NetRatings Buys Jupiter Media Metrix for $71M, Ending Rivalry

NetRatings (Nasdaq: NTRT) said Thursday it will acquire rival Web measurement firm Jupiter Media Metrix (Nasdaq: JMXI) in a stock-and-cash deal worth US$71.2 million.

The move combines two of the most widely quoted Internet measurement firms and two former rivals. As part of the deal, Jupiter will drop a patent infringement lawsuit it filed against NetRatings in September 2000.

The two companies say their merger moves the Web closer to a single, universal measurement standard, even though the standard will not be set by the Internet businesses themselves. Many industry players and observers have called for such a standard.

"The acquisition is a logical and major step in our strategy to set a global standard in Internet audience measurement," said NetRatings chief executive officer Dave Toth.

One-Way Traffic

Tim Meadows, NetRatings' founder and executive vice president of products, told the E-Commerce Times that a single standard is critical for attracting top quality ad buyers to the Web.

"When you look at other media, especially television and radio, it's typical to have a single believable set of numbers that advertisers can trust," said Meadows. "We've been working toward that for some time. This deal moves us quite a ways along that road."

But which standard will emerge isn't clear yet. Meadows said NetRatings intends to evaluate the various panels the firms use and to consult with clients about what type of information they most want to see.

"Right now, there is sometimes a wide gap in our numbers," Meadows added. "The first step will be figuring out why that is and working to refine the process to give us more consistent results."

Big Fish, Little Fish?

Based on 2000 revenues, the acquisition seems to be a case of a smaller fish swallowing a larger one. NetRatings had sales of $20.4 million for 2000, while Jupiter brought in $142 million.

But more recently, NetRatings has shown improved performance, saying Thursday that its third quarter results, to be announced early next month, will beat earlier projections, with higher revenue and lower losses than expected. Jupiter, meanwhile, laid off 30 percent of its staff as part of a restructuring announced earlier this month.

"There is a little bit of David and Goliath in this deal," Meadows said. However, while NetRatings has been able to grow its cash reserves, Jupiter has had trouble slowing its burn rate, he pointed out.

Jupiter Rising

Under the terms of the deal, each share of Jupiter stock will be worth about $1.95, either in cash or the equivalent in NetRatings shares, with no more than half the transaction coming in cash.

The deal also includes $25 million in short-term loans for Jupiter Media Metrix.

Jupiter stock closed at 63 cents Thursday, before the deal was announced, and more than doubled in early trading Friday to $1.49. NetRatings traded down about 7 percent Friday morning to $12.14.

Merge, Merger, Merging

New York City-based Jupiter Media Metrix was created in June of 2000 when Media Metrix paid $414 million to acquire Jupiter Communciations, narrowing the Internet audience measurement field from three to two primary players.

NetRatings is majority owned by VNU, a Netherlands-based media conglomerate.

In a separate deal also announced Thursday, NetRatings said it will acquire ACNielsen's eRatings.com. NetRatings said it will pay $16.4 million to acquire the firm, in which it already owned a 20 percent stake.

Layoffs Loom

Meadows said it will take time for NetRatings to evaluate what services overlap among the three companies, but indicated that job cuts are a likely outcome of the acquisitions.

"Clearly, there is going to be considerable overlap, but it's just too early to tell where or how much," Meadows said.