. ~~recorded~~SFAS ~~stock-based~~159 ~~compensation~~is ~~expense~~effective ~~net~~for ofthe ~~estimated~~Company ~~forfeitures~~beginning in the first quarter of fiscal ~~restricted~~year ~~stock awards. However~~2008, ~~the accounting~~although ~~policy currently~~earlier ~~applied~~adoption byis ~~the~~permitted. The Company, ~~Accounting~~is ~~Principles~~currently ~~Board~~evaluating ~~Opinion~~the ~~No. 25,~~impact ~~“Accounting~~of ~~for~~adopting ~~Stock~~SFAS ~~Issued~~159 toon ~~Employees”~~its ~~(“APB~~financial ~~No. 25”)~~position, results ~~requires~~of ~~forfeitures~~operations toand becash ~~recorded when they occur~~flows.

~~The Company restated these consolidated financial statements as a result of its assessment that this item was material to the previously reported financial statements~~2. COMPREHENSIVE ~~The~~INCOME adjustment associated with the correction of this error resulted in the Company increasing its net loss by $461,000, or $0.01 per share, for the three and six month periods ended June 30, 2005. The information included in this Form 10-Q sets forth the effects of the restatement on the previously reported condensed consolidated statements of operations for the three and six month periods ended June 30, 2005 and the condensed consolidated balance sheet as of June 30, 2005.(LOSS)

The ~~following table presents the effects of the~~ ~~restatement~~components ~~on the condensed consolidated statements~~ of ~~operations~~accumulated ~~for~~other ~~the three~~comprehensive ~~and~~income ~~six~~(loss) ~~months~~are ~~ended~~as ~~June 30,~~follows ~~2005~~ (in ~~thousands, except per share~~ ~~amounts~~thousands):

	Three Months Ended June 30, 2005									Six Months Ended June 30, 2005
	Three Months Ended March 31,
	As Previously Reported			Adjustment			As Restated			As Previously Reported			Adjustment			As Restated
	2007					2006
Amortization of stock-based compensation*	$	708		$	461		$	1,169		$	708		$	461		$	1,169
Accumulated translation adjustment		$	3,060				$	(329	)
Loss from operations	$	(2,647	)	$	(461	)	$	(3,108	)	$	(5,044	)	$	(461	)	$	(5,505	)
Unrealized loss on short-term investments		(125		)			(699		)
Net loss	$	(1,860	)	$	(461	)	$	(2,321	)	$	(3,489	)	$	(461	)	$	(3,950	)
Accumulated other comprehensive income (loss)		$	2,935				$	(1,028	)
Basic and diluted net loss per common share	$	(0.05	)	$	(0.01	)	$	(0.06	)	$	(0.10	)	$	(0.01	)	$	(0.11	)
Shares used in the calculation of net loss per common share	36,014			36,014			36,014			35,893			35,893			35,893

3. COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE

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

*Amortization of stock-based compensation:
Cost of revenue	$	30	$	20	$	50	$	30	$	20	$	50
Research and development	76		49		125		76		49		125
Sales and marketing	322		207		529		322		207		529
General and administrative	280		185		465		280		185		465
Total amortization of stock-based compensation	$	708	$	461	$	1,169	$	708	$	461	$	1,169

(loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding and dilutive common stock equivalents outstanding during the period.

~~The~~Prior ~~following~~to ~~table presents~~ the ~~effect~~second quarter of 2006, the Company had ~~restatement~~experienced onnet losses. As a result, common equivalent shares from stock options were excluded from the ~~consolidated~~calculation ~~balance~~of ~~sheet~~net loss per common share as their ofeffect ~~June~~was anti-dilutive. If NetRatings had recorded net income for the three months ended March 3031, ~~2005~~2006, the calculation of historical diluted earnings per share would have included approximately 0.7 million additional common equivalent shares related to outstanding stock awards (indetermined using ~~thousands~~the treasury stock method):.

	As Previously Reported			Adjustment			As Restated
Deferred stock-based compensation	$	(3,719	)	$	(2,455	)	$	(6,174	)
Additional paid-in capital	445,043			2,916			447,959
Accumulated deficit	(140,381		)	(461		)	(140,842		)
Total stockholders’ equity	280,149			—			280,149

The following table sets forth the computation of basic and diluted net income (loss) per share, determined using the treasury stock method for the three months ended March 31, 2007 and 2006 (in thousands, except per share amounts):

The restatement had no effect on the condensed consolidated statement of cash flows for the six months ended June 30, 2005.

	March 31,			March 31,
	2007			2006
Net income (loss) before cumulative effect of change in accounting principle		$	193		$	(624	)
Cumulative effect of change in accounting principle		—			369
Net income		$	193		$	255
Weighted average number of shares:
Basic		35,397			34,705
Effect of dilutive stock options		480			—
Effect of dilutive restricted stock grants		1,015			—
Diluted		36,892			34,705
Net income (loss) per share—basic		$	0.01		$	(0.01	)
Net income (loss) per share—diluted		$	0.01		$	(0.01	)

The applicable information appearing elsewhere in this quarterly report on Form 10-Q reflects the effects of the restatement on the previously reported financial statements for the second quarter of 20054. OTHER ASSETS

~~The~~Other assets include (i) receivables from the Company’s ~~has~~joint ~~not~~venture ~~amended~~in ~~its~~Latin ~~quarterly~~America, ~~report~~Ibope oneRatings.com, ~~Form~~(ii) ~~10-Q~~restricted ~~for~~cash held in the ~~quarterly~~form ~~period~~of ~~affected~~long-term bysecurity deposits related to the ~~restatement. The~~Company’s office ~~information~~leases ~~that~~in ~~had~~Seattle, ~~been~~New ~~previously filed~~York, orLondon ~~otherwise~~and ~~reported~~Sydney ~~for~~and ~~this~~(iii) other miscellaneous ~~period~~assets. isReceivables ~~superseded~~from byIbope ~~the~~eRatings.com, ~~information~~before inreserves, ~~this~~were ~~Form~~approximately $1.1 million at March ~~10-Q~~31, 2007 and December 31, 2006.

35. ~~COMPREHENSIVE~~ PATENT ENFORCEMENT ~~LOSS~~PROGRAM AND LICENSING REVENUE

In 2005, NetRatings commenced a patent enforcement program to protect the Company’s investments in its patented technologies related to the collection, analysis and reporting of Internet and/or computer usage and activity. The ~~components~~Company’s licensing arrangements may be structured in a variety of ~~comprehensive~~different ~~loss~~ways, ~~are~~including aslump sum ~~follows~~payments, short-term payments or payments over an extended period. As a (result, the Company’s licensing revenues could be significantly higher or lower from one period to a subsequent period. Legal expenses related to the Company’s patent enforcement program are included in ~~thousands):~~general and administrative expenses. Total licensing revenue for the three months ended March 31, 2007 and 2006 was $1.0 million and $1.2 million, respectively.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
Net loss	$	(3,732	)	$	(4,346	)	$	(7,682	)	$	(15,108	)
Accumulated translation adjustment	(179		)	(1,007		)	(1,591		)	(599		)
Unrealized gain (loss) on short-term investments	(91		)	446			43			(347		)
Comprehensive loss	$	(4,002	)	$	(4,907	)	$	(9,230	)	$	(16,054	)

4. STOCKHOLDERS’ EQUITY

The Company computes net loss per common share based on Financial Accounting Standards Board Statement No. 128, “Earnings Per Share” (“FAS 128”). In accordance with FAS 128, basic net loss per share is calculated as net loss divided by the weighted-average number of common shares outstanding less shares subject to repurchase and unvested restricted stock. 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 calculation of basic and diluted net loss per share is as follows (in thousands, except per share data):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
Net loss	$	(3,732	)	$	(4,346	)	$	(7,682	)	$	(15,108	)
Weighted-average shares of common stock outstanding	36,655			34,808			36,471			34,421
Less: shares of unvested restricted stock	475			—			484			—
Weighted-average shares of common stock outstanding used in computing basic and diluted net loss per share	36,180			34,808			35,987			34,421
Basic and diluted net loss per common share	$	(0.10	)	$	(0.12	)	$	(0.21	)	$	(0.44	)

If the Company had reported net income, the calculation of historical diluted earnings per share would have included additional common equivalent shares related to outstanding stock options not included above.

As allowed by Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), the Company follows the disclosure requirements of SFAS 123 and Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure” (“SFAS 148”), but continues to account for its employee stock-based awards in accordance with APB No. 25, which results in no charge to operations when options are issued at or above fair market value. However, as described below, restricted stock awards result in recognition of stock-based compensation under APB No. 25 and SFAS 123. The pro forma information presented below regarding net loss which is required under SFAS 148 has been determined as if the Company had accounted for all of its stock-based awards under the fair value method of SFAS 123. For purposes of such pro forma disclosures, the estimated fair value of all employee stock-based awards is amortized to expense over the awards’ vesting period using the graded vesting method. The Company’s reported and pro forma stock-based compensation information follows (in thousands, except per share data):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
Net loss	$	(3,732	)	$	(4,346	)	$	(7,682	)	$	(15,108	)
Add: Stock-based employee compensation expense included in net loss	1,162			—			2,331			—
Less: Stock-based employee compensation expense determined under fair value method for all awards	(1,694		)	(1,265		)	(3,898		)	(3,537		)
Pro forma net loss	$	(4,264	)	$	(5,611	)	$	(9,249	)	$	(18,645	)
Basic and diluted net loss per share	$	(0.10	)	$	(0.12	)	$	(0.21	)	$	(0.44	)
Pro forma basic and diluted net loss per share	$	(0.12	)	$	(0.16	)	$	(0.26	)	$	(0.54	)

6. STOCK-BASED COMPENSATION

InFor ~~2005,~~ the ~~Company’s~~three ~~Board~~months ~~of Directors and~~ended ~~stockholders~~March 31, ~~approved the Amended and Restated 1998 Stock Plan. Under the Amended and Restated 1998 Stock Plan~~2007, the Company isrecognized ~~authorized to issue restricted~~ stock ~~(as well as other equity~~-based compensation) toexpense ~~the Company’s employees and Board members~~of $1. ~~Through September~~1 30million, ~~2005,~~which ~~the~~included ~~Company issued,~~$0.9 million ~~net~~for ~~of forfeitures, approximately 477,000 shares of~~ restricted stock ~~with~~awards, ~~a fair market value at time of issuance of approximately~~ $70.3 1 million~~. The~~ ~~restricted~~for stock ~~issued~~option ~~to members~~grants ofand ~~the~~$0.1 million ~~Board of Directors vests ratably in equal annual installments over~~for 2shares ~~years, while the restricted stock~~ issued tounder the Company’s ~~non-executive employees~~employee ~~vests ratably in equal annual installments over 3 years. The restricted~~ stock ~~issued~~purchase ~~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~~plan. 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.

~~5. RECENT ACCOUNTING~~Valuation ~~PRONOUNCEMENTS~~Assumptions

InSFAS ~~December~~No. ~~2004,~~123R requires the ~~FASB~~use ~~issued Statement~~ of ~~Financial~~a ~~Accounting~~valuation ~~Standards~~model ~~No. 123(R),~~to ~~“Share-Based~~calculate ~~Payment”~~the ~~(“SFAS~~fair value of ~~123(R)”)~~stock-based awards. ~~This~~No ~~statement~~stock ~~revises~~options ~~SFAS~~were granted during the three months ended March ~~123~~31, 2007 and ~~supersedes~~2006, ~~APB No~~respectively. ~~25. SFAS 123(R)~~ ~~requires~~In ~~all~~February 2007, ~~public~~the ~~entities~~Company todiscontinued ~~recognize~~participation ~~compensation~~in ~~expense~~its ~~for~~employee ~~all~~stock ~~share-based~~purchase ~~payments~~plan. asThe ~~measured by~~Company uses the ~~fair~~Black-Scholes ~~value~~option-pricing onmodel, ~~the~~which ~~grant~~incorporates ~~date~~various assumptions ~~over~~including ~~the~~volatility, ~~requisite~~expected ~~service~~life ~~period. The~~and ~~FASB~~interest ~~required~~rates, ~~companies~~ to ~~adopt~~estimate ~~SFAS No~~fair value. ~~123(R)~~The nofollowing ~~later~~weighted ~~than~~average ~~the~~assumptions ~~first~~were ~~interim~~used orfor ~~annual period~~the ~~beginning~~three ~~after~~months ~~June~~ended March 1531, ~~2005.~~2007 and 2006:

We currently account for our stock-based awards to employees in accordance with APB No. 25 and disclose the general and pro forma financial information required by SFAS 123 and SFAS 148. Historically, we have 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. We currently intend to adopt SFAS 123(R) using the modified-prospective method, and therefore we will begin expensing unvested options in the first quarter of 2006. We currently estimate the impact of adopting SFAS 123(R) for the existing unvested options will be an expense of approximately $1.2 million for fiscal 2006.

	March 31,
	2007		2006
Employee stock purchase plan:
Risk-free interest rate	5.18	%	4.53	%
Dividend yield	0	%	0	%
Volatility	33	%	30	%
Expected life in years	0.5		0.5

~~In March 2004, the FASB approved the consensus reached on EITF Issue No. 03~~Stock-~~1, The Meaning~~Based ofCompensation Other-Than-Temporary Impairment and Its Application to Certain Investments ("EITF 03-1"). EITF 03-1 provides new guidance for evaluating impairment losses on debt and equity investments, as well as new disclosure requirements for investments that are determined to be other-than-temporarily impaired. In September 2004, the FASB approved the issuance of a FASB Staff Position to delay the requirement to record impairment losses under EITF 03-1.Activity

InInformation with ~~June~~respect ~~2005, the FASB decided not~~ to ~~provide additional guidance on~~ the ~~meaning~~stock ofplan ~~other-than-temporary~~activity ~~impairment~~and ~~under EITF 03-1.~~related ~~The~~information ~~FASB~~for ~~directed~~ the ~~staff to issue FASB Staff Position Paper~~three ~~("FSP")~~months ~~115-1,~~ended ~~The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments ("FSP~~March ~~115-1")~~31, ~~superseding~~2007, ~~EITF 03-1. FSP 115-1 will replace the accounting guidance on the determination of whether an investment~~ is ~~other-than-temporarily impaired as~~ set forth in ~~EITF 03-1~~the ~~with references~~following ~~to existing other-than-temporary impairment guidance. FSP 115-1 will be effective for other-than-temporary impairment analyses conducted in periods beginning after December 15, 2005.~~table:

As substantially all of the Company's investments are investment grade government and corporate debt securities that have maturities of less than 180 days, and the Company has both the ability and intent to hold the investments until maturity, management does not expect FSP 115-1 to have a material impact on the Company's consolidated financial position or results of operations.

				Restricted Stock Outstanding						Stock Options Outstanding
	Available for Grant			Number of Restricted Shares			Weighted Average Grant Date Fair Value			Number of Stock Options			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Balance at December 31, 2006		419,000			774,000			$	13.77		2,225,000			$	10.76		5.4	$	13,804,000
Granted		(1,000	)		1,000			18.09			—			—
Exercised/released		—			(249,000	)		14.20			(48,000	)		9.35
Restricted stock withheld for taxes(1)		55,000			—			—			—			—
Canceled		18,000			(15,000	)		13.49			(3,000	)		9.66
Balance at March 31, 2007		491,000			511,000			$	13.57		2,174,000			$	10.79		5.4	$	22,326,000
Options exercisable at March 31, 2007											2,012,000			$	10.74		5.3	$	20,831,000
Unvested shares as of March 31, 2007					511,000			$	13.57		162,000			$	11.20

~~6. GOODWILL~~(1) Upon ~~AND~~the ~~INTANGIBLE~~release of certain shares of restricted stock, ~~ASSETS~~the Company withheld shares to satisfy certain minimum statutory tax withholding obligations of the holder based on the market value of the shares on the date the shares of restricted stock were released.

OnThe ~~February 25,~~aggregate ~~2005,~~intrinsic ~~NetRatings~~value ~~acquired~~in the ~~remaining~~ ~~50%~~table ofabove represents ~~its~~the ~~Italian~~total ~~joint~~pretax ~~venture~~intrinsic value, ~~Red~~based ~~Sheriff~~on ~~S.r.l.,~~the ~~for~~Company’s closing ~~approximately~~stock price of $220.080 ~~million~~on inMarch 31, ~~cash~~2007, ~~resulting~~which inwould anhave ~~increase~~been toreceived ~~goodwill of~~by ~~approximately~~holders ~~$1.9 million. The impact~~ of ~~this~~stock ~~transaction~~options onhad ~~NetRatings’ consolidated~~all ~~results~~holders of ~~operations~~stock isoptions ~~not~~exercised ~~significant~~their ~~and therefore the Company~~stock ~~does~~options ~~not~~that ~~include~~were ~~pro~~in-the-money ~~forma~~as ~~results~~of ~~for~~that ~~this acquisition~~date. ~~During~~ ~~the~~The ~~first~~total ~~quarter~~number of ~~2005, NetRatings~~ ~~also finalized~~ in-the-money ~~purchase~~stock ~~price~~options ~~allocation~~exercisable ~~related~~as toof ~~Red Sheriff~~March 31, ~~resulting in~~2007 awas ~~net increase to goodwill of approximately $0.2 million.~~

Goodwill and other intangible assets, along with their weighted average lives as of September 30, 2005, consisted of the following (in thousands, except weighted average life):

	Gross carrying amount		Accumulated amortization		Net		Weighted average life
Intangible assets continuing to be amortized:
Core technologies	$	5,482	$	2,494	$	2,988	7
Customer contracts	4,940		3,590		1,350		3
Patents and other	15,682		6,148		9,534		11
Total other intangible assets	$	26,104	$	12,232	$	13,872
Goodwill					$	76,963

approximately 2.0 million shares. The aggregate intrinsic value of stock options exercised during the three month period ended March 31, 2007 was $0.4 million.

~~Based~~As ~~on the current amount~~ of ~~intangibles subject to amortization~~March 31, ~~the estimated amortization expense for each of the succeeding~~2007, ~~five~~there ~~years~~was ~~is as follows: 2005 -~~ $24.~~8 million;~~1 ~~2006 - $2.4~~ million~~; 2007~~ -of ~~$2.4 million;~~total ~~2008~~unrecognized -compensation ~~$1.8~~expense ~~million;~~related ~~and~~to unvested ~~2009~~ stock-based ~~$1.4~~compensation ~~million. As~~arrangements ofgranted ~~October 1,~~under ~~2004,~~ the Company’s ~~performed~~stock ~~its~~plan ~~annual evaluation of goodwill~~ and ~~other~~employee ~~intangibles~~stock ~~and~~purchase ~~no impairment was indicated~~plan. ~~The~~ ~~Company will~~Total ~~reassess~~expense ~~the~~is ~~carrying~~expected ~~value~~to ~~of its goodwill and intangible assets each year~~be asrecognized ofover ~~October 1,~~the ~~unless~~weighted-average ~~indicators~~period of ~~impairment become apparent earlier~~1. ~~The evaluation as of October~~3 ~~1, 2005 is in process~~years.

7. ~~RESTRUCTURING~~ GOODWILL AND ~~EXPENSES~~INTANGIBLE ASSETS

In During the ~~third~~three ~~quarter~~months ofended ~~2005~~March 31, ~~NetRatings’~~2007, ~~management approved~~the ~~and~~Company ~~initiated~~used anet ~~restructuring~~operating ~~plan primarily intended to streamline~~loss ~~its~~carryforwards ~~European operations. The 2005 restructuring plan includes the termination~~ of 10acquired ~~employees~~companies, ~~related~~resulting toin ~~relocating~~a ~~engineering operations~~decrease in ~~Europe~~goodwill toof approximately ~~the~~$0.1 ~~United~~million. ~~States~~Goodwill and ~~the~~other ~~elimination~~intangible ofassets, ~~certain management~~along ~~positions. None of the~~with ~~employees~~their ~~were~~weighted ~~terminated~~average lives as of ~~September~~March 3031, ~~2005. As~~2007, aconsisted ~~result~~ of the following ~~2005~~(in ~~restructuring plan~~thousands, ~~the~~ ~~Company~~except ~~recorded~~weighted aaverage ~~restructuring charge of $1.7 million for severance costs during the third quarter of 2005.~~life):

The following table summarizes activity associated with the restructuring plans related to acquisitions in 2002 and 2003 and the restructuring charge in 2005, during the nine month period ended September 30, 2005 (in thousands):

	Gross carrying amount		Accumulated amortization			Net		Weighted average life
Intangible assets continuing to be amortized:
Core technologies	$	5,482		$	3,669	$	1,813		7
Customer contracts	4,940			4,490		450			3
Patents and other	15,682			7,638		8,044			11
Total other intangible assets	$	26,104		$	15,797	$	10,307
Goodwill						$	76,151

	Accrual as of December 31, 2004		Additions Related to Restructuring Charge		Utilized Cash			Accrual as of September 30, 2005
Lease commitments	$	1,424			$	(586	)	$	838
Employee severance benefits	—		$	1,700	—			1,700
Totals	$	1,424	$	1,700	$	(586	)	$	2,538

Based on the current amount of intangible assets subject to amortization, the estimated amortization expense for each of the succeeding five years is as follows: 2007: $2.4 million; 2008: $1.8 million; 2009: $1.4 million; 2010: $1.1 million; and 2011: $1.0 million. As of October 1, 2006, the Company performed its annual evaluation of goodwill and other intangibles and no impairment was indicated. The Company will reassess the carrying value of its goodwill and intangible assets each year as of October 1, unless indicators of impairment become apparent earlier.

8. ~~INDUSTRY SEGMENT AND FOREIGN~~ RESTRUCTURING ~~OPERATIONS~~LIABILITIES

~~NetRatings~~The ~~operates~~Company’s inrestructuring ~~one~~liabilities ~~segment~~relate ~~for~~to ~~providing~~an ~~media~~acquisition ~~and~~in ~~market~~2002 ~~research~~for ~~focused on Internet audience behavior and activity. For geographical reporting, revenues are attributed to the geographic location in~~ which ~~the~~a ~~customer~~lease iscommitment ~~located. Our geographic~~accrual ~~regions include the United States (US), Europe, Middle East and Africa (EMEA), and Asia Pacific and Latin America (APLA)~~remains. ~~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~~summarizes ~~forth~~activity ~~revenue~~associated ~~and~~with ~~property~~these restructuring ~~and~~liabilities ~~equipment,~~during ~~for~~ the three ~~and~~month ~~nine~~period ~~months~~ended ~~indicated~~March 31, 2007 (in thousands):

	Three Months Ended September 30, 2005 *												Nine Months Ended September 30, 2005 *
	Accrual as of December 31, 2006					Utilized Cash					Accrual as of March 31, 2007
	US			EMEA			APLA			Total			US		EMEA		APLA		Total
Lease commitments		$	418				$	(87	)			$	331
Revenue	$	7,815		$	5,346		$	3,635		$	16,796		$	22,977	$	16,426	$	10,931	$	50,334
Property and equipment *	3,955			1,271			2,512			7,738			3,955		1,271		2,512		7,738

9. 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. Licensing revenue from the Company’s patent enforcement program is attributed to the US region.

	Three Months Ended September 30, 2004 *								Nine Months Ended September 30, 2004 *
	US		EMEA		APLA		Total		US		EMEA		APLA		Total
Revenue	$	7,760	$	4,820	$	3,043	$	15,623	$	20,673	$	14,313	$	8,376	$	43,462
Property and equipment *	2,173		1,585		1,628		5,386		2,173		1,585		1,628		5,386

The following tables set forth revenue and property and equipment (in thousands):

* The amounts indicated for property and equipment are as of September 30, 2005 and 2004, respectively.

	Three Months Ended March 31, 2007								Three Months Ended March 31, 2006
	US		EMEA		APLA		Total		US		EMEA		APLA		Total
Revenue	$	11,552	$	5,506	$	4,900	$	21,958	$	9,359	$	5,172	$	3,749	$	18,280

9. CONTINGENCIES

	March 31, 2007								December 31, 2006
	US		EMEA		APLA		Total		US		EMEA		APLA		Total
Property and equipment	$	5,033	$	1,764	$	2,616	$	9,413	$	4,910	$	1,829	$	2,843	$	9,582

~~The Company is involved in certain legal proceedings~~10. See Legal Proceedings in Part II, Item 1 of this Report. Management currently believes that the resolution of these matters, and other pending legal matters that do not presently require disclosure in Legal Proceedings, will not have a material adverse impact on NetRatings’ financial position, results of operations or cash flows. CONTINGENCIES

The Company is involved in certain legal proceedings. See Legal Proceedings in Part I, Item 3 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006. ~~SUBSEQUENT~~ ~~EVENT~~Management currently believes that the resolution of these matters, and other pending legal matters that do not presently require disclosure in Legal Proceedings, will not have a material adverse impact on the Company’s financial position, results of operations or cash flows.

~~On November 3, 2005, the Company announced that its Board of Directors has authorized a stock repurchase program~~11. ~~Under this program, the Company may repurchase up to $25 million~~ INCOME ~~of the Company's common stock in the open market or in privately negotiated transactions.~~TAXES

The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate for each of its legal entities. The Company recorded income tax provision of $0.8 million and $0.1 million for the three month periods ended March 31, 2007 and 2006, respectively, primarily related to its foreign operations. Taxes related to the Company’s domestic operations were primarily offset by net operating loss carryforwards.

The Company adopted the provisions of FASB Interpretation No. 48 Accounting for Uncertainty in Income Taxes (“FIN 48”) an interpretation of FASB Statement No. 109 (“SFAS 109”) on January 1, 2007. FIN 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. The adoption of FIN 48 resulted in a decrease in accumulated deficit at January 1, 2007 of approximately $0.1 million. Including the decrease noted above, the Company had approximately $0.6 million of total gross unrecognized tax benefits. Future changes in the remaining balance of unrecognized tax benefits will have no impact on the effective tax rate as they are subject to a full valuation allowance. There was no change to the Company's unrecognized tax benefits for the three month period ended March 31, 2007.

The Company recognized no interest or penalties related to uncertain tax positions in income tax expense. The Company does not have any material accrued interest or penalties associated with any unrecognized tax benefits.

The Company files annual U.S. federal, state and local income tax returns, as well as annual income tax returns in various foreign jurisdictions. While it is often difficult to predict the final outcome or timing of resolution of any particular uncertain tax position, the Company believes that its unrecognized tax reserves reflect the most probable outcome. The Company adjusts these unrecognized tax reserves, as well as any related interest, in light of changing facts and circumstances. Settlement of any particular uncertain tax position would usually require the use of cash. The resolution of a matter could be recognized as an adjustment to the Company’s provision for income taxes and the Company’s effective tax rate in the period of resolution. The Company's U.S. federal income tax returns, as well as income tax returns in most states, are subject to examination due to the Company’s net operating loss and overall credit carryforward position. With few exceptions, the Company is no longer subject to examination by foreign tax authorities for years prior to 2002.

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

Forward-Looking Statements

Some of the statements contained in this Form 10-Q (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~~These risks weand ~~believe~~uncertainties ~~that~~include, ~~the~~but ~~expectations~~are ~~reflected in~~not ~~the~~limited ~~forward-looking~~to, ~~statements~~those ~~are~~described ~~reasonable~~in this Report, wein ~~cannot guarantee future results~~Part II, ~~levels~~“Item of1A. ~~activity,~~Risk ~~performance~~Factors” orand ~~achievements.~~elsewhere ~~Important~~in ~~factors~~our ~~that~~Annual ~~may~~Report ~~cause~~on ~~actual~~Form 10-K ~~results~~for tothe ~~differ~~year ~~from~~ended ~~expectations~~December 31, 2006, ~~include~~and those ~~discussed~~ ~~elsewhere~~described infrom ~~this~~time ~~Report~~to ~~under~~time ~~the~~in ~~heading~~our ~~“Risk~~future ~~Factors~~reports ~~That~~filed ~~May Affect~~with ~~Our~~the ~~Performance~~Securities and Exchange Commission.”

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, currently owns approximately 59% of our outstanding common stock.~~

~~Our~~The ~~revenues~~Nielsen ~~for~~Company ~~the~~B.V., ~~third~~through ~~quarter~~its ~~of 2005~~subsidiaries ~~totaled~~ACNielsen ~~$16.8~~Corporation ~~million~~and Nielsen Media Research, ~~compared~~owns toapproximately ~~$17~~60% of our outstanding common stock.1 ~~million~~On inFebruary 5, ~~the~~2007, ~~second~~we, ~~quarter~~Nielsen ofMedia ~~2005~~Research and ~~$15.6~~NTRT ~~million~~Acquisition inSub, Inc., ~~the~~a ~~third~~newly-formed ~~quarter~~and ofwholly-owned ~~2004.~~ subsidiary As of ~~September 30,~~Nielsen ~~2005~~Media Research, weentered ~~had~~into ~~1,574~~an ~~clients,~~Agreement ~~compared~~and toPlan 1of Merger,~~485~~ under ~~clients~~which asNTRT ofAcquisition ~~June 30,~~Sub ~~2005~~will merge with and 1into us,~~338~~ ~~clients~~which aswill ofresult ~~September 30,~~in ~~2004.~~ The ~~increases~~Nielsen inCompany ~~our~~and ~~revenues~~its ~~and number~~subsidiaries ofowning ~~clients~~all ~~during~~of ~~the~~our ~~last~~common ~~year~~stock. isUpon completion of the ~~result~~merger, holders of our common stock (~~i) organic~~other ~~growth~~than Nielsen Media inResearch, ~~our~~any ~~product~~other ~~portfolio~~direct ~~and~~or ~~(ii) our~~indirect ~~consolidation~~subsidiary of ~~the~~The ~~results~~Nielsen ofCompany and ~~operations~~any ofstockholders ~~Red~~who ~~Sheriff~~perfect ~~Italy~~their ~~which~~appraisal werights ~~acquired~~under onDelaware ~~February 25,~~law) will ~~2005. The~~have ~~revenue~~the ~~increase~~right to receive $21.00 in ~~the~~cash, ~~third quarter~~without ofinterest, ~~2005~~for ~~was~~each ~~offset~~share byof our acommon ~~decrease~~stock inheld ~~exchange~~immediately ~~rates~~prior into ~~our~~completion ~~international operations. We~~of ~~expect~~the ~~our~~merger. ~~revenues~~For ~~and~~more ~~client~~information ~~base~~regarding tothe ~~continue~~proposed totransaction, ~~grow~~please assee ~~(i) our~~the ~~newer~~preliminary proxy ~~products~~statement ~~gain~~filed ~~marketplace acceptance,~~by ~~(ii) we~~us ~~develop~~with ~~additional~~the ~~products~~SEC, and ~~services,~~the ~~(iii)~~related Schedule we13E-3 ~~launch~~filed ~~our~~with ~~products~~the ~~and~~SEC ~~services~~by inus, ~~new~~The ~~international~~Nielsen ~~territories~~Company, ~~(iv) we~~Nielsen Media Research, ~~increase~~ACNielsen ~~the~~and ~~prices~~NTRT ~~for~~Acquisition ~~our~~Sub. ~~products~~The ~~and~~Nielsen ~~services~~Company ~~and~~is ~~(v) we~~a ~~cross~~wholly-~~sell~~owned ~~our~~indirect ~~products~~subsidiary ~~and~~of ~~services~~Valcon toAcquisition ~~our~~Holding ~~global~~(Luxembourg) ~~client base~~S.a.r.l.

WeOur ~~have~~revenues ~~incurred~~for ~~operating~~the ~~losses~~first ~~and~~quarter ~~net losses since our inception and, as~~ of ~~September 30,~~2007 ~~2005, our accumulated~~totaled ~~deficit was~~ $~~144~~22.60 million~~. Since the beginning of 2002~~, ~~however,~~compared ~~we have made significant progress in reducing our operating losses and net losses. Our operating loss decreased from $39.9 million in 2002~~ to $2922.70 million in ~~2003 and to $20.2 million~~ in ~~2004, and our operating loss for~~ the ~~first~~fourth ~~nine months~~quarter of ~~2005~~2006 ~~was $10.2 million. Likewise, our net loss decreased from~~and $3818.93 million in ~~2002 to $25.1 million in 2003 and to $17.4 million in 2004, and our net loss for~~ the first ~~nine~~quarter ~~months~~ of ~~2005 was $7~~2006.7 ~~million. Our ability~~As toof ~~reduce~~March 31, ~~our operating and net losses~~2007, ~~and our belief that~~ we ~~will~~had ~~make further progress in reducing such losses for the remainder of 2005~~1, ~~is attributable to a number of factors.~~850 ~~First~~clients, wecompared ~~expect the revenue growth we have experienced in the past few years~~ to ~~continue~~1,851 ~~particularly~~clients as weof ~~generate~~December 31, ~~sales~~2006 ~~from our MegaPanel~~and ~~services. In addition~~1,679 ~~because~~clients weas ~~offer~~of ~~syndicated panel services~~March 31, ~~and because~~2006. weThe ~~are~~increase ~~able~~in ~~to utilize~~ our ~~existing~~number ~~databases~~of ~~to expand our custom~~clients ~~analytical~~from ~~offerings~~March 31, ~~our~~2006 ~~revenue~~to ~~growth~~March 31, ~~does~~2007 ~~not~~is ~~require~~the aresult ~~direct corresponding~~of ~~increase~~organic growth in our ~~product expenses~~business.

AsOur revenue growth from the first quarter of ~~September~~2006 to the first quarter of 2007 is due to (i) ~~30,~~organic ~~2005,~~growth in our ~~cash and~~overall ~~cash~~product ~~equivalents~~portfolio and ~~short-term~~(ii) the ~~investments~~effect ~~totaled~~of ~~$194~~fluctuating exchange rates relating to our international operations.2 ~~million,~~Our ~~which~~revenues weremained unchanged from ~~believe~~the isfourth ~~sufficient~~quarter 2006 to ~~meet~~the first quarter of 2007 due to an increase in sales of our ~~cash~~product ~~needs~~portfolio, ~~for~~which atwas ~~least~~offset ~~the~~by ~~next~~a ~~twelve~~reduction in patent ~~months~~licensing revenue.

~~Industry Trends~~11

~~The~~As ~~success~~ of March 31, 2007, our ~~business~~accumulated ~~depends~~deficit ~~heavily~~was on$142.3 ~~the~~million. ~~expanding~~Since ~~use~~the beginning of ~~the~~2002, ~~Internet~~we ~~for~~have ~~advertising,~~made ~~commerce~~significant ~~and~~progress ~~communications~~in reducing our operating losses and net losses. ~~Internet~~ ~~advertising,~~Our operating loss decreased ~~e-commerce~~from ~~and~~$39.9 ~~the~~million ~~number~~in of2002 ~~people~~to ~~logging~~$29.7 ~~onto~~million ~~the~~in ~~Internet~~2003, ~~particularly~~$20.2 million in 2004, ~~through~~$11.9 ~~the~~million ~~use~~in of2005, ~~Internet~~$1.4 ~~broadband~~million ~~connections~~in 2006, ~~have~~and ~~dramatically~~our ~~increased~~operating loss for the infirst ~~recent~~three ~~years~~months ~~and~~of we2007 ~~expect~~was ~~this~~$1.0 ~~growth~~million. toLikewise, ~~continue~~our innet ~~upcoming~~loss ~~years~~decreased from ~~both~~$38.9 million in ~~the~~ ~~United~~2002 ~~States~~to ~~and~~$25.1 ~~abroad~~million in 2003, $17. ~~These growth~~4 ~~trends~~million ~~have~~in ~~made~~2004 ~~the~~and $8.4 ~~Internet~~million anin ~~increasingly~~2005. ~~important~~We ~~component~~recorded net income of ~~companies’~~ ~~overall~~$2.8 ~~business~~million ~~strategies~~and $0. 2 million Asfor a2006 ~~result,~~and ~~companies~~the ~~conducting~~first ~~business~~three ~~online~~months ~~are~~of ~~increasingly seeking~~2007, ~~analysis~~respectively. The operating loss and ~~insights~~net toincome ~~(i) define~~amounts ~~and~~for ~~reach~~2006 ~~their~~and ~~target audiences,~~2007 ~~(ii) measure~~include ~~the~~acquisition ~~effectiveness~~related expenses of ~~their~~$0.8 ~~advertising~~million and ~~marketing~~ ~~strategies~~$1.9 million, ~~(iii) benchmark~~respectively. ~~their~~We ~~performance~~expect ~~with~~that ~~their~~we will make ~~competitors~~further ~~and~~progress ~~(iv) increase~~in ~~brand~~improving ~~equity~~our operating and ~~commerce~~net ~~revenue~~income results during the remainder of 2007.

~~Companies~~As ~~are~~of ~~also increasingly recognizing that~~March 31, ~~compared with other media~~2007, our ~~the~~cash ~~Internet~~and ~~allows~~cash ~~online~~equivalents ~~market~~and ~~participants to~~marketable ~~obtain~~securities atotaled ~~unique understanding of consumer behavior~~$185. ~~Unlike~~7 ~~with other forms of advertising~~million, ~~including~~which ~~print,~~we ~~radio~~believe ~~and~~is ~~television,~~sufficient ~~advertisers~~to ~~can~~meet ~~(i) target advertising~~our incash anneeds ~~unprecedented~~for ~~manner,~~at ~~(ii) confirm~~least ~~whether~~the ~~consumers~~next ~~have~~twelve ~~actually viewed~~months.

11Industry Trends

~~advertisements~~The ~~(and~~success ~~when)~~of ~~and~~our ~~(iii) decipher~~business ~~whether~~depends ~~consumers have~~heavily ~~taken~~on ~~certain~~the continued ~~actions,~~expansion ~~whether~~of ~~completing~~the aInternet ~~purchase~~for oradvertising, ~~visiting~~commerce ~~a Web~~and ~~site~~communications. Internet advertising, e-commerce and ~~understand~~the ~~exactly~~number ~~why. Because~~ of people using the ~~unique~~Internet, ~~dynamics~~particularly ofthrough the use of Internet broadband connections, have wedramatically ~~expect~~increased ~~that~~in ~~Internet advertising~~recent years, and ~~commerce~~we ~~will~~expect ~~not~~this ~~only~~growth to continue ~~to grow~~ in ~~coming~~upcoming years, ~~but that~~around ~~Internet~~the ~~advertising~~world. ~~and~~These ~~commerce~~growth ~~will~~trends ~~garner~~have amade ~~larger~~the Internet ~~percentage~~an increasingly important component of ~~total~~companies’ overall business ~~advertising~~strategies. ~~and~~As ~~commerce~~a ~~dollars. We believe~~result, ~~that~~companies ~~this~~conducting ~~growth~~business ~~will~~online ~~require~~are aincreasingly seeking ~~commensurate~~analysis ~~increase~~and ininsights ~~Internet~~to ~~media~~ (i) define and ~~market~~reach ~~research~~their target audiences, ~~and~~(ii) measure ~~that~~the weeffectiveness ~~are~~of ~~particularly~~their ~~well-suited~~advertising toand marketing ~~address~~strategies, ~~the~~(iii) benchmark their performance with their ~~global~~competitors ~~needs~~and of(iv) increase ~~online~~brand ~~participants~~equity and commerce revenue.

~~Product~~Companies ~~Portfolio~~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.

~~Our~~Product 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.Portfolio

InOur goal for the ~~first~~last ~~half~~few ofyears ~~2002,~~has webeen ~~acquired~~to offer the ~~AdRelevance,~~most ~~our~~comprehensive ~~online~~global ~~advertising~~portfolio ~~expenditure~~of ~~service,~~Internet media and ~~@Plan,~~market ~~which~~research ~~provides~~products ~~demographic,~~and ~~lifestyle~~services. ~~and~~In ~~product~~order ~~preference~~to ~~information. During~~reach ~~2002~~this goal, we ~~also~~have ~~made~~focused ~~strategic~~on both strategic acquisitions ~~designed~~in tothe ~~expand~~United ~~our~~States ~~NetView~~and ~~service~~abroad ~~around~~and ~~the~~investing ~~world,~~in ~~which~~new ~~provides~~products ~~detailed~~to ~~panel-based~~meet ~~Internet~~changing ~~audience~~marketplace ~~information~~needs. ~~These~~ ~~included~~As ~~our~~a ~~acquisition~~result of ~~NetValue S.A.~~these efforts, anwe ~~international~~currently offer ~~provider~~a ofwide ~~Internet~~range ~~audience~~of ~~measurement~~products and services, ~~and~~ in the ~~purchase~~United ~~from~~States ~~ACNielsen~~and ~~Corporation~~in ofmany countries ~~the~~throughout ~~80.1%~~Europe, ~~interest~~Asia inPacific ~~ACNielsen~~and ~~eRatings~~Latin America.~~com that~~ weWe ~~did~~believe ~~not~~that this ~~already~~product ~~own. Since~~portfolio ~~the beginning~~and breadth of ~~2003,~~coverage wewill ~~have~~enable ~~acquired~~us ~~LemonAd~~to ~~(now~~continue ~~branded~~to increase ~~AdRelevance),~~ our ~~international~~ ~~online~~client ~~advertising~~base, ~~measurement~~increase ~~service,~~our ~~and~~ability ~~Red~~to ~~Sheriff,~~sell amultiple ~~global~~products to ~~provider~~clients ofand ~~site-centric-based~~increase ~~Internet~~the ~~audience~~total ~~measurement~~sales ~~tools~~to individual clients.

In ~~conjunction with these strategic acquisitions~~2002, we ~~have~~acquired ~~also~~AdRelevance, ~~devoted~~our ~~significant resources to internal product~~online ~~development. Our~~advertising ~~key~~expenditure ~~new~~service, ~~products~~ and ~~services~~ ~~include (i) MegaPanel~~@Plan, which ~~includes~~provides ~~our vertical offerings~~demographic, ~~such~~lifestyle asand ~~MegaView~~product ~~Financial,~~preference ~~MegaView~~information. ~~Retail,~~During ~~MegaView Travel~~2002, ~~MegaView~~we ~~Search~~also made ~~and~~strategic ~~MegaView~~acquisitions ~~Local,~~designed asto ~~well~~expand asour ~~WebIntercept,~~NetView aservice ~~behavioral-based~~around ~~online~~the ~~survey~~world, ~~research~~which ~~tool that~~ provides ~~surveying~~detailed ~~capabilities on real~~panel-~~time~~based Internet ~~behavior;~~ ~~and~~audience ~~(ii) Homescan~~information. ~~Online,~~These included aour ~~joint~~acquisition ~~initiative~~of ~~with~~NetValue ~~ACNielsen~~S.A., ~~that combines~~an ~~offline~~international ~~consumer~~provider ~~purchasing data with~~ of Internet audience measurement ~~data. We~~ ~~believe~~services, ~~these~~and ~~new~~the ~~products~~purchase ~~and~~from ACNielsen ~~services,~~Corporation asof ~~well~~the as80.1% ~~additional~~interest ~~MegaPanel~~in ~~offerings,~~ACNielsen ~~will~~eRatings.com bethat ~~important~~we todid ~~our~~not ~~financial~~already ~~performance~~own. ~~over~~Since the ~~next~~beginning ~~few~~of ~~years.~~2003, we

~~Revenue Overview~~12

Weacquired ~~generate~~LemonAd ~~revenues primarily from the sale~~(now ofbranded AdRelevance), our ~~Internet~~international ~~media~~online ~~and~~advertising ~~market~~measurement ~~research products and services~~service, ~~which include~~ ~~both syndicated products~~ and ~~customized~~Red ~~products. Syndicated products currently represent a significant majority of our total revenues~~Sheriff, ~~and our goal is for syndicated products to continue to represent~~ a ~~significant~~global ~~majority~~provider of ~~our~~site-centric-based ~~total~~Internet ~~revenues~~audience measurement tools.

WeIn ~~sell~~conjunction awith ~~majority~~these strategic ofacquisitions, ~~our~~we ~~syndicated~~have ~~products and~~also ~~services~~devoted onsignificant anresources ~~annual~~to ~~subscription~~internal product ~~basis~~development. We ~~recognize~~Our ~~revenue~~key ~~from~~new ~~the sale of our syndicated~~ products and services ~~ratably~~include ~~over~~(i) MegaPanel, which ~~the~~includes ~~term~~our ofvertical ~~the~~offerings ~~subscription~~MegaView ~~agreement. Subscription~~Financial, ~~fees~~MegaView ~~invoiced~~Retail, MegaView inSearch, ~~advance~~MegaView ~~are recorded~~Travel asand ~~deferred~~MegaView ~~revenue~~Local, ~~until~~and ~~earned.~~(ii) VideoCensus, Aswhich atracks ~~result,~~video astreams ~~significant~~consumed ~~portion~~online. ofWe ~~revenue~~believe ~~recognized~~these innew ~~any~~products ~~period~~and ~~results~~services, ~~from~~as ~~the~~well ~~amortization~~as ofadditional ~~deferred~~MegaPanel ~~revenue~~offerings, ~~balances. Revenue~~will ~~from~~be ~~customized~~important ~~products~~to ~~and services~~our isfinancial ~~recognized~~performance in the ~~period in which the product or service is provided~~future.

InRevenue France, Japan and Latin America, we offer many of our services through entities jointly owned by 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. As a result, NetRatings included the results of operations of Red Sheriff S.r.l. in its consolidated financial statements beginning in the second quarter of 2005.Overview

We ~~have~~generate ~~experienced~~revenues ~~revenue~~primarily ~~growth~~from inthe ~~each~~sale of our ~~the~~Internet ~~years~~media ~~since~~and wemarket ~~launched~~research ~~our~~products ~~first~~and ~~product~~services, inwhich ~~1999~~include both syndicated products and customized products. Syndicated products currently represent a significant majority of our total revenues, asand ~~demonstrated~~our bygoal ~~the~~is for ~~table~~syndicated ~~below:~~products to continue to represent a significant majority of our total revenues. We also generate revenues from the licensing of our patents.

12In 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 have consolidated the operating results of NetRatings Japan and Mediametrie NetRatings in our consolidated financial statements since the respective dates we acquired majority control of these companies. 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.

Years ended December 31:	Revenues (in thousands)
2000	$	20,411
2001	$	23,504
2002	$	29,706
2003	$	41,432
2004	$	59,294

We have experienced revenue growth in each of the years since we launched our first product in 1999, and the revenue growth since 2002 is shown in the table below:

Nine months ended September 30:
Years ended December 31:			Revenues
2004	$	43,362
			(in thousands)
2005	$	50,334
2002				$	29,706
2003				$	41,432
2004				$	59,294
2005				$	69,017
2006				$	81,769

We expect our 2005 revenues to exceed our 2004 revenues, as a result of sales from our new products and services, the launch of our new and existing products and services in new international territories, increasing the prices for our products and services and cross-selling our products and services to our global client base, as well as the consolidation of the results of operations of Red Sheriff S.r.l. which we acquired in February 2005.

Three months ended March 31:
2006	$	18,280
2007	$	21,958

~~Critical~~We ~~Accounting~~expect ~~Policies~~our 2007 revenues to exceed our 2006 revenues, primarily as a result of sales from our new products and ~~Estimates~~services, price increases for our existing products and services and the launch of our new and existing products and services in new international territories.

Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, our management evaluates its estimates and judgments, including those related to bad debts, investments, income taxes, 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.13

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

~~Revenue~~Management’s ~~Recognition~~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.

WeOur ~~recognize~~significant ~~revenue in accordance with SEC~~accounting ~~Staff~~policies ~~Accounting~~and ~~Bulletin~~estimates ~~No. 104,~~detailed ~~Revenue~~in ~~Recognition.~~our ~~SAB~~Annual ~~104~~Report ~~requires that~~on ~~four basic criteria must be met before revenue can be recognized: (1)~~Form ~~persuasive~~10-K ~~evidence~~for ~~that an arrangement exists; (2) delivery has occurred or services rendered; (3)~~ the ~~fee~~year isended ~~fixed or determinable; and (4)~~December ~~collectibility is~~31, ~~reasonably~~2006 ~~assured.~~have ~~Determination~~not ofchanged ~~criteria~~from ~~(4)~~December ~~is based on~~31, ~~management’s~~2006 ~~judgment regarding the collectibility of those fees. We sell a majority of our products and services pursuant~~ to ~~one-year~~March 31, ~~subscription agreements.~~2007, Weexcept ~~recognize revenue from the sale of these subscription products and services ratably over the term of the subscription agreement. Subscription fees invoiced 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.follows:

~~Accounting for~~Income ~~Stock-Based~~Taxes ~~Compensation~~

~~We measure~~In ~~compensation~~June ~~expenses~~2006, ~~for~~the ~~our~~FASB ~~stock-based~~issued ~~compensation~~FASB Interpretation ~~plans~~No. ~~using~~48, ~~the intrinsic~~“Accounting ~~value~~for ~~method~~Uncertainty in ~~accordance~~Income ~~with~~Taxes—an interpretation ~~APB~~of ~~No. 25 and~~ FASB ~~Interpretation~~ Statement No. ~~28. Under~~ ~~the intrinsic~~109” ~~value~~(“FIN ~~recognition~~48”), ~~provisions~~which ofprovides ~~APB No. 25, stock-based~~specific ~~compensation~~guidance ~~cost~~on ~~is measured at~~ the ~~grant~~financial ~~date~~statement ~~based~~recognition, onmeasurement, ~~the~~reporting ~~difference between~~and ~~the~~disclosure ~~quoted~~of ~~market~~uncertain ~~price~~tax ofpositions ~~the~~taken ~~stock~~or atexpected ~~the~~to ~~measurement~~be ~~date~~taken ~~less~~in ~~the~~a ~~amount,~~tax ifreturn. ~~any,~~FIN ~~that~~48 addresses the ~~employee~~manner isin ~~required~~which totax ~~pay under the award~~positions, ~~and~~either ispermanent ~~recognized~~or astemporary, ~~expense~~should ~~over~~be ~~the~~reflected ~~vesting~~in ~~period using~~ the ~~accelerated~~financial ~~method~~statements.

~~Bad~~In accordance with the adoption of ~~Debt~~FIN 48, we evaluate our tax positions to determine if it is more likely than not that a tax position is sustainable, based on its technical merits. If it is more likely than not that a tax position is not sustainable, a full reserve is established. If it is more likely than not that a tax position is sustainable, we measure the benefit at the greatest cumulative probability of being realized and establish a reserve for the balance. A material change in our tax reserves could have a significant impact on our financial position, results of operations or cash flows.

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.14

13Results of Operations

~~Legal~~The following ~~Contingencies~~table sets forth certain financial data as a percentage of revenue for the three months indicated:

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

	Three Months Ended March 31,
	2007			2006
Revenue		100	%		100	%
Cost of revenue		28	%		31	%
Gross profit		72	%		69	%
Operating expenses:
Research and development		16	%		16	%
Sales and marketing		30	%		37	%
General and administrative		19	%		21	%
Acquisition related expenses		9	%		—
Amortization of intangible assets		3	%		3	%
Total operating expenses		77	%		77	%
Loss from operations		(5	)%		(8	)%
Interest income, net		9	%		7	%
Minority interest in net profit of consolidated subsidiaries		—			(1	)%
Net income (loss) before provision for income taxes and cumulative effect of change in accounting principle		4	%		(2	)%
Provision for income taxes		(3	)%		(1	)%
Net income (loss) before cumulative effect of change in accounting principle		1	%		(3	)%
Cumulative effect of change in accounting principle		—			2	%
Net income (loss)		1	%		(1	)%

~~Goodwill~~Revenue. We generate revenue primarily from the sale of our Internet audience measurement products and ~~Intangible~~services. ~~Assets~~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. We also receive revenues from licensing our patents.

~~Our~~As ~~long~~of ~~lived~~March 31, ~~assets~~2007, ~~include~~1,850 ~~goodwill~~customers ~~and~~worldwide ~~other~~subscribed ~~intangible~~to ~~assets. In~~our ~~accordance with~~products ~~SFAS No. 142, goodwill~~ and ~~indefinite-lived~~services ~~intangibles~~compared ~~are~~to ~~not amortized~~1,679 ~~but~~customers ~~are reviewed at least annually for impairment. We retain an independent appraisal firm which~~worldwide ~~annually~~as ~~provides a valuation~~ of ~~our company’s fair value~~March 31, ~~based on a discounted cash flow analysis~~2006. ~~This~~ ~~cash flow~~The ~~analysis~~increase ~~requires~~of ~~significant~~171 ~~judgment~~customers ~~and~~since ~~estimates by management~~March 31, ~~relating~~2006 ~~to assumptions about expected future operating performance and appropriate discount rates. An impairment loss~~ is ~~recorded if~~ the ~~estimated~~result ~~future cash flows plus net proceeds expected from disposition~~ of ~~the~~organic ~~asset~~growth ~~(if~~in ~~any)~~our ~~are~~global ~~less~~customer ~~than the carrying value of the asset~~base. ~~Our estimate~~ ofWe ~~discounted~~expect ~~cash flows may differ from actual cash flows due to,~~our ~~among~~global ~~other~~customer ~~things,~~base ~~economic conditions, changes~~ to ~~our~~increase ~~business model and changes~~ in ~~operating performance. An impairment loss recorded in~~ the ~~future,~~next iffew ~~any,~~quarters ~~could~~as ~~have~~we aexpand ~~material adverse~~our ~~impact~~product onportfolio in our ~~financial~~existing ~~position~~geographic ~~or results of operations~~markets.

WeOur ~~performed~~global ~~our~~client ~~annual~~renewal ~~evaluation~~rate was 85% for the first quarter of 2007, an increase over the global client renewal rate of 84% for the ~~goodwill~~first quarter of 2006 and ~~intangibles~~a asdecrease ofover ~~October 1,~~the ~~2004~~global atclient ~~which~~renewal ~~time~~rate noof ~~impairment~~86% ~~was~~for ~~indicated~~the fourth quarter of 2006. ~~There~~ ~~has~~Our ~~been~~global noaverage sales price was $44,000 for the ~~indication~~first quarter of ~~impairment~~2007 ~~since~~and ~~October 1~~$42,000 ~~2004~~for the first quarter of 2006. We ~~will~~The ~~reassess~~increase in the ~~carrying~~global ~~value~~average ~~of goodwill~~sales ~~and~~prices ~~intangible~~was ~~assets~~due ~~each~~to ~~year~~the asnon-renewal of ~~October 1,~~several ~~unless~~small ~~indicators~~contracts ofwith ~~impairment~~low ~~become~~average ~~apparent~~sales ~~earlier~~price. ~~The~~ ~~valuation~~During asthe ofthree ~~October~~month period ended March 131, 2007, ~~2005~~no ~~is in~~customer ~~process~~accounted for more than 10% of our revenue.

~~Restructuring~~Revenue increased 20% to $22.0 million for the three month period ended March 31, 2007, compared to $18.3 million for the three month period ended March 31, 2006. The increase in revenue was primarily due to (i) organic growth in sales of our product portfolio and (ii) the impact of fluctuating exchange rates relating to our international operations.

~~We have engaged in, and may~~Cost ~~continue~~of ~~to engage in, restructuring actions and activities associated with productivity improvement initiatives and expense reduction measures~~Revenue. ~~These~~ Cost ~~restructuring~~of ~~actions~~revenue ~~and~~consists ~~activities~~primarily ~~require~~of usexpenses ~~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: (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 employeesrecruitment, ~~or part of a pre-established or legally required~~ ~~benefit;~~maintenance ~~(3) the plan of termination specifically identifies the number~~ and ~~job classifications~~support 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~~Internet ~~estimate~~audience ofmeasurement ~~the obligations we expect to incur in connection with these actions~~panels, ~~but~~which ~~could be subject to change due to various~~are ~~factors~~expensed ~~including~~as ~~market~~they ~~conditions~~are ~~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~~ 15

~~Estimates~~incurred. ~~and~~Cost ~~judgments are required in the calculation~~ of ~~certain tax liabilities and in the determination~~revenue ofalso ~~the~~includes ~~recoverability~~data ofcollection ~~deferred~~costs ~~tax~~for ~~assets,~~our ~~which~~products ~~arise from net operating losses, tax carryforwards~~ and ~~temporary~~services ~~differences between the tax~~ and ~~financial~~operational ~~statement~~costs ~~recognition~~related ofto ~~revenue~~data ~~and expense~~centers. ~~SFAS No. 109~~Accordingly, ~~“Accounting~~ ~~for~~such ~~Income~~expenses ~~Taxes”~~are ~~(“SFAS 109”), 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~~necessarily ~~tax~~matched ~~assets will not be realized in future periods. In addition, the calculation of our tax liabilities involves dealing~~ with ~~uncertainties~~ inany ~~the~~revenue ~~application~~or ofsubscriptions ~~complex~~generated ~~tax regulations~~ in a ~~multitude of~~given ~~domestic~~period and ~~international~~are ~~jurisdictions.~~higher Ifin ~~our~~periods ~~estimate~~in ofwhich ~~tax~~we ~~liabilities proves~~are toinvolved bein ~~less~~significant ~~than the ultimate assessment, a charge to expense would~~panel ~~result.~~development activities.

~~Results~~Cost of ~~Operations~~revenue increased 9% to $6.2 million for the three month period ended March 31, 2007, compared to $5.6 million for the three month period ended March 31, 2006. The increase in cost of revenue was primarily due to (i) an increase in global MegaPanel build and online recruitment costs and (ii) depreciation and maintenance expenses related to additional capital expenditures in our data centers. As a percentage of revenue, our cost of revenue decreased to 28% for the three month period ended March 31, 2007 from 30% for the three month period ended March 31, 2006. This decrease as a percentage of revenue is primarily due to organic sales growth in our product portfolio.

~~The~~Research and ~~following~~Development. Research and ~~table~~development ~~sets~~expenses ~~forth~~consist ~~certain~~primarily ~~financial~~of compensation and related costs ~~data~~for aspersonnel aassociated ~~percentage~~with ofour ~~revenue~~research and product development activities. These costs are expensed as incurred, except for ~~the~~costs ~~three~~related to internally developed software, which are capitalized and ~~nine~~subsequently ~~months~~depreciated ~~indicated:~~when the development of the software is completed.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2005		2004		2005		2004
Revenue	100	%	100	%	100	%	100	%
Cost of revenue	33	%	36	%	34	%	41	%
Gross profit	67	%	64	%	66	%	59	%
Operating expenses:
Research and development	19	%	20	%	18	%	22	%
Sales and marketing	37	%	38	%	38	%	39	%
General and administrative	18	%	18	%	18	%	21	%
Restructuring expenses	10	%	—		3	%	(1	)%
Litigation settlement recovery	—		—		—		(4	)%
Amortization of intangibles	4	%	6	%	4	%	7	%
Amortization of stock-based compensation	7	%	15	%	5	%	16	%
Total operating expenses	95	%	97	%	86	%	100	%
Loss from operations	(28	)%	(33	)%	(20	)%	(41	)%
Equity in earnings (losses) of joint ventures	—		—		—		—
Interest income, net	7	%	5	%	6	%	5	%
Minority interest in net profit of consolidated subsidiaries	(1	)%	—		(1	)%	—
Net loss	(22	)%	(28	)%	(15	)%	(36	)%

Research and development expenses increased 20% to $3.5 million, or 16% of revenue, for the three month period ended March 31, 2007 from $2.9 million, or 16% of revenue, for the three month period ended March 31, 2006. The increase is primarily due to (i) additional amortization of engineering costs related to internally developed software; (ii) additional stock-based compensation expense; and (iii) additional engineering personnel.

~~Revenue~~Sales and Marketing. Sales and Wemarketing ~~generate~~expenses ~~revenue~~consist primarily ~~from~~of ~~the~~salaries, ~~sale~~benefits ofand ~~our Internet~~commissions ~~audience~~to ~~measurement~~our ~~products~~salespeople and ~~services.~~analysts, Weas ~~typically~~well ~~sell~~as ~~our~~costs ~~syndicated services~~related ~~pursuant~~ to ~~one-year subscription agreements. We also derive a portion~~seminars, ofpromotional ~~our~~materials, ~~revenue~~public ~~from~~relations, ~~our~~corporate ~~customized~~marketing ~~products~~ and ~~services~~other ~~and from joint venture~~sales and ~~other~~marketing ~~distribution partners~~programs.

AsSales ofand ~~September 30,~~marketing ~~2005,~~expenses ~~1,574~~decreased 2% to ~~customers~~$6.7 million, ~~worldwide~~or ~~subscribed~~30% toof ~~our~~revenue, ~~products~~for ~~and~~the ~~services~~three ~~compared~~month toperiod 1ended March 31,~~485~~ ~~customers~~2007 ~~worldwide~~from as$6.8 million, or 37% of ~~June 30~~revenue, ~~2005.~~ for the comparable period in 2006. The ~~increase~~decrease ofwas 89primarily ~~customers~~due ~~since~~to ~~June 30,~~reductions ~~2005~~in isstock-based ~~the~~compensation expense, ~~result~~partially ~~of organic~~offset ~~growth~~by increases in ~~our~~global ~~worldwide~~sales commission expense.

14General and Administrative. General and administrative expenses consist primarily of salaries and related costs for executive management; finance and accounting; human resources; legal; information technology and other administrative personnel. General and administrative expenses also include professional fees, including professional fees for our patent enforcement program, and other general corporate expenses.

~~customer~~General ~~base~~and administrative expenses increased 8% to $4. We1 ~~expect~~million, ~~our~~or 19% of revenue, for the three month period ended March 31, ~~global~~2007 ~~customer~~from ~~base~~$3.8 tomillion, ~~increase~~or in21% of revenue, for the ~~next~~comparable ~~few~~period ~~quarters~~in as2006. weThe increase ~~market~~in general and ~~sell~~administrative expenses is primarily due to (i) additional legal expenses related to a number of pending litigations and our ~~new~~patent enforcement ~~products~~program and ~~services~~(ii) additional finance and ~~expand~~human ~~into~~resources personnel. ~~new~~The ~~geographical~~increase ~~markets~~was partially offset by reductions in professional fees.

~~Our~~Acquisition Related ~~global~~Expenses. On ~~client~~October 6, ~~renewal~~2006, ~~rate~~our board ~~was~~of ~~78%~~directors ~~for the~~received ~~third~~a ~~quarter~~proposal offrom ~~2005,~~The anNielsen ~~increase~~Company ~~over~~B.V. ~~the~~to ~~global~~acquire our ~~client~~outstanding ~~renewal~~publicly ~~rate~~held minority stake. A special committee of the board ~~76%~~of ~~for~~directors was appointed to evaluate the ~~third~~offer ~~quarter~~and, ofsubsequently, ~~2004~~engaged legal and afinancial ~~decrease~~advisors. ~~over~~On ~~the~~February 5, ~~global~~2007, ~~client~~we, ~~renewal~~Nielsen Media ~~rate~~Research ofand ~~83%~~NTRT ~~for~~Acquisition ~~the~~Sub, Inc., ~~second~~a ~~quarter~~newly-formed ofand ~~2005.~~wholly-owned subsidiary ~~The~~of ~~decrease~~Nielsen inMedia ~~global~~Research, ~~client renewal~~entered ~~rate~~into ~~over~~an ~~the~~Agreement ~~second~~and ~~quarter~~Plan of Merger, ~~2005~~under ~~was~~which ~~primarily~~NTRT ~~the~~Acquisition ~~result~~Sub ~~of decreased~~will ~~client~~merge ~~renewals~~with inand ~~our~~into ~~EMEA~~us, ~~region.~~ which ~~Our~~will ~~global~~result ~~average~~in ~~sales~~The ~~price~~Nielsen ~~was~~Company ~~$45,000~~and ~~for~~its ~~the~~subsidiaries ~~third~~owning ~~quarter~~all of ~~2005~~our ~~and~~common ~~2004~~stock. ~~During~~ ~~the~~The ~~quarter~~acquisition ~~ended~~related ~~September 30,~~expenses of $1.9 million reflect the ~~2005,~~expenses noincurred ~~customer~~in ~~accounted~~connection ~~for~~with ~~more~~this ~~than~~transaction. ~~10%~~There ofwere ~~our~~no corresponding ~~revenue~~fees in the first quarter of 2006.

~~Revenue increased 8% to $~~16.8 million for the three month period ended September 30, 2005, compared to $15.6 million for the three month period ended September 30, 2004. Revenue increased 16% to $50.3 million for the nine month period ended September 30, 2005, compared to $43.4 million for the nine month period ended September 30, 2004. The increases in revenue were primarily organic revenue growth due to (i) new business sales of our products and services; (ii) the launch of new product offerings; and (iii) price increases for existing products and services. The impact of foreign exchange rates also contributed to the increase in revenues for the nine month period ended September 30, 2005, while it had a negative impact on revenue for the three month period ended September 30, 2005. The revenue for the three month and nine month periods ended September 30, 2005 also includes our consolidation of the results of operations of Red Sheriff S.r.l. which we acquired on February 25, 2005.

~~Cost~~ Amortization of ~~Revenue~~Intangible Assets. ~~Cost~~ Amortization of ~~revenue~~intangible ~~consists~~assets ~~primarily~~was ofunchanged ~~expenses~~at ~~related~~$0.6 ~~to the recruitment~~million, ~~maintenance~~ ~~and~~or ~~support~~3% of ~~our Internet audience measurement panels~~revenue, ~~which~~for ~~are~~the ~~expensed~~three asmonth ~~they~~periods ~~are~~ended ~~incurred. Cost of revenue also includes data collection costs for our products and services and operational costs related to data centers. Accordingly~~March 31, ~~such~~2007 ~~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~~2006.

~~Cost~~Interest Income, ofNet. Interest income, ~~revenue~~net, ~~was~~increased ~~$5.5~~68% ~~million~~to ~~and~~ $52.7 0 million for the three month ~~periods~~period ended ~~September~~March 3031, 2007, ~~2005~~from ~~and 2004, respectively~~$1. ~~The~~2 ~~decrease~~million infor ~~cost~~the ~~of revenue~~three ~~was~~month ~~primarily~~period ~~due~~ended ~~to (i)~~March ~~reductions~~31, in2006. ~~our international NetView~~The ~~recruitment~~increase ~~costs and (ii) charges related to the termination of certain employees~~ in ~~2004.~~interest ~~These~~income ~~reductions~~was ~~were~~due ~~partially offset by~~ (i) ~~additional US~~to ~~NetView~~higher ~~and~~investment ~~MegaPanel~~balances ~~recruitment costs; (ii) additional third party costs~~ for ~~a custom project in our international operations; and (iii) costs~~ ~~related to our data center in China which began operations in~~ the ~~fourth quarter of 2004. As a percentage of revenue, our cost of revenue decreased to 33% for the~~ three month period ended ~~September~~March 3031, ~~2005~~ ~~from~~2007, ~~36%~~compared ~~for~~to the three month period ended ~~September~~March 3031, ~~2004. This~~2006 ~~decrease~~and as(ii) to aan ~~percentage~~overall ofhigher ~~revenue is~~interest ~~primarily~~yield ~~due~~on toour ~~revenue~~investments ~~growth~~during ~~from~~ the ~~launch~~first quarter of ~~our new products~~2007.

~~Cost~~Minority Interest. Minority interest ofwas ~~revenue~~$29 ~~decreased~~thousand 3%and to $170.12 million, ~~or 34% of revenue,~~ for the ~~nine~~three month ~~period~~periods ended ~~September~~March 3031, ~~2005 from~~ ~~$17.6 million,~~2007 orand ~~41% of revenue~~2006, ~~for the nine month period ended September 30, 2004~~respectively. The ~~decrease~~minority ininterest ~~cost~~for ofeach ~~revenue was primarily due to (i) reductions in our international NetView and MegaPanel recruitment costs; (ii) cost reductions in US MegaPanel recruitment expenses; (iii) the elimination~~ of ~~our~~ ~~Hispanic~~these ~~panel in the third quarter of 2004; and (iv) charges related~~periods torepresents the ~~termination~~minority ofshare ~~certain employees in 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~~profits offrom ~~information~~Mediametrie ~~available~~NetRatings, ~~through~~ our ~~MegaPanel~~ ~~product;~~French subsidiary, and ~~(iv) the impact~~NetRatings ofJapan, ~~foreign exchange rates relating to~~ our ~~international~~Japanese ~~operations~~subsidiary. ~~The decrease as a percentage of revenue is primarily due to revenue growth from the launch of our new products.~~

~~Research~~Provision for ~~and~~Income ~~Development~~Taxes. The provision for income taxes ~~Research~~totaled $0.8 million, or 3% of revenue, and ~~development~~$0.1 ~~expenses~~million, ~~consist~~or ~~primarily~~1% of ~~compensation~~revenue, for the three month periods ending March 31, 2007 and 2006, respectively. This ~~related~~expense ~~costs~~primarily ~~for~~relates ~~personnel~~to ~~associated~~income ~~with~~taxes for certain of our ~~research~~foreign subsidiaries and ~~product development~~the ~~activities~~alternative minimum tax on our U.S. operations.

~~Research~~Operating Loss and ~~development~~Net ~~expenses~~Loss. Operating loss ~~increased~~decreased 234% to $31.2 0 million, or 195% of revenue, for the three month period ended ~~September~~March 3031, ~~2005~~ 2007 from $3.1.5 million, or 207% of revenue, for the three month period ended ~~September~~March 3031, ~~2004~~2006. ~~Research~~For ~~and~~the ~~development~~three ~~expenses~~month ~~decreased 6%~~period toended ~~$8.8~~March ~~million~~31, or2007, ~~18%~~our ofnet ~~revenue,~~income ~~for~~was ~~the~~$0.2 ~~nine~~million, ~~month~~or ~~period~~$0.01 ~~ended~~per ~~September 30~~share, ~~2005~~on ~~from~~approximately $935.4 million, orweighted ~~22%~~average ofshares ~~revenue~~outstanding, ~~for~~as compared ~~the~~with ~~nine~~a ~~month~~net ~~period~~loss ~~ended September~~of $0.3 30million, ~~2004~~or $0. ~~The~~01 ~~increase~~per ~~in the~~share, ~~three month period is primarily due to an increase in personnel in our~~on ~~international~~approximately ~~and US research departments~~34.7 million ~~The~~weighted ~~decrease~~average inshares ~~research~~outstanding, ~~and development expenses~~ for the three ~~nine~~ month period ~~was primarily due to a reduction in personnel costs for the first six months of 2005 and the capitalization of engineering costs related to internally developed software. During the nine months~~ ended ~~September~~March 3031, ~~2005,~~ ~~the Company capitalized approximately $0~~2006.~~8 million of payroll and related costs related to internal use software development.~~

~~Sales~~The ~~and~~improvement ~~Marketing. Sales~~in ~~and~~operating ~~marketing~~loss ~~expenses~~was ~~consist~~ primarily ofdue ~~salaries,~~to ~~benefits~~increased ~~and~~revenue ~~commissions~~from organic growth, topartially ~~our~~offset ~~salespeople~~by (i) acquisition related expenses and ~~analysts,~~(ii) increased other asoperating ~~well~~expenses. asNet ~~costs~~income ~~related~~was toalso ~~seminars,~~positively impacted by increased ~~promotional~~interest ~~materials~~income, ~~public~~partially ~~relations~~offset by additional taxes. Additionally, ~~corporate~~net ~~marketing~~income in ~~and~~the ~~other~~first ~~sales~~quarter of 2006 was positively impacted by the cumulative effect ~~and~~of ~~marketing~~change ~~programs~~in accounting principle related to our adoption of SFAS 123(R).

~~Sales~~Liquidity and ~~marketing expenses increased 7% to~~ ~~$6.3 million,~~Capital ~~or 37% of revenue, for the three month period ended September 30, 2005 from $5.9 million, or 38% of revenue, for the comparable period in 2004. Sales and marketing expenses~~Resources

15At March 31, 2007, the Company’s cash, cash equivalents and marketable securities were $185.7 million, compared with $170.1 million at March 31, 2006.

~~increased 13%~~Cash toused in operating activities was $191.3 2 million, orfor the ~~38%~~three ofmonths ~~revenue~~ended March 31, ~~for~~2007, ~~the~~reflecting ~~nine~~our ~~month~~net ~~period~~income ~~ended~~of ~~September 30,~~$0.2 ~~2005~~million ~~from~~and non-cash expenses of $173.1 million, oroffset ~~39%~~by cash used in working capital changes of ~~revenue~~$4.5 million. The non-cash expenses include $1.1 million for stock-based compensation, $1.2 million for ~~the~~depreciation ~~comparable~~and ~~period~~amortization inof ~~2004~~assets, $0. ~~The~~6 ~~increases~~million ~~were~~for ~~primarily related~~amortization toof ~~(i) an~~intangible ~~increase~~assets and $0.2 million in other ~~headcount~~non-cash ~~due~~charges. toCash ~~the~~provided ~~acquisition~~by ofoperating ~~the remaining~~activities ~~shares~~was of$1.8 ~~our~~million for ~~joint~~the ~~venture~~three inmonths ~~Italy;~~ended ~~(ii)~~March ~~additional~~31, ~~personnel in~~2006, reflecting our ~~analytics~~net ~~area~~loss ~~due~~of to$0.3 million ~~the~~and ~~growth~~cash used in ~~custom~~working ~~analytics~~capital ~~revenue;~~changes ~~(iii) additional~~of $1.3 million, partially ~~product~~offset ~~marketing~~by ~~personnel~~non-cash ~~due~~expenses toof ~~our~~$3.4 ~~product~~million. ~~expansion;~~The ~~and~~non-cash ~~(iv) the~~expenses include $1.2 ~~impact~~million for stock-based compensation, $0.9 million for depreciation and amortization of ~~foreign~~assets, ~~exchange~~$0.6 ~~rates~~million ~~relating~~for amortization of intangible assets, $0.4 million related to the ~~expenses~~cumulative effect of change in ~~our~~accounting ~~international~~principle ~~operations~~and $0.3 million in other non-cash charges.

~~General~~Net ~~and~~cash ~~Administrative~~provided by investing activities for the three months ended March 31, 2007 was $5.3 million, resulting from ~~General~~net sales and ~~administrative~~maturities ~~expenses~~of ~~consist~~our ~~primarily~~short-term investments of ~~salaries~~$6.3 million, which was partially offset by the acquisition of property and equipment of $1.0 ~~related~~million. ~~costs~~Net cash provided by investing activities for ~~executive~~the ~~management,~~three ~~finance,~~months ~~accounting~~ended March 31, 2006 ~~human~~was ~~resources~~$16.3 million, ~~legal,~~ ~~information~~resulting ~~technology~~from net sales and ~~other~~maturities ~~administrative~~of ~~personnel~~our short-term investments of $18.1 million, inwhich ~~addition~~was topartially offset by the ~~professional~~acquisition ~~fees~~of property and ~~other~~equipment ~~general~~of ~~corporate~~$1.8 ~~expenses~~million.

General and administrative expenses increased 7% to $3.1 million, or 18% of revenue, for the three month period ended September 30, 2005 from $2.9 million, or 18% of revenue, for the comparable period in 2004. General and administrative expenses were $9.1 million, or 18% of revenue, for the nine month period ended September 30, 2005 and $8.9 million, or 21% of revenue, for the nine month period ended September 30, 2004. The increase in general and administrative expenses for the three and nine month periods is primarily due to additional legal expenses related to a number of pending litigations.17

~~Restructuring~~Net ~~Expenses~~cash provided by financing activities totaled $0. In9 million for the ~~third~~three ~~quarter~~months ofended ~~2005~~March 31, ~~management~~2007, ~~approved~~due ~~and~~to ~~initiated~~the aexercise ~~restructuring~~of ~~plan~~options ~~primarily~~and ~~intended~~the topurchase ~~streamline~~of stock through our ~~European~~employee ~~operations. The~~stock ~~restructuring~~purchase plan. ~~includes relocating~~Net ~~engineering~~cash ~~operations~~used in ~~Europe~~financing toactivities ~~the~~totaled ~~United~~$10.4 ~~States~~million ~~and~~for the ~~elimination~~three ofmonths ~~certain~~ended ~~management~~March 31, ~~positions~~2006. In November 2005, we were authorized to repurchase ~~connection~~up ~~with~~to $25 million of our common stock in the open market or in privately negotiated transactions. We completed this ~~restructuring~~stock ~~plan~~repurchase program in February 2006. During the three months ended March 31, we2006, ~~recorded~~cash apaid ~~charge~~in ofconnection with this stock repurchase program was $111.76 million (including commissions). This ~~for~~was ~~severance~~partially ~~costs~~offset ~~during~~by cash provided by the ~~third~~exercise ~~quarter~~of options and the purchase of ~~2005~~stock through our employee stock purchase plan.

~~During~~We ~~the~~believe ~~first~~that ~~quarter of 2004, the Company~~our ~~negotiated~~existing abalances ~~new~~of ~~lease~~cash ~~for~~and ~~its~~cash ~~offices~~equivalents inand ~~Milpitas,~~short-term ~~California~~investments ~~which included a~~will ~~release~~be ~~from~~sufficient ~~its~~to ~~obligations~~meet ~~for~~our ~~the~~cash ~~abandoned~~needs ~~portion~~for ofworking ~~the~~capital ~~facility,~~and capital ~~resulting~~expenditures infor aat ~~reversal~~least ofthe ~~restructuring~~next ~~expense~~12 months, ofalthough ~~$525,000~~we ~~during~~could ~~the~~elect ~~nine~~to ~~month~~seek ~~period~~additional ~~ending~~funding ~~September 30,~~prior ~~2004~~to that time.

~~Litigation~~Off-Balance ~~Settlement Recovery.~~ Sheet During the fourth quarter of 2002, NetRatings expensed costs related to the settlement in 2002 of the patent litigation initiated 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 expenses.Arrangements

~~Amortization~~We ofhave ~~Intangibles. Amortization~~no ~~of intangible expenses decreased 27% to $0.6 million, or 4%~~off-balance ofsheet ~~revenue,~~arrangements ~~for~~(as ~~the~~defined ~~three month period ended September 30, 2005 from $0.9 million, or 6% of revenue, for the comparable period~~ in ~~2004. Amortization~~Item of303 ~~intangible expenses decreased 27% to $2.2 million, or 4%~~ of ~~revenue, for the nine month period ended September~~Regulation ~~30, 2005 from $3~~S-K).~~0 million, or 7% of revenue, for the comparable period in 2004. The decrease was primarily due to certain assets reaching their final amortization period.~~

~~Amortization~~Item ~~of Stock-based Compensation~~3. ~~Amortization~~ ofQuantitative ~~stock-based compensation in 2005 represents amortization of compensation expense related to restricted stock grants issued in 2005. This amortization expense totaled $1.2 million~~ and ~~$2.3~~Qualitative ~~million~~Disclosures ~~for~~About ~~the~~Market ~~three and nine month periods ended September 30, 2005, respectively~~Risk.

~~Amortization~~As of ~~stock-based~~March 31, ~~compensation~~2007, inwe had cash, cash ~~2004~~equivalents ~~represents~~and ~~amortization~~marketable securities of ~~deferred~~$185.7 ~~service~~million ~~costs~~consisting ~~related~~of tocash ~~warrants~~and ~~which~~highly ~~Nielsen~~liquid, ~~Media~~short-term ~~Research~~investments. ~~exercised~~The inprimary ~~December 1999. As~~objective of ~~December 31,~~our ~~2004, the deferred~~investment ~~service~~activities ~~costs~~is ~~relating~~ to ~~the~~preserve ~~stock~~capital ~~warrants~~while ofat ~~Nielsen~~the ~~Media~~same ~~Research~~time ~~were~~maximizing yields ~~fully~~without ~~amortized~~significantly increasing risk. ~~Accordingly~~ To achieve this objective, ~~there~~we ismaintain noour ~~amortization~~portfolio ~~related~~of tocash ~~these~~equivalents ~~warrants~~and marketable securities in ~~2005. In~~a ~~2004,~~variety ~~the~~of government ~~amortization~~and ~~expense~~corporate ~~related~~obligations ~~to these~~and ~~warrants~~money ~~was~~market $2funds.3 ~~million~~As ~~and~~of ~~$6.8~~March 31, 2007, ~~million~~our ~~for~~investments ~~the~~had ~~three~~a ~~and~~weighted-average ~~nine~~time ~~month periods~~to ~~ended~~maturity ~~September 30,~~of ~~2004,~~approximately 144 ~~respectively~~days.

~~Equity~~Investments in ~~Earnings~~both offixed-rate and ~~Joint~~floating-rate ~~Ventures. Equity in~~interest-earning ~~earnings~~instruments carry varying degrees of interest ~~joint~~rate ~~ventures~~risk. ~~was~~The $0fair ~~and~~market ~~$43,000~~value ~~for~~of ~~the~~our ~~three~~fixed-rate ~~month~~securities ~~periods~~may be ~~ended~~adversely ~~September 30,~~impacted ~~2005~~due ~~and~~to ~~2004,~~a ~~respectively. For~~rise ~~the~~in ~~nine~~interest ~~month~~rates. ~~periods~~In ~~ended September 30~~general, ~~2005~~ ~~and~~securities ~~2004,~~with longer ~~the~~maturities ~~equity~~are insubject ~~earnings~~to ofgreater ~~joint~~interest-rate ~~ventures~~risk ~~was~~than ~~$56,000~~those ~~and~~with ~~$81,000,~~shorter ~~respectively~~maturities. ~~The~~ ~~equity~~While ~~in earnings~~floating ofrate ~~joint~~securities ~~ventures~~generally ~~for~~are ~~each~~subject ofto less ~~these~~interest-rate ~~quarters~~risk ~~reflected~~than ~~our~~fixed-rate ~~equity~~securities, infloating-rate securities ~~the~~may ~~earnings~~produce ofless ~~our~~income ~~Italian~~than ~~joint~~expected ~~venture,~~if ~~Red~~interest ~~Sheriff~~rates Sdecrease.~~r.l. At~~ ~~the~~Declines ~~end~~ of interest ~~the~~rates ~~first~~over ~~quarter~~time inwill ~~2005,~~reduce ~~we purchased~~our ~~the remaining 50%~~ interest inincome ~~Red~~from ~~Sheriff~~our ~~S.r.l.,~~cash ~~which~~and ~~resulted in~~cash ~~its~~equivalents ~~results~~and ofmarketable ~~operations~~securities ~~being~~and, ~~reported~~accordingly, incould ~~our~~adversely ~~consolidated results rather~~affect ~~than~~our innet ~~equity~~income inand earnings ofper ~~joint ventures~~share. ~~Due~~ toFor ~~losses incurred by Ibope~~example, weif ~~reduced~~interest ~~our~~rates ~~investment~~were ~~in Ibope~~ to ~~zero~~instantaneously inincrease ~~the~~(decrease) ~~first~~by ~~quarter~~100 basis ~~of 2004. In addition~~points, wethe ~~have~~fair ~~no financial support commitments to Ibope and therefore we do~~market ~~not~~value ~~presently~~of ~~recognize~~ our ~~share~~total ofinvestment ~~Ibope’s~~portfolio ~~net~~would ~~losses~~decrease in(increase) ~~our financial~~by ~~statements~~approximately $0.5 million.

~~Interest~~Item ~~Income, Net~~4. ~~Interest income,~~ ~~net,~~Controls ~~increased~~and ~~58% to $1~~Procedures.2 million for the three month period ended September 30, 2005, from $0.7 million for the three month period ended September 30, 2004. Interest income, net, increased 46% to $3.1 million for the nine month period ended September 30, 2005 from $2.1 million for the comparable period in 2004. The increase in interest income was due to an overall higher interest yield on our investments in 2005.

~~Minority~~Disclosure ~~Interest.~~ Controls ~~Minority interest was $(152,000)~~ and $(558,000) for the three and nine month periods ended September 30, 2005, respectively, and $(69,000) and $(169,000) for the three and nine month periods ended September 30, 2004, respectively. TheProcedures

16The 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) 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 the 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.

~~minority interest for each of these periods represents the minority share of the profits from Mediametrie NetRatings and NetRatings Japan.~~18

~~Operating~~Internal ~~Loss and Net Loss. Operating loss decreased 6% to~~Control ~~$4.7 million,~~over orFinancial 28% of revenue, for the three month period ended September 30, 2005 from $5.1 million, or 33% of revenue, for the three month period ended September 30, 2004. For the three month period ended September 30, 2005, our net loss decreased to $3.7 million, or $0.10 per share, on approximately 36.2 million weighted average shares outstanding, as compared with a net loss of $4.3 million, or $0.12 per share, on approximately 34.8 million weighted average shares outstanding, for the three month period ended September 30, 2004. Operating loss decreased 40% to $10.2 million, or 20% of revenue, for the nine month period ended September 30, 2005 from $17.1 million, or 41% of revenue, for the nine month period ended September 30, 2004. For the nine month period ended September 30, 2005, our net loss decreased to $7.7 million, or $0.21 per share, on approximately 36.0 million weighted average shares outstanding, as compared with a net loss of $15.1 million, or $0.44 per share, on approximately 34.4 million weighted average shares outstanding, for the nine month period ended September 30, 2004.Reporting

~~The~~There ~~decreases~~have innot ~~operating~~been ~~and net loss were~~any ~~primarily~~changes ~~due~~in tothe ~~(i) increased~~Company’s ~~revenue~~internal ~~from~~control ~~organic~~over ~~growth~~financial ~~and~~reporting ~~our~~during ~~consolidation~~the offiscal ~~the~~quarter ~~results~~to ~~of operations of Red Sheriff S.r.l.~~ which wethis ~~acquired~~report ~~in February~~relates ~~2005;~~that ~~(ii) increased~~have ~~interest~~materially ~~income; and (iii) decreased cost of revenue~~affected, ~~research and development, amortization of intangibles and~~or ~~amortization~~are ofreasonably ~~stock~~likely ~~based compensation costs. These improvements~~ to ~~operating loss~~materially ~~and net loss were partially offset by (i) additional personnel to support our global expansion~~affect, ~~including SiteCensus and custom analytics work related to MegaPanel; (ii)~~ the ~~restructuring~~Company’s ~~charge~~internal ~~recorded~~control ~~in the third~~over ~~quarter~~financial ~~of 2005; and (iii) the litigation recovery recorded in 2004~~reporting.

~~Inflation~~19

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

~~Liquidity~~OTHER ~~and Capital Resources~~INFORMATION

AsItem of September 30, 2005, our cash and cash equivalents and short-term investments totaled $194.2 million. Cash used in operating activities was $2.0 million for the nine month period ended September 30, 2005, reflecting our net loss of $7.7 million and net cash used in operating asset and liability changes of $2.1 ~~million, which was partially offset by non-cash charges of $7~~.~~8 million. The net loss included a restructuring charge~~ Legal ~~of $1~~Proceedings.7 million in the third quarter of 2005. The non-cash expenses include $2.6 million for depreciation, $2.3 for amortization of stock-based compensation, $2.2 million for amortization of intangible assets, $0.6 million of minority interest and $0.2 million of other non-cash charges. Cash used in operating activities totaled $8.7 million for the nine month period ended September 30, 2004, due to our net loss of $15.1 million and net cash used in operating asset and liability changes of $5.8 million, which was partially offset by non-cash charges of $12.2 million. The net loss included a $1.8 million litigation settlement recovery, all of which was received in the second quarter of 2004. The non-cash expenses included $6.8 million for amortization of stock-based compensation, $3.0 million for amortization of intangible assets, $2.2 million for depreciation and $0.2 million in other non-cash expenses.

~~Net~~There ~~cash~~have ~~used~~been in investing activities for the nine month period ended September 30, 2005 was $3.9 million. This amount reflects the acquisition of property and equipment of $4.3 million and net cash paid for acquisitions of $1.8 million, which was partially offset by net sales and maturities of our short-term investments of $2.2 million. During the corresponding period in 2004, net cash used in investing activities was $20.3 million. This amount reflects the cash paid for acquisitions of $10.8 million, net purchase of our short-term investments of $5.9 million, and the acquisition of property and equipment of $3.6 million. We had no material ~~capital expenditure~~ ~~commitments~~developments atwith ~~September 30,~~respect ~~2005. We expect capital expenditures in the fourth quarter of 2005~~ to ~~decrease slightly~~previously asreported ~~compared~~legal ~~to the first three quarters of 2005~~proceedings.

~~Net~~Item ~~cash provided by financing activities totaled $5~~1A.0 ~~million~~Risk ~~and $9~~Factors.0 million for the nine month periods ended September 30, 2005 and 2004, respectively, reflecting stock issued as a result of the exercise of options and our employee stock purchase plan. The 2004 amount also includes $0.2 million related to the issuance and sale of stock by NetRatings Japan.

OnIn ~~November 3,~~addition ~~2005~~to the other information set forth in this report, weyou ~~announced~~should ~~that~~carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our ~~Board~~Annual ofReport ~~Directors~~on ~~authorized~~Form 10-K for athe ~~stock~~year ~~repurchase~~ended ~~program.~~December 31, ~~Under~~2006, ~~this~~which could materially affect our ~~program~~business, wefinancial ~~may~~condition ~~repurchase~~or upfuture toresults. ~~$25 million~~The ofrisks described in our Annual ~~common~~Report ~~stock~~on inForm 10-K are not the only risks facing our ~~open~~company. ~~market~~Additional risks and uncertainties not currently known to us or inthat we ~~privately~~currently ~~negotiated~~deem ~~transactions~~to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

WeItem ~~believe~~6. that our existing balances of cash and cash equivalents and short-term investments will be sufficient to meet our cash needs for working capital and capital expenditures for at least the next 12 months, although we could elect to seek additional funding prior to that timeExhibits.

Off-Balance Sheet Arrangements

Exhibit Number				Exhibit
2.1(1)				Agreement and Plan of Merger, dated as of February 5, 2007, among Nielsen Media Research, Inc., NTRT Acquisition Sub and NetRatings, Inc.
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.

We(1) Incorporated ~~have~~by reference noto ~~off-balance~~exhibit ~~sheet~~number ~~arrangements~~2.1 ~~(as defined~~to inRegistrant’s ~~Item~~Current ~~303~~Report ofon ~~Regulation~~Form S8-K)k dated February 6, 2007.

1720

~~RISK FACTORS THAT MAY AFFECT OUR PERFORMANCE~~SIGNATURES

AnPursuant 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~~requirements ~~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~~Securities ~~could~~Exchange ~~(i) materially~~Act ~~adversely~~of ~~affect our business~~1934, ~~operating~~ ~~results and financial condition, (ii) cause~~ the ~~trading~~Registrant ~~price~~has ofduly ~~our~~caused ~~common~~this ~~stock~~report to ~~decline~~be ~~and~~signed ~~(iii) cause~~on ~~you~~its tobehalf ~~lose~~by ~~all~~the orundersigned ~~part~~thereunto ofduly ~~your investment~~authorized.

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

Date: May 10, 2007
	NETRATINGS, INC.
	By:	/s/ TODD SLOAN
		Todd Sloan Executive Vice President of Corporate Development, Chief Financial Officer and Secretary (Principal Accounting and Financial Officer)
	By:	/s/ WILLIAM PULVER
		William Pulver President, Chief Executive Officer and Director

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 $7.7 million for the nine month period ended September 30, 2005. As of September 30, 2005, our accumulated deficit was $144.6 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.21

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

We were incorporated in July 1997 and did not start generating revenue until the quarter ended September 30, 1998. We introduced our NetView service in the quarter ended September 30, 1999. Many of our other products and services were first offered by us during 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, many 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 growth, if any, in the Internet media research and market research markets;

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

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

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

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 AND COULD LEAD TO REDUCED PRICES FOR OUR STOCK

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.

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

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

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.

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.

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

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

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

We believe that the quality, size and scope of our panels 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.

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;

• manage third-party vendors who will likely perform panel 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;

• 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 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.

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. Recently, the legislatures of the States of Utah and California 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 SUCCESSFUL IN THE DEVELOPMENT OR INTRODUCTION OF NEW PRODUCTS AND SERVICES TO KEEP UP WITH THE PROLIFERATION OF ALTERNATIVE INTERNET ACCESS DEVICES AND TECHNOLOGIES RELATED TO THE EXPECTED CONVERGENCE OF THE INTERNET AND TELEVISION

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

WE MAY NOT BE ABLE TO RECRUIT OR RETAIN QUALIFIED PERSONNEL

Our future success depends in large part on our ability to attract, retain and motivate highly skilled employees in many locations around the world. Although we provide compensation packages that include competitive salaries, stock options, restricted stock, 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 ARE DEPENDENT ON NIELSEN MEDIA RESEARCH AND ACNIELSEN FOR VARIOUS SERVICES RELATED TO OUR DOMESTIC AND INTERNATIONAL OPERATIONS

The data for our NetView service is collected from randomly-selected panels of Internet users. Our NetView Internet audience measurement panel in the United States has been developed and is maintained by Nielsen Media Research as part of our strategic relationship with that company. In addition, ACNielsen has granted us a license to use ACNielsen’s sampling methodology and the “Nielsen” name outside North America in the Internet audience measurement business, and has entered into a service agreement to provide us with the services of certain dedicated marketing and panel management personnel who are employed by ACNielsen, as well as specific back office services. Accordingly, we expect that our business could be dependent upon these arrangements for the continued maintenance of our international Internet audience measurement panels and for other international business operations. Any failure on the part of Nielsen Media Research, ACNielsen or our other business partners to devote adequate resources to the development or maintenance of such panels or other sampling methodologies, or to maintain the overall quality of these methodologies, will harm our business. In addition, Nielsen Media Research may terminate its obligations with respect to

Internet audience measurement panels in the event it no longer holds at least 5% of our outstanding stock on a fully-diluted basis.

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. In the second quarter of 2005, we filed patent infringement lawsuits against five companies that we believe infringe multiple patents owned or controlled by us and which relate generally to the collection, analysis and reporting of information concerning computer usage activity. Although one of these lawsuits has been settled, the other four lawsuits are ongoing.

We cannot assure you, however, that the steps we have taken, including filing the lawsuits referenced above, will be sufficient to protect our intellectual property from infringement or misappropriation. Moreover, effective intellectual property protections may not be available in every country in which we offer our products and services to the extent these protections are available in the United States. Our patent applications or trademark registrations may not be approved or, even if approved, could be challenged by others or invalidated through administrative process or litigation. If our patent applications or trademark registrations are not approved because third parties own rights to the technology we are trying to patent or the trademarks we are trying to register, our use of such technology or trademark would be restricted unless we enter into arrangements with the third-party owners, which might not be possible on commercially reasonable terms or at all.

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

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

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

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 our U.S. panel members’ data reside in Nielsen Media Research’s data center facilities in Oldsmar, Florida and the servers on which we collect our international panel members' data reside in a professionally managed data center in France. We currently do not have a backup facility to provide redundant network capacity in the event of a system failure. Accordingly, our ability to collect Internet audience data in real time is dependent upon the efficient and uninterrupted operation of these data centers’ 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 either or both of these data centers should discontinue their 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.

We intend to develop back-up systems outside of these data centers. 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. Therefore, any new legislation regulating the Internet could inhibit the growth of the Internet and decrease the acceptance of the Internet as a communications and commercial medium, which might harm our business. Finally, the global nature of the Internet could subject us to the laws of a foreign jurisdiction in an unpredictable manner.

LEGISLATIVE ACTIONS, HIGHER INSURANCE COSTS AND REGULATORY REQUIREMENTS APPLICABLE TO PUBLIC REGISTRANTS ARE LIKELY TO CAUSE OUR GENERAL AND ADMINISTRATIVE EXPENSES TO INCREASE AND MAY IMPACT OUR FUTURE FINANCIAL POSITION AND 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 may be required to enhance our internal controls and hire additional personnel and additional outside legal, accounting and advisory services, all of which will cause our general and administrative costs to increase. For example, in 2002 we hired outside consultants to assist us with our compliance with Section 404 of the Sarbanes-Oxley Act of 2002, which resulted in additional general and administrative expenses during 2004 and 2005. Insurers may also increase premiums, causing our premiums for various insurance policies, including our directors’ and officers’ insurance policy, to increase. Changes in the accounting rules, in particular the rules relating to accounting for employee stock options, are likely to materially increase the expenses that we report under generally accepted accounting principles and adversely affect our operating results. In addition, any such changes may impact the amount of equity compensation we grant to our employees, which may affect our ability to recruit or retain key employees.

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

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

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

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

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

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

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As of September 30, 2005, we had cash and cash equivalents and short-term investments of $194.2 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 short-term investments in a variety of government and corporate obligations and money market funds. As of September 30, 2005, our investments had a weighted-average time to maturity of approximately 153 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 and cash equivalents and short-term investments 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.

Item 4. 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 that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were not functioning effectively to ensure that the information required to be disclosed by the Company in reports filed under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. The identified weakness in internal control over financial reporting and in disclosure controls and procedures is described below under the heading “Internal Control over Financial Reporting”.

Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). In connection with the preparation of the Company’s consolidated financial statements for the quarter ended September 30, 2005, the Company concluded that it had made an error in calculating the amount of the amortization of stock-based compensation in the Company’s consolidated financial statements for the three and six month periods ended June 30, 2005. In the second quarter of 2005, the Company issued restricted shares to the Company’s employees and directors for the first time. The accounting policy currently followed by the Company to account for the expensing of the restricted stock requires the Company to recognize forfeitures when they occur. In its consolidated financial statements for the three and six month periods ended June 30, 2005, the Company computed the expense for the restricted stock grants net of an estimate of future forfeitures. As a result, the Company has restated its consolidated financial statements for the periods ended June 30, 2005 to reflect the appropriate accounting treatment. This restatement resulted in the Company increasing its net loss by $461,000, or $0.01 per share, for the three and six month periods ended June 30, 2005.

As a result of this restatement of the consolidated financial results for the three and six month periods ended June 30, 2005, the Company has determined that it had an internal control deficiency that constitutes a “material weakness”, as defined by the Public Company Accounting Oversight Board’s Auditing Standard No. 2. A material weakness is a control deficiency, or aggregation of control deficiencies, that results in more than a remote risk that a material misstatement in the Company’s annual or interim financial statements will not be prevented or detected. The Company has revised the method for calculating the amortization of stock-based compensation, and it is currently determining the appropriate remedial steps to address the material weakness identified above.

Except as described above, there have not been any changes in the Company's internal control over financial reporting during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

Securities Class Action Complaint

A class action lawsuit was filed on November 6, 2001 in the United States District Court for the Southern District of New York on behalf of purchasers of our common stock alleging violations of federal securities laws. The case is now designated as In re NetRatings, Inc. Initial Public Offering Securities Litigation, related to In re Initial Public Offerings Securities Litigation. The case is brought purportedly on behalf of all persons who purchased the Company’s common stock from December 8, 1999 through December 6, 2000. The complaint names as defendants NetRatings; two of our former directors; and investment banking firms that served as underwriters for our initial public offering in December 1999. The Plaintiffs electronically served an amended complaint on or about April 19, 2002. The amended complaint alleges violations of Section 11 and 15 of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934, on the grounds that the prospectus incorporated in the registration statement for the offering failed to disclose, among other things, that (i) the underwriters had solicited and received excessive and undisclosed commissions from certain investors in 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 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 proceeds 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 May 2005, NetRatings filed patent infringement lawsuits against Coremetrics, Inc. and Omniture, Inc. The complaints, filed in the United States District Court for the District of Delaware, allege that both companies infringe four patents owned or controlled by NetRatings which relate generally to the collection, analysis and reporting of information concerning computer usage activity. Both complaints seek, among other things, injunctive relief enjoining further infringement of such patents as well as compensatory damages. In May 2005, NetRatings also filed a patent infringement lawsuit against Sane Solutions, LLC in the United States District Court for the Southern District of New York. This complaint alleges that Sane Solutions infringes three computer usage patents owned or controlled by NetRatings and seeks, among other things, injunctive relief and compensatory damages.

In June 2005, NetRatings filed a patent infringement lawsuit against Visual Sciences, LLC in the United States District Court for the Eastern District of Virginia. The complaint alleges that Visual Sciences infringes four computer usage patents owned or controlled by NetRatings and seeks, among other things, injunctive relief and compensatory damages. In June 2005, NetRatings filed a patent infringement lawsuit against SageMetrics Corporation in the United States District Court for the Central District of California. This complaint alleges that SageMetrics infringes three computer usage patents owned or controlled by NetRatings and seeks, among other things, injunctive relief and compensatory damages.

In October 2005, NetRatings and Visual Sciences settled their patent infringement litigation. Under the settlement, in exchange for license fees paid by Visual Sciences, NetRatings has licensed certain patents to Visual Sciences.

The litigation process is inherently uncertain and we cannot guarantee that we will be successful in the remaining lawsuits.

Item 6. Exhibits

Exhibit Number		Exhibit
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.

SIGNATURES

Pursuant to the requirements 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.

Date: November 9, 2005
	NETRATINGS, INC.
	By:	/s/ Todd Sloan
		Todd Sloan Executive Vice President of Corporate Development, Chief Financial Officer And Secretary (Principal Accounting and Financial Officer)
	By:	/s/ William Pulver
		William Pulver President, Chief Executive Officer and Director

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