RealTime IT News

This Showdown Will Attract Ratings

On Monday I looked at the acquisition binge sweeping the Internet advertising/marketing sector spurred by the growing rivalry between holding company CMGI Inc. (CMGI) and leading online ad server DoubleClick Inc. (DCLK).

There's another battle looming in the advertising sector, one that pits a current market leader against a well-heeled upstart.

The market leader is Media Metrix (MMXI), which has established itself as the premier research company for measuring Web site traffic. With the high brand recognition and growing revenues usually accorded market first movers, many observers think Media Metrix is well on the way toward establishing itself as the "Nielsen of the 'Net," a reference to the company whose name is synonymous with TV ratings.

But now the real Nielsen is stepping up to challenge Media Metrix. Late last month, NetRatings, a competing Web traffic analysis provider, filed with the SEC to go public. The company seeks to raise $69 million in an offering led by Lehman Brothers and Bank of America Securities. The proposed ticker symbol is (NTRT) and the IPO is expected sometime next month.

Nielsen Media Research owns nearly half of NetRatings. Indeed, the service -- which is sold to more than 140 customers (Internet advertisers, e-commerce players and media companies) -- is billed as Nielsen/NetRatings.

The company was founded in 1997, and though Media Metrix has a good head start, NetRatings in the past year has increased its visibility, with media outlets such as Bloomberg, The San Jose Mercury News, The Washington Post and USA Today citing its audience measurement data.

NetRatings charges customers on an annual subscription basis, providing them with Web audience information and analysis. It didn't begin generating revenue until Q1 1998, recording just $237,000 that year and $642,000 in the first two quarters of 1999.

Still, despite providing services since 1995, Media Metrix' revenues aren't eye-catching. The company had $6.3 million in sales last year and $7.5 million through two quarters this year. Hardly an insurmountable lead in such an early-stage sector.

However, Media Metrix is beginning to gain traction. After going public in early May, shares of (MMXI) floundered through much of the summer.

Trading in the mid-$30s in early August, the stock since has gone on a tear, closing at $69.88 on Sept. 30 and selling Tuesday afternoon at $59.75 per share. In two months the company's market capitalization has increased about 75% to $1.03 billion.

Media Metrix isn't staying idle. Last week the company announced it would purchase AdRelevance, which makes software enabling users to help gauge the effectiveness of their ads. And in August, Media Metrix unveiled a joint venture with BizRate.com, which collects consumer e-commerce data from the point of sale.

For NetRatings to stay in the game and close the gap on Media Metrix, it needs to bulk up fast, hence the IPO. The company hasn't yet specified how it will use proceeds from the IPO, but a marketing campaign to leverage the Nielsen name and acquisitions to keep pace with Media Metrix are good bets.

It shapes up as an interesting contest.

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