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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