Delaware		77-0495335
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4360 PARK TERRACE DRIVE, SUITE 100
WESTLAKE VILLAGE, CALIFORNIA 91361
(Address of principal executive offices, including zip code)

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ý No o

The number of shares of the Registrant's common stock outstanding as of May 10, 2002 was 53,669,308.

VALUECLICK, INC.

INDEX TO FORM 10-Q FOR THE
QUARTERLY PERIOD ENDED MARCH 31, 2002

The condensed consolidated financial statements are unaudited and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair presentation of the results for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for the full fiscal year or for any future period. As required by the Securities and Exchange Commission (the "SEC") under Rule 10-01 of Regulation S-X, the accompanying condensed consolidated financial statements and related footnotes have been condensed and do not contain certain information that may be included in the Company's annual consolidated financial statements and footnotes thereto. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001 and the information contained in the Company's registration statement on Form S-4 related to the proposed merger with Be Free, Inc, as amended, originally filed with the SEC on March 22, 2002 and declared effective by the SEC on April 15, 2002.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and 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. Actual results may differ from those estimates.

The condensed consolidated financial statements include the accounts of the Company and its subsidiaries from the dates of their respective acquisitions, acquisition of majority voting control or date of formation, for business combinations accounted for as pooling-of-interests.

ValueClick derives its revenues from two reportable business segments based on the types of products and services provided. These business segments are ValueClick Media and ValueClick Technology.

VALUECLICK MEDIA—The ValueClick Media segment provides digital marketing solutions for advertisers and Web publishers. Through a combination of digital advertising, digital marketing and digital retention marketing, the ValueClick Media segment provides marketers with custom media solutions to both build brand value and attract targeted, high-quality customers. ValueClick provides online advertisers and publishers of Web sites advertising models known as cost-per-click ("CPC"), cost-per-action ("CPA") and cost-per-lead ("CPL"), in which an advertiser only pays ValueClick, and ValueClick in turn only pays a publisher of a Web site, when an Internet user clicks on an advertiser's banner advertisement or performs a specific action, such as a software download, an online registration or other transactions. Additionally, ValueClick provides advertisers a branding model known as cost-per-thousand-impressions ("CPM") whereby the advertiser pays for the number of times an advertisement is viewed.

VALUECLICK TECHNOLOGY—The ValueClick Technology Segment, through its wholly-owned subsidiaries Mediaplex, Inc. ("Mediaplex") and AdWare Systems, Inc. ("AdWare") acquired in October 2001, serves the marketing communications industry with technology solutions for digital messaging, support services that enhance campaign return, and infrastructure tools to ensure effective program implementation. ValueClick enables marketers to manage, target and distribute integrated messaging across all digital media. The Mediaplex proprietary MOJO® technology platform is unique in its ability to automatically configure messages in response to real-time information from a marketer's

enterprise data system and to provide ongoing campaign optimization. AdWare Systems, Inc. is an applications service provider (ASP) delivering information management systems to advertising agencies, marketing communications companies, and public relations agencies. Mediaplex's revenue is primarily derived from software access and use charges paid by its software clients. These fees vary based on the client's use of the technology. AdWare's revenue is generated principally from monthly service fees paid by customers over the service periods.

In July 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 establishes a new standard for accounting and reporting requirements for business combinations initiated after June 30, 2001 and prohibits the use of the pooling-of-interests method for combinations initiated after June 30, 2001. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment only approach. The Company adopted SFAS No. 142 on January 1, 2002, accordingly goodwill will be tested at the reporting unit within the related business segment annually and whenever events or circumstances occur indicating that goodwill might be impaired. Amortization of goodwill from the Company's past business combinations has ceased. Management does not anticipate recording a goodwill impairment charge during 2002. However, future impairment assessments made could result in additional impairment charges to reduce the carry values of these assets in future periods. Adjusted net loss and basic and diluted net loss per common share for the three-month period ended March 31, 2001, excluding amortization of goodwill are as follows:

		Three-month Period Ended March 31, 2001
Reported net loss		$	(2,112,000	)
	Add back: Goodwill amortization		406,000

Adjusted net loss		$	(1,706,000	)

Reported basic and diluted net loss per common share		$	(0.06	)
	Add back: Goodwill amortization		0.01

Adjusted basic and diluted net loss per common share		$	(0.05	)

In August of 2001, the FASB issued SFAS No. 143, "Accounting for Obligations Associated with the Retirement of Long-Lived Assets," which establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost. It also provides accounting guidance for legal obligations associated with the retirement of tangible long-lived assets. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002, with early adoption permitted. Management expects to adopt SFAS No. 143 effective January 1, 2003 and does not expect that the adoption of this new standard will have a significant impact on our results of operations and financial position.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which addresses financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of. This Statement supersedes FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for "Long-Lived Assets to Be Disposed Of." This Statement also supersedes the accounting and reporting provisions of APB Opinion No. 30 ("APB 30"), "Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for segments of a business to be disposed of. This Statement also amends ARB No. 51, "Consolidated Financial Statements," to eliminate the exception to consolidation for a temporarily controlled subsidiary. The adoption of SFAS No. 144 effective January 1, 2002 did not have a material effect on the Company's results of operation or financial position.

On February 28, 2000, the Company consummated an investment by DoubleClick under a common stock and warrant purchase agreement (the "Agreement") entered into on January 11, 2000 whereby DoubleClick acquired 7,878,562 shares of the Company's common stock for a purchase price of approximately $12.16 per share. The purchase price was paid with $10.0 million in cash and 732,860 shares of DoubleClick common stock. The shares of DoubleClick common stock were valued at approximately $85.8 million for accounting purposes based on an average price of $117.07 per share for the public announcement date of January 13, 2000 and the 5 trading days before and 5 trading days thereafter. Under the Agreement, the Company also issued a warrant to DoubleClick to acquire additional shares of the Company's common stock at $21.76 per share payable in DoubleClick common stock which is exercisable for that number of shares that would result in DoubleClick owning 45% of the Company's outstanding common stock on a fully diluted basis. The warrant was exercisable for the 15-month period commencing on February 28, 2000 and it expired under its terms unexercised in May 2001.

The Company has accounted for the investment in DoubleClick common stock as an available for sale investment in accordance with Financial Accounting Standards Board Statement of Financial Accounting Standards No. 115 "Accounting For Certain Investments in Debt and Equity Securities," whereby the investment is carried at market value with unrealized holding gains and losses from increases and decreases in market value being recorded as a separate component of stockholders' equity until realized.

During May 2000, the Company sold 165,000 shares of its DoubleClick common stock for cash proceeds of $10.3 million. The sale of these shares resulted in a realized non-cash loss of $9.0 million.

In December 2000, the Company's management made an assessment that the decline in market value of the remaining DoubleClick stock was other than temporary. Accordingly, in 2000 the Company recorded a non-cash charge to operations of $60.2 million representing the unrealized holding losses previously accounted for as a separate component of stockholders' equity.

During April 2001, the Company sold its remaining 567,860 shares of its DoubleClick common stock for cash proceeds of $6.9 million. The sale of these shares resulted in a realized gain of $701,000.

On October 19, 2001, ValueClick completed its acquisition of Mediaplex, Inc. and its wholly-owned subsidiary AdWare Systems, Inc. Under the terms of the merger agreement, a wholly-owned subsidiary of ValueClick was merged with and into Mediaplex and Mediaplex survived as a wholly-owned subsidiary of ValueClick. Mediaplex serves the marketing communications industry with technology solutions for digital messaging, support services that enhance campaign return, and infrastructure tools to ensure effective program implementation.

Under the terms of the merger agreement, Mediaplex stockholders received .4113 shares of ValueClick common stock for each share of Mediaplex common stock. ValueClick issued a total of approximately 15.1 million shares of its common stock for all the outstanding stock of Mediaplex. In addition, based on shares of Mediaplex common stock underlying its outstanding stock options as of the record date and the exchange ratio, options to purchase approximately 3.0 million additional shares of ValueClick common stock will be assumed by ValueClick.

The offer and sale of ValueClick common stock under the merger agreement was registered under the Securities Act of 1933, as amended, pursuant to ValueClick's Registration Statement on Form S-4, as amended (Registration No. 333-65562) ("Registration Statement"), filed with the Securities and

Exchange Commission (the "SEC") on July 20, 2001 and declared effective on September 27, 2001. The Joint Proxy Statement/Prospectus of ValueClick and Mediaplex included in the Registration Statement (the "Joint Proxy Statement/Prospectus") contains additional information about this transaction.

ValueClick accounted for the acquisition under the purchase method. Accordingly, the results of Mediaplex's operations are included in the Company's consolidated financial statements from the date of acquisition. The aggregate consideration constituting the purchase price of approximately $47.6 million at closing, includes the issuance of 15,084,898 shares of common stock valued at approximately $42.7 million (based on the average ValueClick common stock price for the public announcement date and the five trading days before and after that date), the assumption of options and warrants to purchase an aggregate of 2,968,562 shares of common stock valued at $3.4 million and transaction costs of approximately $1.5 million, which include legal fees, accounting fees, and fees for other related professional services.

On January 31, 2001, the Company consummated its merger with Z Media. In connection with the merger, the Company issued an aggregate of 2,727,678 shares of its Common Stock in exchange for all outstanding shares of Z Media and reserved 419,366 additional shares of Common Stock for issuance upon exercise of outstanding employee stock options of Z Media.

The Company accounted for the merger as pooling-of-interests, and as such, the condensed consolidated financial statements as of and for the three-month period ended March 31, 2001 has been restated to combine Z Media's financial data as if it had always been a part of the Company.

Merger-related costs of $713,000 and $17,000 included in the condensed consolidated statements of operations for the three-month periods ended March 31, 2001 and 2002, respectively, were comprised primarily of direct transaction costs related to the Z Media merger.

On March 10, 2002, the Company entered into a merger agreement with Be Free, Inc. ("Be Free"), a provider of performance-based marketing technology and services. The merger agreement, which has been approved by the board of directors of both companies, provides that each holder of Be Free common stock will receive 0.65882 shares of ValueClick common stock for each share of Be Free common stock they own. The merger, anticipated to close by the end of May 2002, is subject to approval by the stockholders of both companies. In the merger, the Company expects to issue approximately 43.4 million shares of its common stock for all the outstanding common stock of Be Free and assume Be Free options to purchase approximately 6.4 million shares of ValueClick common stock. The shares to be used in the merger have been registered through a Registration Statement filed on Form S-4, as amended, originally filed with the Securities and Exchange Commission ("SEC") on March 22, 2002 and declared effective by the SEC on April 15, 2002. When the merger is completed, Be Free will become a wholly-owned subsidiary of ValueClick and Be Free's stockholders will own approximately 45% of the combined company's outstanding shares.

Accounts receivable are stated net of an allowance for doubtful accounts of $1,546,000 and $1,765,000 at December 31, 2001 and March 31, 2002, respectively.

	December 31, 2001			March 31, 2002
Computer equipment and purchased software	$	15,261,000		$	15,180,000
Furniture and equipment		2,336,000			2,336,000
Vehicles		92,000			92,000
Leasehold improvements		472,000			472,000

		18,161,000			18,080,000
Less: accumulated depreciation and amortization		(11,036,000	)		(12,545,000	)

	$	7,125,000		$	5,535,000

Intangible assets are comprised primarily of goodwill, which represents the excess of the cost of the acquired business over the identifiable net assets acquired, and purchased technologies. Purchased technologies are being amortized on a straight-line basis over 3 to 5 years. Intangible assets are stated net of accumulated amortization of $3,392,000 and $3,437,000 at December 31, 2001 and March 31, 2002, respectively.

The Company's goodwill is primarily related to specific operating units such as ValueClick Japan and Bach Systems with no enterprise level goodwill. The carrying amounts of goodwill are reviewed annually and more frequently if the facts and circumstances arise indicating potential impairment of their carrying value. Factors considered by the Company include, but are not limited to, significant under performance relative to expected historical or projected future operating results, and significant changes in the manner of use of the acquired assets or the strategy for the Company's overall business. The Company measures any permanent impairment based on the fair value method. To date, no such impairment charge has been necessary.

Marketable securities as of March 31, 2002 consist primarily of marketable debt securities in high-grade corporate and government securities with maturities of less than three years. All of the Company's investments are classified as available-for-sale. Available-for-sale securities are carried at fair value, with unrealized gains and losses, net of tax, reported in a separate component of stockholders' equity.

Marketable securities at March 31, 2002 are comprised of the available for sale investment grade corporate debt securities with an aggregate cost of $136.3 million, an estimated fair value of $136.0 million, and unrealized losses of $260,000. Marketable securities at December 31, 2001 had an aggregate cost of $136.0 million, an estimated fair value of $136.5 million, and unrealized gains of $467,000.

et al., and Mashayekh vs. Mediaplex, Inc. et al. In addition to Mediaplex and each of its underwriters for its November 1999 initial public offering, Gregory Raifman, Sandra Abbott, Jon Edwards, Lawrence Lenihan, Peter Sealy, James Desorrento, and A. Brooke Seawell, all of whom are former officers and directors of Mediaplex, are named as individual defendants. Mr. Raifman is a current member of the ValueClick board of directors. The cases are pending before the United States District Court for the Southern District of New York.

The complaint alleges that the defendants violated the Securities Act of 1933 and the Securities Exchange Act of 1934 by issuing a prospectus that contained "materially false and misleading information and failed to disclose material information." It alleges that the prospectus was false and misleading because it failed to disclose the underwriter defendants' purported agreement with investors to provide them with unspecified amounts of Mediaplex shares in the initial public offering in exchange for undisclosed commissions; and the purported agreement between the underwriter defendants and certain of their customers whereby the underwriter defendants would allocate shares in Mediaplex's initial public offering to those customers in exchange for the customers' agreement to purchase Mediaplex shares in the after-market at pre-determined prices.

Five additional putative class action lawsuits were recently commenced on behalf of all persons who acquired Mediaplex, Inc. securities against the underwriter defendants only. These cases are also pending before the United States District Court for the Southern District of New York. Information on these cases is incomplete. Based on the information available, neither Mediaplex, Inc. nor its former directors or officers have been named as defendants in these cases. At a later date, Mediaplex, Inc. and its former officers and directors may be added as defendants.

ValueClick believes that the plaintiffs' allegations are without merit and intends to vigorously defend itself. ValueClick has not recorded an accrual related to damages, if any, resulting from this case, as an unfavorable outcome is, in management's opinion, not probable and an amount of loss, if any, is not estimable.

In October of 2001, ValueClick received a demand letter from 24/7 Real Media, Inc. alleging that the ad-serving technology of both ValueClick and Mediaplex infringes upon 24/7 Real Media's "368 ad-serving patent and including a demand that the companies purchase a license for the patent. The Company responded with a detailed letter denying liability. In February of 2002, 24/7 Real Media filed a patent infringement suit against ValueClick and Mediaplex in the Southern District of New York. The complaint seeks injunctive relief and unspecified damages relating to alleged patent infringement of 24/7 Real Media's "368 patent. ValueClick believes that neither its nor Mediaplex's technology violates 24/7 Real Media's patent. In February of 2002, after receiving notice of 24/7 Real Media's lawsuit, ValueClick filed a Declaratory Judgment action in the United States District Court for the Northern District of California. The parties are currently litigating the issue of venue. ValueClick believes that the patent infringement allegations are without merit and intends to vigorously defend itself. ValueClick has not recorded any accrual related to damages, if any, resulting from this case, as an unfavorable outcome is, in management's opinion, not probable and an amount of loss, if any, is not estimable.

fraud, breach of fiduciary duty, and conversion, arising from the same set of allegations. The litigation, including the appeal, was settled on January 22, 2002. Pursuant to the terms of the settlement, the plaintiff received 363,409 shares of ValueClick common stock held in an escrow account established in connection with the acquisition of ClickAgents that would have otherwise been distributed to the stockholders of ClickAgents. Immediately upon delivery of these shares, ValueClick purchased the shares from the plaintiff, at a price that approximated the fair value at the date of the purchase, pursuant to a redemption agreement for approximately $1.1 million. The Superior Court complaint and the Court of Appeals proceeding have been dismissed with prejudice, and the litigation is thus concluded.

Other than the 24/7 Real Media, Mediaplex and ClickAgents matters discussed above, the Company is not a party to any other material legal proceedings, nor is it aware of any pending or threatened litigation that would have a material adverse effect on its business, operating results, cash flows or financial condition. From time to time, the Company may become subject to additional legal proceedings, claims, and litigation arising in the ordinary course of business. In addition, the Company receives letters alleging infringement of patent or other intellectual property rights. The Company's management believes that these letters generally are without merit and intend to contest them vigorously.

The Company's authorized capital consists of 120,000,000 shares of capital stock (100,000,000 shares of Common Stock at a par value of $0.001 per share and 20,000,000 shares of Preferred Stock at a par value of $0.001 per share) of which 52,698,617 and 53,618,708 shares of Common Stock were outstanding at December 31, 2001 and March 31, 2002, respectively.

Basic loss per share represents net loss divided by the weighted-average number of common shares outstanding for the period. Diluted loss per share represents net loss divided by the weighted-average number of shares outstanding, inclusive of the impact of common stock equivalents unless anti-dilutive.

For the three-month periods ended March 31, 2001 and 2002, there were no dilutive potential common shares. Options to purchase 1.9 million and 1.7 million weighted shares of common stock at prices ranging from $5.00 to $11.00 and $2.70 to $247.99 were outstanding during the three-month periods ended March 31, 2001 and 2002, respectively, but were not included in the diluted computation because the proceeds from the options' exercise prices combined with the related unamortized stock compensation expense was greater than the proceeds using the average market price of the common shares during these periods and, therefore, the options were anti-dilutive. Options to purchase 1.5 million and 3.4 million weighted shares of common stock at prices ranging from $0.07 to $4.25 and $0.07 to $2.67, were outstanding during the three-month periods ended March 31, 2001 and 2002, respectively, but were not included in the diluted computation because the options were anti-dilutive, as the Company incurred a net loss.

The Company derives its revenues from two business segments based on the types of products and services provided. These business segments are ValueClick Media and ValueClick Technology.

	Revenues				Gross Profit
	Three-month Periods Ended March 31,
	2001		2002		2001		2002
	(In thousands)
Media	$	12,716	$	6,978	$	6,593	$	3,696
Technology		—	$	5,378		—	$	4,089

Total	$	12,716	$	12,356	$	6,593	$	7,785

The Company's operations are domiciled in the United States with operations in Japan through our majority owned subsidiary, ValueClick Japan and with operations in Europe through our wholly-owned subsidiaries, ValueClick Europe, ValueClick France and ValueClick Germany. Other international subsidiaries included ValueClick Brazil and ValueClick Canada, which were closed during 2001. The Company's geographic information is as follows:

	Three-month Period Ended March 31, 2002
	Revenues		Loss from Operations			Long-lived Assets at March 31, 2002
	(In thousands)
United States	$	9,556	$	(1,983	)	$	12,497
Japan		1,642		(322	)		1,027
Europe		1,158		(347	)		112
Other International		—		—			—

Total	$	12,356	$	(2,652	)	$	13,636

	Three-month Period Ended March 31, 2001
	Revenues		Income (loss) from Operations			Long-lived Assets at March 31, 2001
	(In thousands)
United States	$	7,464	$	(3,874	)	$	9,510
Japan		3,689		680			834
Europe		1,518		109			124
Other International		45		(173	)		67

Total	$	12,716	$	(3,258	)	$	10,535

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Report contains forward-looking statements based on our current expectations, estimates and projections about our industry, management's beliefs, and certain assumptions made by us. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," "may," "will" and variations of these words or similar expressions are intended to identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Such statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. The section entitled "Risk Factors" set forth in this Form 10-Q and similar discussions in our Annual Report on Form 10-K for the year ended December 31, 2001 and in our other SEC filings including our Registration Statement on Form S-4 related to the proposed merger with Be Free, Inc., as amended, originally filed with the Securities and Exchange Commission on March 22, 2002 and declared effective by the Securities and Exchange Commission on April 15, 2002, discuss some of the important risk factors that may affect our business, results of operations and financial condition. You should carefully consider those risks, in addition to the other information in this Report and in our other filings with the SEC, before deciding to invest in our company or to maintain or increase your investment. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. The information contained in this Form 10-Q is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this Report and in our other reports filed with the SEC that discuss our business in greater detail and advise interested parties of certain risks, uncertainties and other factors that may affect our business, results of operations or financial condition.

We provide digital marketing solutions and advertising technology tools. We offer a broad range of media and technology products and services to our customers to allow them to address all aspects of the digital marketing process, from pre-campaign to execution, including measurement and campaign refinements. Combining media and technological expertise, our products and services help our customers optimize their advertising and marketing campaigns on the Internet and through other media.

We derive our revenues from two business segments based on the types of products and services provided. These business segments are ValueClick Media and ValueClick Technology.

VALUECLICK MEDIA—Our Media segment provides digital marketing solutions for advertisers and Web publishers. Through a combination of digital advertising, digital marketing and digital retention marketing, our Media segment provides marketers with custom media solutions to both build brand value and attract targeted, high-quality customers. To accomplish this, we employ rigorous network quality control, advanced targeting capabilities and an integrated product line. For Web site publishers of all sizes, we offer the ability to create reliable new revenue opportunities from their advertising inventory. We offer marketers and advertisers a wide spectrum of custom media solutions. Specifically, we provide online advertisers and publishers of Web sites advertising models known as cost-per-click ("CPC"), cost-per-action ("CPA") and cost-per-lead ("CPL"), in which an advertiser only pays us, and we in turn only pay a publisher of a Web site, when an Internet user clicks on an advertiser's banner advertisement or performs a specific action, such as a software download, an online registration or other transactions. Additionally, we provide advertisers an effective branding model

known as cost-per-thousand-impressions ("CPM") whereby the advertiser pays for the number of times an advertisement is viewed.

VALUECLICK TECHNOLOGY—Our Technology segment, through our wholly-owned subsidiaries Mediaplex, Inc. and AdWare Systems, Inc. acquired in October 2001, serves the marketing communications industry with technology solutions for digital messaging, support services that enhance campaign return, and infrastructure tools to ensure effective program implementation. We enable marketers to manage, target and distribute integrated messaging across all digital media. Our proprietary MOJO® technology platform is unique in our ability to automatically configure messages in response to real-time information from a marketer's enterprise data system and to provide ongoing campaign optimization. AdWare Systems is an applications service provider (ASP) delivering high-quality information management systems to advertising agencies, marketing communications companies, and public relations agencies. Mediaplex's revenue is primarily derived from software access and use charges paid by our software clients. These fees vary based on the client's use of the technology. AdWare's revenue is generated primarily from monthly service fees paid by customers over the service periods.

	Revenues				Gross Profit
	Three-month Periods Ended March 31,
	2001		2002		2001		2002
	(In thousands)
Media	$	12,716	$	6,978	$	6,593	$	3,696
Technology		—	$	5,378		—	$	4,089

Total	$	12,716	$	12,356	$	6,593	$	7,785

Our operations are domiciled in the United States with operations in Japan through our majority owned subsidiary, ValueClick Japan and with operations in Europe through our wholly-owned subsidiaries, ValueClick Europe, ValueClick France and ValueClick Germany. Other international subsidiaries included ValueClick Brazil and ValueClick Canada, which were closed during 2001. The Company's geographic information is as follows:

	Three-month Period Ended March 31, 2002
	Revenues		Loss from Operations			Long-lived Assets at March 31, 2002
	(In thousands)
United States	$	9,556	$	(1,983	)	$	12,497
Japan		1,642		(322	)		1,027
Europe		1,158		(347	)		112
Other International		—		—			—

Total	$	12,356	$	(2,652	)	$	13,636

	Three-month Period Ended March 31, 2001
	Revenues		Income (loss) from Operations			Long-lived Assets at March 31, 2001
	(In thousands)
United States	$	7,464	$	(3,874	)	$	9,510
Japan		3,689		680			834
Europe		1,518		109			124
Other International		45		(173	)		67

Total	$	12,716	$	(3,258	)	$	10,535

RESULTS OF OPERATIONS—THREE-MONTH PERIOD ENDED MARCH 31, 2002 COMPARED TO MARCH 31, 2001

Revenues. Net revenues from our Media segment and our Technology segment were $7.0 million and $5.4 million, respectively, for the three-month period ended March 31, 2002, resulting in consolidated net revenues of $12.4 million compared to $12.7 million for the same period in 2001, a decrease of $360,000 or 2.8%. Although net revenues for the first quarter of 2002 were relatively flat compared to the same period in 2001, there was a shift in our product mix primarily due to a decline in revenues for the Media segment compared to 2001 offset by the inclusion of the Technology segment in the 2002 period. The decline in media segment revenues reflect the continued effects of the generally weak U.S. economy.

The ValueClick worldwide network delivered approximately 9.9 million click-throughs, 1.0 million actions and 6.5 million leads during the three-month period ended March 31, 2002, compared to approximately 12.8 million click-throughs, 2.7 million actions and 8.8 million leads during the same period in 2001. We also delivered more than 12.2 billion ad impressions from our ad delivery system during 2002.

Cost of Revenues. Cost of revenues consists primarily of amounts that we pay to Web site publishers on the ValueClick consolidated networks. We pay these publishers on either a CPC, CPA, CPL or CPM basis. Cost of revenues also includes depreciation costs of the advertising delivery system and Internet access costs. Cost of revenues was $4.6 million for the three-month period ended March 31, 2002 compared to $6.1 million for the same period in 2001, a decrease of $1.5 million or 25.4%. The decrease in cost of revenues as well as the corresponding increase in the gross profit margin to 63.0% for the three-month period ended March 31, 2002 from 51.8% for the same period in 2001 was directly attributable to the change in product mix as a result of the inclusion of the operations of our higher profit margin Technology segment in the 2002 period.

Sales and Marketing. Sales and marketing expenses consist primarily of compensation, sales commissions, travel, advertising, trade show costs and costs of marketing materials. Sales and marketing expenses for the three-month period ended March 31, 2002 were $4.0 million compared to $3.0 million for the same period 2001, an increase of $1.0 million or 33.8%. The increase in sales and marketing expenses was due primarily to the addition of sales and marketing personnel for our Technology segment.

General and Administrative. General and administrative expenses consist primarily of facilities costs, executive and administrative compensation and professional service fees. General and administrative expenses remained flat at $3.7 million for both three-month periods ended March 31, 2002 and 2001. General and administrative expenses remained flat due primarily to the addition of facilities costs and additional executive and administrative personnel in our Technology segment offset by management's efforts to scale general and administrative costs in line with the decreased media revenue production, as well as synergistic cost savings associated with the Mediaplex, Inc. merger.

Product Development. Product development costs include expenses for the development of new technologies designed to enhance the performance of our service, including the salaries and related expenses for our software engineering department, as well as costs for contracted services and supplies. To date, all product development costs have been expensed as incurred. Product development expenses for the three-month period ended March 31, 2002 were $2.1 million compared to $1.0 million for the same period in 2001, an increase of $1.1 million or 103.8%. The increase in product development expenses was due primarily to the addition of engineers and support personnel in our Technology segment.

Stock-Based Compensation. Deferred stock compensation included in the accompanying consolidated balance sheets reflects the difference between the deemed fair value of our common stock for financial accounting purposes and the exercise price of options on the date of the options were granted. Stock-based compensation expense for the three-month period ended March 31, 2002 amounted to $550,000, which relates primarily to the amortization of existing deferred compensation recorded in prior periods for stock options and restricted shares. The decrease in stock-based compensation from $960,000 for the three-month period ended March 31, 2001 relates to our amortization method that proportionally charges to expense the deferred stock-based compensation as options vest offset by amortization of the additional deferred compensation recorded in the fourth quarter of 2001 related to stock options granted to Mediaplex employees.

Amortization of Intangible Assets. Amortization of intangible assets for the three-month period ended March 31, 2002 represents principally the amortization of acquired software purchased from a founding stockholder in May 1998 and software acquired from StraightUP!, Inc. in September 2000.

For the three-month period ended March 31, 2001 amortization of intangible assets also included the amortization of goodwill created as a result of the acquisitions of Bach Systems in November 2000 and a majority interest in ValueClick Japan in August 1999. In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 changed the accounting for goodwill from an amortization method to an impairment only approach. Goodwill will now be tested at the reporting unit annually and whenever events or circumstances occur indicating that goodwill might be impaired. The adoption date for SFAS No. 142 was January 1, 2002, accordingly, amortization of goodwill from our past business combinations has ceased. We do not anticipate recording a goodwill impairment charge from the adoption of SFAS No. 142.

Merger-Related Costs. Merger-related costs for the three-month period ended March 31, 2002 represent the last of the direct transaction costs incurred related to the merger with ClickAgents in December 2000 accounted for as a pooling-of-interests.

Interest Income, Net. Interest income, net principally consists of interest earned on our cash and cash equivalents and marketable debt securities and is net of interest paid on debt obligations. Interest income was $1.3 million for the three-month period ended March 31, 2002 compared to $1.4 million for the same period in 2001. The decrease is attributable to the effects of decreasing average investment yields due to declines in interest rates since 2001, offset by increased balances of cash and cash equivalents and marketable debt securities resulting from the Mediaplex acquisition. Interest income in future periods may fluctuate in correlation with the average cash and investment balances we maintain and as a result of changes in the market rates of our investments.

Provision for Income Taxes. For the three-month period ended March 31, 2002, we recorded a benefit from federal, state and foreign income taxes amounted of $137,000, compared income tax expense of $100,000 for the same period in 2001. Income taxes for interim periods are computed using the effective tax rate estimated to be applicable for the full fiscal year, which is subject to our ongoing review and evaluation. The effective income tax rate reflects certain non-deductible expenses, including the stock-based compensation charges and goodwill amortization in the 2001 period.

Minority Share of Income/Loss of Consolidated Subsidiary. Minority share of loss of ValueClick Japan was $64,000 for the three-month period ended March 31, 2002 and minority share of income of ValueClick Japan was $144,000 for the corresponding period in 2001. We account for our interest in ValueClick Japan on a consolidated basis for financial reporting purposes, resulting in a minority interest in the net loss incurred by ValueClick Japan.

Since our inception, we have financed our operations through working capital generated from operations and equity financings. As of March 31, 2002, we had a combined cash and cash equivalents and marketable securities balance of $160.0 million. The net cash used in operating activities of $1.6 million for the three-month period ended March 31, 2002 primarily resulted from the timing of payments on acquired liabilities.

The net cash used in investing activities for the three-month period ended March 31, 2002 of $398,000 was primarily the result of $126,000 of computer equipment purchases and the net purchase of investment grade corporate debt securities of $259,000.

Net cash used in financing activities primarily resulted from the purchase of $1.1 million in treasury stock.

In October 1999, we entered into a loan and security agreement with Silicon Valley Bank for a $2.5 million revolving line of credit. Interest on outstanding balances will accrue at an annual rate of one percentage point above the Bank's Prime Rate. The credit facility has a revolving maturity date that is the anniversary date of the agreement and is collateralized by substantially all our assets. As of December 31, 2001, no amounts were outstanding under this line of credit. The credit facility matured on April 1, 2002 and, based on our current financial condition, we did not renew the facility.

We believe that our existing cash and cash equivalents, our marketable securities, our available bank credit and the proceeds from our initial public offering are sufficient to meet our anticipated cash needs for working capital and capital expenditures for the next 12 months.

As of March 31, 2002, we had no material commitments other than obligations under operating and capital leases for office space and office equipment, of which some commitments extend through 2010, and a note payable to a bank, which requires monthly payments through 2003.

Management's discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to revenue recognition, allowance for doubtful accounts, investments, deferred taxes, impairment of long-lived assets, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

We apply the following critical accounting policies in the preparation of our consolidated financial statements:

In June 1998, the Financial Accounting Standards Board (the "FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The new standard requires companies to record derivatives on the balance sheet as assets or liabilities measured at fair value. Under SFAS No. 133, gains or losses resulting from changes in the values of derivatives are to be reported in the statement of operations or as a deferred item, depending on the use of the derivatives and whether they qualify for the hedge accounting. We adopted SFAS No. 133 in the first quarter of 2001. To date, we have not engaged in any hedging activity and therefore the adoption of this new standard has had no significant impact on us.

In July 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 establishes a new standard for accounting and reporting requirements for business combinations initiated after June 30, 2001 and prohibits the use of the pooling-of-interests method for combinations initiated after June 30, 2001. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment only approach. We adopted SFAS No. 142 on January 1, 2002, accordingly goodwill will be tested at the reporting unit annually and whenever events or circumstances occur indicating that goodwill might be impaired. Amortization of goodwill from our past business combinations has ceased. We do not anticipate recording a goodwill impairment charge during 2002. However, future impairment assessments made could result in additional impairment charges to reduce the carry values of these assets in future periods.

In August of 2001, the FASB issued SFAS No. 143, "Accounting for Obligations Associated with the Retirement of Long-Lived Assets," which establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost. It also provides accounting guidance for legal obligations associated with the retirement of tangible long-lived assets. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002, with early adoption permitted. We expect to adopt SFAS No. 143 effective January 1, 2003 and do not expect that the adoption of this new standard will have a significant impact on our results of operations and financial position.

Inflation was not a material factor in either revenues or operating expenses during the three-month periods ended March 31, 2001 and 2002.

The primary objective of our investment activities is to preserve capital while at the same time maximizing yields without significantly increasing risk. We are exposed to the impact of interest rate changes and changes in the market values of our investments. Our interest income is sensitive to changes in the general level of U.S. interest rates. In this regard, changes in U.S. interest rates affect the interest earned on our cash equivalents and marketable debt securities. Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio. We have not used derivative financial instruments in our investment portfolio. We invest our excess cash in debt instruments of high-quality corporate issuers and, by policy, limit the amount of credit exposure to any one issuer. We protect and preserve our invested funds by limiting default, market and reinvestment risk. Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates, or we may suffer losses in principal if forced to sell securities, which have declined in market value due to changes in interest rates.

Marketable securities as of March 31, 2002 consist primarily of marketable debt securities in high-grade corporate and government securities with maturities of less than three years. As of March 31, 2002, our investment in marketable securities had a weighted-average time to maturity of approximately 318 days. We classify all of our investments as available-for-sale. Available-for-sale securities are carried at fair value, with unrealized gains and losses, net of tax, reported in a separate component of stockholders' equity. As of March 31, 2002, unrealized losses in our investments in marketable securities aggregated $260,000.

During the three-month period ended March 31, 2002, our investments in marketable securities yielded an effective interest rate of 3.69%. If interest rates were to decrease 1%, the result would be an annual decrease in our interest income related to our cash and cash equivalents of approximately $574,000. However, due to the uncertainty of the actions that would be taken and their possible effects, this analysis assumes no such action. Further, this analysis does not consider the effect of the change in the level of overall economic activity that could exist in such an environment.

Our investment in ValueClick Japan subjects us to foreign currency exchange risks as ValueClick Japan denominates our transactions in the Japanese Yen. We also transact business in various foreign countries and are thus subject to exposure from adverse movements in other foreign currency exchange rates. This exposure is primarily related to revenue and operating expenses for ValueClick Europe, which denominates our transactions in U.K. pounds. The effect of foreign exchange rate fluctuations for the three-month period ended March 31, 2002 was not material. Historically, we have not hedged our exposure to exchange rate fluctuations. Accordingly, we may experience economic loss and a negative impact on earnings, cash flows or equity as a result of foreign currency exchange rate fluctuations.

You should carefully consider the following risks before you decide to buy shares of our common stock. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties, including those risks set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations" above, may also adversely impact and impair our business. If any of the following risks actually occur, our business, results of operations or financial condition would likely

suffer. In such case, the trading price of our common stock could decline, and you may lose all or part of the money you paid to buy our stock.

This Report contains forward-looking statements based on the current expectations, assumptions, estimates and projections about us and our industry. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those discussed in these forward-looking statements as a result of certain factors, as more fully described in this section and elsewhere in this Report. We do not undertake to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

OUR PENDING MERGER WITH BE FREE, INC. MAY SUBJECT US TO RISKS THAT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

On March 10, 2002, we entered into a merger agreement with Be Free, Inc., a prominent provider of performance-based marketing technology and services. Specified conditions must be satisfied or waived to complete the merger, including the approval of the merger by the stockholders of both companies. We cannot assure you that each of the conditions will be satisfied. If the conditions are not satisfied or waived, the merger will not occur or will be delayed, and we may lose some or all of the intended benefits of the merger. In addition, if the merger is not completed for any reason, our stock price may decline because costs related to the merger, such as legal, accounting and financial advisor fees, must be paid even if the merger is not completed. In addition, if the merger is not completed, our stock price may decline to the extent that the current market price reflects a market assumption that the merger will be completed.

If the merger is completed, achieving the benefits of the merger will depend in part on the integration of the operations, products and personnel of both companies in a timely and efficient manner. We expect to incur costs and commit significant management time integrating Be Free's operations, products and personnel. This integration may be difficult and unpredictable because Be Free's products are highly complex, have been developed independently and were designed without regard to integration. In addition, the integration of our operations, personnel and product lines may be difficult and unpredictable because of possible cultural conflicts between the companies, the different geographical locations of the companies, and different opinions on product and technology decisions. The integration of Be Free into our company will also place significant burdens on our management and internal resources. We do not know whether we will be successful in these integration efforts and we cannot assure you that we will be able to integrate the business and operations of Be Free in a timely and efficient manner. If we cannot successfully integrate Be Free's operations, products and personnel, we may not realize the expected benefits of the merger which could adversely affect our business.

INTEGRATING OUR ACQUIRED OPERATIONS MAY DIVERT MANAGEMENT'S ATTENTION AWAY FROM OUR DAY-TO-DAY OPERATIONS.

We have grown in part because of business combinations with other companies. Acquisitions generally involve significant risks, including difficulties in the assimilation of the operations, services,

technologies and corporate culture of the acquired companies, diversion of management's attention from other business concerns, overvaluation of the acquired companies, and the acceptance of the acquired companies' products and services by our customers. The integration of our acquired operations, products and personnel may place a significant burden on management and our internal resources. The diversion of management attention and any difficulties encountered in the transition and integration process could harm our business.

IF WE FAIL TO MANAGE OUR GROWTH EFFECTIVELY, OUR EXPENSES COULD INCREASE AND OUR MANAGEMENT'S TIME AND ATTENTION COULD BE DIVERTED.

As we continue to increase the scope of our operations, we will need an effective planning and management process to implement our business plan successfully in the rapidly evolving Internet advertising market. Our business, results of operations and financial condition will be substantially harmed if we are unable to manage our expanding operations effectively. We plan to continue to expand our sales and marketing, customer support and research and development organizations. Past growth has placed, and any future growth will continue to place, a significant strain on our management systems and resources. We recently implemented a new financial reporting system, and we will likely need to continue to improve our financial and managerial controls and our reporting systems and procedures. In addition, we will need to expand, train and manage our work force. Our failure to manage our growth effectively could increase our expenses and divert management's time and attention.

UNEXPECTED SIGNIFICANT COSTS TO INTEGRATE OUR ACQUIRED OPERATIONS INTO A SINGLE BUSINESS MAY NEGATIVELY IMPACT OUR FINANCIAL CONDITION AND THE MARKET PRICE OF OUR STOCK.

We will incur costs from the integration of purchased company operations, products and personnel. These costs may be significant and may include expenses and other liabilities for:

The integration costs that we incur may negatively impact our financial condition and the market price of our stock.

WE HAVE A LIMITED OPERATING HISTORY, A HISTORY OF LOSSES, AN ACCUMULATED DEFICIT AND MAY CONTINUE TO EXPERIENCE LOSSES.

For the three-month period ended March 31, 2002, we incurred a net loss of approximately $1.1 million and at March 31, 2002 we had an accumulated deficit of approximately $64.7 million. We expect to continue to incur net losses for the foreseeable future. These losses may be substantial, and we may never become profitable.

Because we have a limited operating history, it may be difficult to evaluate our business and prospects. You should consider our prospects in light of the risks, expenses and difficulties frequently encountered by early-stage companies in the rapidly-changing Internet market. These risks include our ability to:

If we are unsuccessful in addressing these risks and uncertainties, our business, results of operations and financial condition could be materially and adversely affected.

IF BANNER ADVERTISING ON THE INTERNET LOSES ITS APPEAL TO DIRECT MARKETING COMPANIES, OUR REVENUES COULD DECLINE.

Our Media segment accounted for 56.5% of our revenues for the three-month period ended March 31, 2002 by delivering banner advertisements that generate click-throughs to our advertisers' Web sites. This business model may not continue to be effective in the future for a number of reasons, including the following: click rates have always been low and may decline as the number of banner advertisements on the Web increases; Internet users can install "filter" software programs which allow them to prevent banner advertisements from appearing on their screens; banner advertisements are, by their nature, limited in content relative to other media; direct marketing companies may be reluctant or slow to adopt banner advertising that replaces, limits or competes with their existing direct marketing efforts; and direct marketing companies may prefer other forms of Internet advertising, including permission-based e-mail. If the number of direct marketing companies who purchase banner clicks from us does not continue to grow, we may experience difficulty in attracting publishers, and our revenues could decline.

IF OUR BUSINESS MODEL IS NOT ACCEPTED BY INTERNET ADVERTISERS OR WEB PUBLISHERS, OUR REVENUES COULD DECLINE.

Traditionally, substantially all of our revenues have been derived from our Media segment. Although we intend to grow our Technology segment, we expect that our Media segment will continue to generate a majority of our revenues in the future. For the three-month period ended March 31, 2002, our Media segment accounted for 56.5% of our revenues. In addition, substantially all of our Media products and services are based on a cost-per-click, or CPC, cost-per-action, or CPA, or cost-per-lead, or CPL, pricing model. These business models are relatively new and much less common than the cost-per-thousand impressions, or CPM, pricing model, which many other Internet advertising companies use. Our ability to generate significant revenue from advertisers will depend, in part, on our ability to demonstrate the effectiveness of our pricing models to advertisers, many of which may be more accustomed to the CPM pricing model, and to Web publishers; and on our ability to attract and retain advertisers and Web publishers by differentiating our technology and services from those of our competitors. One component of our strategy is to enhance advertisers' ability to measure their return on investment and track the performance and effectiveness of their advertising campaigns. However, we have limited experience in implementing our strategy. To date, few advertisers have taken advantage of the most sophisticated tool we offer for tracking Internet users' activities after they have reached advertisers' Web sites. We will not be able to assure you that our strategy will succeed.

Intense competition among Web sites and Internet advertising services has led to the proliferation of a number of alternative pricing models for Internet advertising. These alternatives, and the likelihood that additional pricing alternatives will be introduced, make it difficult for us to project the levels of advertising revenue or the margins that we, or the Internet advertising industry in general, will

realize in the future. Moreover, an increase in the amount of advertising on the Web may result in a decline in click rates. Since we predominantly rely on a performance-based pricing model to generate revenue, any decline in click rates may make our pricing models less viable or less attractive solutions for Web publishers and advertisers.

OUR REVENUES COULD DECLINE IF WE FAIL TO EFFECTIVELY MANAGE OUR EXISTING ADVERTISING SPACE AND OUR GROWTH COULD BE IMPEDED IF WE FAIL TO ACQUIRE NEW ADVERTISING SPACE.

Our success depends in part on our ability to effectively manage our existing advertising space. The Web sites that list their unsold advertising space with us are not bound by long-term contracts that ensure them a consistent supply of advertising space, which we refer to as inventory. In addition, Web sites can change the amount of inventory they make available to us at any time. If a Web site publisher decides not to make advertising space from its Web sites available to us, we may not be able to replace this advertising space with advertising space from other Web sites that have comparable traffic patterns and user demographics quickly enough to fulfill our advertisers' requests. This would result in lost revenues. We expect that our customers' requirements will become more sophisticated as the Web matures as an advertising medium. If we fail to manage our existing advertising space effectively to meet our customers' changing requirements, our revenues could decline. Our growth depends on our ability to expand our advertising inventory. To attract new customers, we must maintain a consistent supply of attractive advertising space. We intend to expand our advertising inventory by selectively adding to our network new Web sites that offer attractive demographics, innovative and quality content and growing Web user traffic. Our ability to attract new Web sites to our network and to retain Web sites currently in our network will depend on various factors, some of which are beyond our control. These factors include our ability to introduce new and innovative product lines and services, our ability to efficiently manage our existing advertising inventory, our pricing policies and the cost-efficiency to Web publishers of outsourcing their advertising sales. In addition, the number of competing Internet advertising networks that purchase advertising inventory from small- to medium-sized Web sites continues to increase. We will not be able to assure you that the size of our inventory will increase or even remain constant in the future.

WE MAY FACE INTELLECTUAL PROPERTY DISPUTES THAT ARE COSTLY OR COULD HINDER OR PREVENT OUR ABILITY TO DELIVER OUR PRODUCTS AND SERVICES.

We may be subject to disputes and legal actions alleging intellectual property infringement, unfair competition or similar claims against us. One of our principal competitors, DoubleClick, was awarded a patent on certain aspects of ad-delivery technology, including the ability to target the delivery of ads over a network such as the Internet and the ability to compile statistics on individual Web users and the use of those statistics to target ads. DoubleClick has previously brought lawsuits against other companies in our industry on the basis of this patent. We have, however, entered into an agreement with DoubleClick whereby DoubleClick has agreed to not sue or threaten to sue us, or any of our customers, affiliates or licensees, in connection with its patent, so long as DoubleClick or any of its subsidiaries hold at least five percent of our capital stock on a fully diluted basis. DoubleClick has agreed that if it no longer owns at least five percent of our capital stock, it will in good faith negotiate with us for a license to use its technology under commercially reasonable terms. However, there can be no assurance that we will be able to secure such a license.

Other companies may apply for or be awarded patents or have other intellectual property rights covering aspects of our technology or business. In 2000, 24/7 Real Media was awarded a patent relating to our technology for delivering content and advertising information over the Internet. We are currently involved in a patent infringement lawsuit with 24/7 Real Media related to our ad-serving technology. Our failure to prevail in any litigation with any party asserting intellectual property infringement,

including our current lawsuit with 24/7 Real Media, could result in substantial monetary damages, including: damages for past infringement, which could be tripled if a court determines that the infringement was willful; an injunction requiring us to stop offering our services in their current form; the need to redesign our systems; or the need to pay significant license fees in order to use technology belonging to third parties. For additional information regarding our lawsuit with 24/7 Real Media, see "Risk Factors—If we are unsuccessful in defending against 24/7 Real Media's lawsuit for patent infringement, we may be required to pay significant monetary damages to 24/7 Real Media and may be enjoined from utilizing our ad-serving technology in our business" and "Legal Proceedings."

IF THE TECHNOLOGY THAT WE CURRENTLY USE TO TARGET THE DELIVERY OF BANNERS AND TO PREVENT FRAUD ON OUR NETWORK IS RESTRICTED OR BECOMES SUBJECT TO REGULATION, OUR EXPENSES COULD INCREASE AND WE COULD LOSE CUSTOMERS OR ADVERTISING INVENTORY.

Web sites typically place small files of information, commonly known as cookies, on an Internet user's hard drive, generally without the user's knowledge or consent. Cookie information is passed to the Web site through an Internet user's browser software. We currently use cookies to track an Internet user's movement through the advertiser's Web site and to monitor and prevent potentially fraudulent activity on our network. We do not share, collect or sell any other information concerning Internet users. Most currently available Internet browsers allow Internet users to modify their browser settings to prevent cookies from being stored on their hard drive, and some users currently do so. Internet users can also delete cookies from their hard drives at any time. Some Internet commentators and privacy advocates have suggested limiting or eliminating the use of cookies, and legislation has been introduced in some jurisdictions to regulate the use of cookie technology. The effectiveness of our technology could be limited by any reduction or limitation in the use of cookies. If the use or effectiveness of cookies were limited, we would have to switch to other technologies to gather demographic and behavioral information. While such technologies currently exist, they are substantially less effective than cookies. We would also have to develop or acquire other technology to prevent fraud. Replacement of cookies could require significant reengineering time and resources, might not be completed in time to avoid losing customers or advertising inventory, and might not be commercially feasible. Our use of cookie technology or any other technologies designed to collect Internet usage information may subject us to litigation or investigations in the future. Any litigation or government action against us could be costly and time-consuming, could require us to change our business practices and could divert management's attention.

WE COULD LOSE CUSTOMERS OR ADVERTISING INVENTORY IF WE FAIL TO MEASURE CLICKS ON BANNER ADVERTISEMENTS IN A MANNER THAT IS ACCEPTABLE TO OUR ADVERTISERS AND WEB PUBLISHERS.

We earn advertising revenues and make payments to Web publishers based on the number of clicks on advertisements delivered on our network. Advertisers' and Web publishers' willingness to use our services and join our network will depend on the extent to which they perceive our measurements of clicks to be accurate and reliable. Advertisers and Web publishers often maintain their own technologies and methodologies for counting clicks, and from time to time we have had to resolve differences between our measurements and theirs. Any significant dispute over the proper measurement of clicks or other user responses to advertisements could cause us to lose customers or advertising inventory.

IF WE FAIL TO COMPETE EFFECTIVELY AGAINST OTHER INTERNET ADVERTISING COMPANIES, WE COULD LOSE CUSTOMERS OR ADVERTISING INVENTORY AND OUR REVENUES COULD DECLINE.

The Internet advertising markets are characterized by rapidly changing technologies, evolving industry standards, frequent new product and service introductions and changing client demands. The introduction of new services embodying new technologies and the emergence of new industry standards and practices could render our existing services obsolete and unmarketable or require unanticipated investments in research and development. Our failure to adapt successfully to these changes could harm our business, results of operations and financial condition.

The market for Internet advertising and related services is intensely competitive. We expect this competition to continue to increase because there are no significant barriers to entry. Increased competition may result in price reductions for advertising space, reduced margins and loss of our market share. Our principal competitors are other companies that provide advertisers with performance-based Internet advertising solutions, such as CPC, CPL or CPA. We directly compete with a number of competitors in the CPC market segment, such as Advertising.com and Datacomm. We also compete in the performance-based marketing segment with CPL and CPA performance-based companies such as CyberAgents, DirectLeads and CommissionJunction. We also compete with other Internet advertising networks that focus on the traditional CPM model, including DoubleClick, Engage and 24/7 Real Media. Unlike us, these companies primarily deal with publishers of large Web sites and advertisers seeking increased brand recognition. These companies have longer operating histories, greater name recognition and have greater financial and marketing resources than we have. DoubleClick is a principal stockholder of ValueClick.

Competition for advertising placements among current and future suppliers of Internet navigational and informational services, high-traffic Web sites and ISPs, as well as competition with other media for advertising placements, could result in significant price competition and reductions in advertising revenues. In addition, as we expand the scope of our Web services, we may compete with a greater number of Web publishers and other media companies across an increasing range of different Web services, including in vertical markets where competitors may have advantages in expertise, brand recognition and other areas. If existing or future competitors develop or offer services that provide significant performance, price, creative or other advantages over those offered by us, our business, result of operations and financial condition would be negatively affected. We will also compete with traditional advertising media, such as direct mail, television, radio, cable and print, for a share of advertisers' total advertising budgets. Many current and potential competitors enjoy competitive advantages over us, such as longer operating histories, greater name recognition, larger customer bases, greater access to advertising space on high-traffic Web sites, and significantly greater financial, technical and marketing resources. As a result, we may not be able to compete successfully. If we fail to compete successfully, we could lose customers or advertising inventory and our revenues could decline.

OUR REVENUE GROWTH COULD BE NEGATIVELY IMPACTED IF INTERNET USAGE AND THE DEVELOPMENT OF INTERNET INFRASTRUCTURE DO NOT CONTINUE TO GROW.

Our business and financial results will depend on continued growth in the use of the Internet. Internet usage may be inhibited for a number of reasons, such as: inadequate network infrastructure; security concerns; inconsistent quality of service; and unavailability of cost-effective, high-speed service. If Internet usage grows, our infrastructure may not be able to support the demands placed on it and our performance and reliability may decline. In addition, Web sites have experienced interruptions in their service as a result of outages and other delays occurring throughout the Internet network infrastructure, and as a result of sabotage, such as the recent electronic attacks designed to interrupt service on many Web sites. The Internet could lose its viability as a commercial medium due to delays in the development or adoption of new technology required to accommodate increased levels of

Internet activity. If use of the Internet does not continue to grow, or if the Internet infrastructure does not effectively support our growth, our revenues could be materially and adversely affected.

OUR LONG-TERM SUCCESS MAY BE MATERIALLY ADVERSELY AFFECTED IF THE MARKET FOR E-COMMERCE DOES NOT GROW OR GROWS SLOWER THAN EXPECTED.

Because many of our customers' advertisements encourage online purchasing, our long-term success may depend in part on the growth and market acceptance of e-commerce. The growth and acceptance of e-commerce has developed more slowly than expected and our business will be adversely affected if the market for e-commerce does not grow or grows slower than now expected. A number of factors outside of our control could hinder the future growth of e-commerce, including the following:

In particular, any well-publicized compromise of security involving Web-based transactions could deter people from purchasing items on the Internet, clicking on advertisements, or using the Internet generally, any of which could cause us to lose customers and advertising inventory and could materially, adversely affect our revenues.

IF WE ARE UNSUCCESSFUL IN DEFENDING AGAINST 24/7 REAL MEDIA'S LAWSUIT FOR PATENT INFRINGEMENT, WE MAY BE REQUIRED TO PAY SIGNIFICANT MONETARY DAMAGES TO 24/7 REAL MEDIA AND MAY BE ENJOINED FROM UTILIZING OUR AD-SERVING TECHNOLOGY IN OUR BUSINESS.

In February 2002, 24/7 Real Media, Inc. filed a lawsuit against us and Mediaplex, Inc., our wholly-owned subsidiary, in the District Court for the Southern District of New York seeking unspecified damages and injunctive relief arising from our alleged infringement of 24/7 Real Media's "368 patent. We filed a Declaratory Judgment action in the District Court for the Northern District of California in February 2002 seeking to remove the case to California.

This lawsuit is in the early stages. We intend to defend ourselves vigorously in this lawsuit. Although we believe 24/7 Real Media's patent infringement allegations are without merit, the outcome of this lawsuit, at this time however, is uncertain. Our expenses and other resources expended on this lawsuit have not been material to date. However, as this lawsuit progresses, we expect to incur greater legal fees and expenses. In addition, our defense of this lawsuit is expected to divert the efforts and attention of our management and technical personnel. As a result, our defense of this lawsuit, regardless of its eventual outcome, will likely be costly and time consuming. If 24/7 Real Media's patent is found to be valid and enforceable and our ad-serving technology is found to infringe, we may be enjoined from utilizing this technology in our business, we may be liable for significant monetary damages and/or we may be required to obtain a license from 24/7 Real Media to use its patented technology, any of which could disrupt our ability to offer our products and services. An injunction preventing us from using our ad-serving technology would have a material adverse effect on our business, operating results, cash flow and financial condition. If we are required to obtain a license to 24/7 Real Media's patent, such license may not be available from 24/7 Real Media on commercially reasonable terms, if at all. For additional details regarding this lawsuit, see "Legal Proceedings."

The successful integration of the companies we have acquired will depend in part on the retention of personnel critical to our combined business and operations due to, for example, unique technical skills or management expertise. We may be unable to retain existing management, technical, sales and customer support personnel that are critical to the success of the integrated company, resulting in disruption of operations, loss of key information, expertise or know-how and unanticipated additional recruitment and training costs and otherwise diminishing anticipated benefits of these acquisitions.

Our future success is substantially dependent on the continued service of our key senior management. Our employment agreements with our key personnel are short-term and on an at-will basis. We will not have key-person insurance on any of our employees. The loss of the services of any member of our management team, or of any other key employees, could divert management's time and attention, increase our expenses and adversely affect our ability to conduct our business efficiently. Our future success also depends on our continuing ability to attract, retain and motivate highly skilled employees. Competition for employees in our industry is intense. We may be unable to retain our key employees or attract, assimilate or retain other highly qualified employees in the future. We have experienced difficulty from time to time in attracting the personnel necessary to support the growth of our business, and may experience similar difficulties in the future.

DOUBLECLICK WILL REMAIN OUR LARGEST STOCKHOLDER, AND DOUBLECLICK MAY HAVE INTERESTS THAT ARE DIFFERENT FROM, OR IN ADDITION TO, YOURS.

DoubleClick, which is one of our competitors, currently owns approximately 15% of our outstanding common stock. DoubleClick also has the right to maintain its percentage ownership if we issue new securities, other than in a public offering, in connection with an acquisition of, or merger with, another company or under other specified exceptions until February 28, 2003. DoubleClick may have interests that are different from, or in addition to, your interests. Because we have generally agreed to use DoubleClick rather than other providers of services similar to those that DoubleClick makes available, and because we may have additional commercial relationships with DoubleClick in the future, conflicts of interest could arise with respect to the nature, quality and pricing of services that DoubleClick provides to us. DoubleClick currently has the right to designate one member of our board of directors. In addition, the holders of approximately 12.2% of our currently outstanding common stock have agreed to vote their shares in favor of a specified number of DoubleClick's nominees to our board of directors, depending on DoubleClick's percentage ownership of our common stock. Because DoubleClick provides Internet advertising services that compete with us, conflicts of interest could arise for DoubleClick's representative on our board of directors. We have not implemented specific policies with respect to these potential conflicts of interest, which could be resolved in a manner adverse to us.

DOUBLECLICK HAS RIGHTS THAT MAY AFFECT OUR FUTURE SALE OR TAKEOVER OR DISCOURAGE THIRD-PARTY OFFERS FOR US.

As long as DoubleClick continues to own 10% or more of our common stock on a fully diluted basis, we must obtain DoubleClick's consent before we take specified actions such as implementing any anti-takeover provision. DoubleClick has agreed to standstill provisions under which it would not acquire more than 45% ownership of our Common Stock on a fully-diluted basis for a period of three years from February 2000, but after that time it may acquire additional shares of our common stock. These standstill provisions would terminate upon the announcement or commencement of a tender or exchange offer to acquire shares of our common stock which would result in the offeror owning 50% or more of our common stock. As long as DoubleClick owns 10% or more of our common stock on a fully-diluted basis, DoubleClick will have the right to receive prior notice of, and will have the

opportunity to respond to, a proposed sale of our company or an unsolicited offer to buy us. These rights may discourage third-party offers for us.

DELAWARE LAW CONTAINS ANTI-TAKEOVER PROVISIONS THAT COULD DETER TAKEOVER ATTEMPTS THAT COULD BE BENEFICIAL TO OUR STOCKHOLDERS.

Provisions of Delaware law could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. Section 203 of the Delaware General Corporation Law may make the acquisition of the company and the removal of incumbent officers and directors more difficult by prohibiting stockholders holding 15% or more of our outstanding voting stock from acquiring the company without the board of director's consent for at least three years from the date they first hold 15% or more of the voting stock. DoubleClick is not subject to this provision of Delaware law with respect to its investment in ValueClick.

SYSTEM FAILURES COULD SIGNIFICANTLY DISRUPT OUR OPERATIONS, WHICH COULD CAUSE US TO LOSE CUSTOMERS OR ADVERTISING INVENTORY.

Our success depends on the continuing and uninterrupted performance of our systems. Sustained or repeated system failures that interrupt our ability to provide services to customers, including failures affecting our ability to deliver advertisements quickly and accurately and to process users' responses to advertisements, would reduce significantly the attractiveness of our solutions to advertisers and Web publishers. Our business, results of operations and financial condition could be materially and adversely affected by any damage or failure that interrupts or delays our operations. Our computer systems will be vulnerable to damage from a variety of sources, including telecommunications failures, power outages, malicious human acts and natural disasters. We lease server space in Los Angeles and Santa Clara, California; Boca Raton, Florida; Louisville, Kentucky; McLean, Virginia and Tokyo, Japan. Therefore, any of the above factors affecting the Los Angeles, Santa Clara, Boca Raton, Louisville, McLean, or Tokyo areas would substantially harm our business. Moreover, despite network security measures, our servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems in part because we cannot control the maintenance and operation of our third-party data centers. Despite the precautions taken, unanticipated problems affecting our systems could cause interruptions in the delivery of our solutions in the future. Our data storage centers incorporate redundant systems, consisting of additional servers, but our primary system does not switch over to our backup system automatically. Our insurance policies may not adequately compensate us for any losses that may occur due to any failures in our systems.

Our future success depends in part on the efficient performance of our software and technology, as well as the efficient performance of the systems of third parties. As the numbers of Web pages and Internet users increase, our services and infrastructure may not be able to grow to meet the demand. A sudden and unexpected increase in the volume of advertising delivered through our servers or in click rates could strain the capacity of the software or hardware that we have deployed. Any capacity constraints we experience could lead to slower response times or system failures and adversely affect the availability of advertisements, the number of advertising views delivered and the level of user responses received, which would harm our revenues. To the extent that we do not effectively address capacity constraints or system failures, our business, results of operations and financial condition could be harmed substantially. We will also depend on the Internet service providers, or ISPs, that provide consumers with access to the Web sites on which our customers' advertisements appear. Internet users have occasionally experienced difficulties connecting to the Web due to failures of their ISPs' systems. Any disruption in Internet access provided by ISPs or failures by ISPs to handle the higher volumes of traffic expected in the future could materially and adversely affect our revenues.

IT MAY BE DIFFICULT TO PREDICT OUR FINANCIAL PERFORMANCE BECAUSE OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE.

Our revenues and operating results may vary significantly from quarter to quarter due to a variety of factors, many of which are beyond our control. You should not rely on period-to-period comparisons of our results of operations as an indication of our future performance. Our results of operations may fall below the expectations of market analysts and investors in some future periods. If this happens, the market price of our common stock may fall. The factors that may affect our quarterly operating results include:

Expenditures by advertisers also tend to be cyclical, reflecting overall economic conditions as well as budgeting and buying patterns. Any decline in the economic prospects of advertisers or the economy generally may alter current or prospective advertisers' spending priorities, or may increase the time it takes us to close sales with advertisers, and could materially and adversely affect our business, results of operations and financial condition.

WE MAY BE UNABLE TO REDUCE SPENDING IF OUR REVENUES ARE LOWER THAN EXPECTED BECAUSE OUR SHORT-TERM EXPENSES ARE FIXED AND FUTURE REVENUES AND OPERATING RESULTS ARE DIFFICULT TO FORECAST.

Our current and future expense estimates are based, in large part, on our estimates of future revenues and on our investment plans. In particular, we plan to increase our operating expenses significantly in order to expand our sales and marketing operations; enhance our technology and software solutions; acquire additional advertising inventory; enhance our advertising management platform; and continue our international expansion. Most of our expenses are fixed in the short term. We may be unable to reduce spending if our revenues are lower than expected. Any significant shortfall in revenues in relation to our expectations could materially and adversely affect our cash flows.

IF WE DO NOT SUCCESSFULLY DEVELOP OUR INTERNATIONAL STRATEGY, OUR REVENUES AND CASH FLOWS AND THE GROWTH OF OUR BUSINESS COULD BE HARMED.

We initiated operations, through joint ventures and wholly-owned subsidiaries or divisions, in Japan in 1998, in the United Kingdom in 1999, and Brazil, Canada, France and Germany in 2000. Subsequently, we discontinued operations in Brazil and Canada in 2001. Our foreign operations subject us to foreign currency exchange risks. We currently do not utilize hedging instruments to mitigate foreign exchange risks.

Our international expansion will subject us to additional foreign currency exchange risks and will require management's attention and resources. We expect to pursue expansion through a number of international alliances and to rely extensively on these business partners initially to conduct operations, establish local networks, register Web sites as affiliates and coordinate sales and marketing efforts. Our success in these markets will depend on the success of our business partners and their willingness to dedicate sufficient resources to the relationships. We cannot assure you that we will be successful in our efforts overseas. International operations are subject to other inherent risks, including:

Our failure to address these risks adequately could materially and adversely affect our business, results of operations and financial condition.

WE MAY BE LIABLE FOR CONTENT DISPLAYED ON THE WEB SITES OF OUR PUBLISHERS WHICH COULD INCREASE OUR EXPENSES.

We may be liable to third parties for content in the advertising we deliver if the artwork, text or other content involved violates copyright, trademark, or other intellectual property rights of third parties or if the content is defamatory. Any claims or counterclaims could be time-consuming, result in costly litigation or divert management's attention.

REVENUES GENERATED BY OUR TECHNOLOGY PRODUCTS AND SERVICES DEPEND UPON A FEW KEY CLIENTS, AND IF WE LOSE A MAJOR CLIENT FOR THESE PRODUCTS OR SERVICES, OUR REVENUES MAY BE SIGNIFICANTLY REDUCED.

For the three-month period ended March 31, 2002, revenues from our Technology segment accounted for 43.5% of our revenues. With our recent acquisition of companies offering complimentary technology products and services, including our October 2001 acquisition of Mediaplex, Inc., we expect that our Technology segment will account for a greater percentage of our revenues in the future. Revenues generated by our technology products and services have been derived from a limited number of advertisers and advertising agencies. Our results of operations would be harmed by the loss of any of these clients. In the first quarter of 2002, no individual customer accounted for more than 10% of our revenues. Three companies accounted for 42.1%, 11.7% and 10.5% of revenues generated by our technology products and services, respectively. We expect that some of these entities may continue to account for a significant percentage of our revenues generated by our technology products and services. Current advertisers may not continue to purchase advertising services from us or we may not be able to successfully attract additional advertisers. If sales of our technology products and services do not grow, we will be unable to grow our Technology segment.

IF WE FAIL TO ESTABLISH, MAINTAIN AND EXPAND OUR TECHNOLOGY BUSINESS AND MARKETING ALLIANCES AND PARTNERSHIPS, OUR ABILITY TO GROW COULD BE LIMITED, WE MAY NOT ACHIEVE DESIRED REVENUES AND OUR STOCK PRICE MAY DECLINE.

In order to grow our technology business, we must generate, retain and strengthen successful business and marketing alliances with advertising agencies.

We depend, and expect to continue to depend, on our business and marketing alliances, which are companies with which we have written or oral agreements to work together to provide services to our clients, to refer business from their clients and customers to us. If companies with which we have business and marketing alliances do not refer their clients and customers to us to perform their online campaign and message management, our revenues and results of operations would be severely harmed.

Our AdWare company has two primary business partnerships that have an impact on our ability to deliver needed functionality to our customers. The first is with Strata, the company whose radio pre-buy product is integrated with AdWare SPOT. Radio pre-buy is an integral part of broadcast media buying functionality. A loss of that partnership would necessitate the development of an entirely new product that would require resources and time. The second is with IBM; loss of this partnership might damage our reputation and negatively impact our ability to drive revenues in the digital asset management arena.

WE WILL BE DEPENDENT UPON TECHNOLOGIES, INCLUDING BOTH OUR MOJO AND ADWARE TECHNOLOGIES, FOR OUR FUTURE REVENUES, AND IF THESE TECHNOLOGIES DO NOT GENERATE REVENUES, OUR BUSINESS MAY FAIL.

Our future revenues are likely to be dependent on the acceptance by clients of the use of technologies, which we believe to be the cornerstone of the technology business. If these technologies do not perform as anticipated or otherwise do not attract clients to use our services, our operations will suffer. In addition, we have incurred and will continue to incur significant expense developing our technologies. If our revenues generated from the use of our technologies do not cover these development costs, our financial condition would suffer.

IF OUR TECHNOLOGIES SUFFER FROM DESIGN DEFECTS, WE MAY NEED TO EXPEND SIGNIFICANT RESOURCES TO ADDRESS RESULTING PRODUCT LIABILITY CLAIMS.

Our business will be harmed if our technologies suffer from design or performance defects and, as a result, we could become subject to significant product liability claims. Technology as complex as our technology may contain design and/or performance defects which are not detectable even after extensive internal testing. Such defects may become apparent only after widespread commercial use. Our contracts with our clients currently do not contain provisions to limit our exposure to liabilities resulting from product liability claims. Although we have not experienced any product liability claims to date, we cannot assure you that we will not do so in the future. A product liability claim brought against us, which is not adequately covered by our insurance, could materially harm our business.

TECHNOLOGY SALES AND IMPLEMENTATION CYCLES ARE LENGTHY, WHICH COULD DIVERT OUR FINANCIAL AND OTHER RESOURCES, AND IS SUBJECT TO DELAYS, WHICH COULD RESULT IN DELAYED REVENUES.

If the sales and implementation cycle of our technology products and services are delayed, our revenues will likewise be delayed. Our sales and implementation cycles are lengthy, causing us to recognize revenues long after our initial contact with a client. During our sales effort, we spend significant time educating prospective clients on the use and benefit of our message management services. As a result, the sales cycle for our products and services is long, ranging from a few weeks to several months for our larger clients. The sales cycle for our message management services and media

management applications is likely to be longer than the sales cycle for competitors because we believe that clients may require more extensive approval processes related to integrating internal business information with their advertising campaigns. In addition, in order for a client to implement our services, the client must commit a significant amount of resources over an extended period of time. Furthermore, even after a client purchases our services, the implementation cycle is subject to delays. These delays may be caused by factors within our control, such as possible technology defects, as well as those outside our control, such as clients' budgetary constraints, internal acceptance reviews, functionality enhancements, lack of appropriate customer staff to implement our media management applications and the complexity of clients' advertising needs. Also, failure to deliver service or application features consistent with delivery commitments could result in a delay or cancellation of the agreement.

WE MAY NOT BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY FROM UNAUTHORIZED USE, WHICH COULD DIMINISH THE VALUE OF OUR SERVICES, WEAKEN OUR COMPETITIVE POSITION AND REDUCE OUR REVENUES.

Our success depends in large part on our proprietary technology, including our eTrax™ tracking management software and MOJO platform. In addition, we believe that our trademarks are key to identifying and differentiating our services from those of our competitors. We may be required to spend significant resources to monitor and police our intellectual property rights. If we fail to successfully enforce our intellectual property rights, the value of our services could be diminished and our competitive position may suffer.

We rely on a combination of copyright, trademark and trade secret laws, confidentiality procedures and licensing arrangements to establish and protect our proprietary rights. Third-party software providers could copy or otherwise obtain and use our technology without authorization or develop similar technology independently which may infringe upon our proprietary rights. We may not be able to detect infringement and may lose competitive position in the market before we do so. In addition, competitors may design around our technology or develop competing technologies. Intellectual property protection may also be unavailable or limited in some foreign countries.

We generally enter into confidentiality or license agreements with our employees, consultants, vendor clients and corporate partners, and generally control access to and distribution of our technologies, documentation and other proprietary information. Despite these efforts, unauthorized parties may attempt to disclose, obtain or use our services or technologies. Our precautions may not prevent misappropriation of our services or technologies, particularly in foreign countries where laws or law enforcement practices may not protect our proprietary rights as fully as in the United States.

IF WE FAIL TO KEEP PACE WITH RAPIDLY CHANGING TECHNOLOGIES, WE COULD LOSE CUSTOMERS OR ADVERTISING INVENTORY.

The Internet advertising market is characterized by rapidly changing technologies, evolving industry standards, frequent new product and service introductions and changing customer demands. The introduction of new products and services embodying new technologies and the emergence of new industry standards and practices can render existing products and services obsolete and unmarketable or require unanticipated investments in research and development. Our success will depend on our ability to adapt to rapidly changing technologies, to enhance existing solutions and to develop and introduce a variety of new solutions to address our customers' changing demands. For example, advertisers are increasingly requiring Internet advertising networks to have the ability to deliver advertisements utilizing new formats that surpass stationary images and incorporate rich media, such as video and audio, interactivity, and more precise consumer targeting techniques. Our system does not support some types of advertising formats, such as certain video and audio formats, and many of the Web sites in our network have not implemented systems to allow rich media advertisements. In

addition, an increase in the bandwidth of Internet access resulting in faster data delivery may provide new products and services that will take advantage of this expansion in delivery capability. If we fail to adapt successfully to developments such as these, we could lose customers or advertising inventory. We purchase most of the software used in our business from third parties. We intend to continue to acquire technology necessary for us to conduct our business from third parties. We cannot assure you that, in the future, these technologies will be available on commercially reasonable terms, or at all. We may also experience difficulties that could delay or prevent the successful design, development, introduction or marketing of new solutions. Any new solution or enhancement that we develop will need to meet the requirements of our current and prospective customers and may not achieve significant market acceptance. If we fail to keep pace with technological developments and the introduction of new industry and technology standards on a cost-effective basis, our expenses could increase, and we could lose customers or advertising inventory.

CHANGES IN GOVERNMENT REGULATION AND INDUSTRY STANDARDS COULD DECREASE DEMAND FOR OUR SERVICES AND INCREASE OUR COSTS OF DOING BUSINESS.

Laws and regulations that apply to Internet communications, commerce and advertising are becoming more prevalent. These regulations could affect the costs of communicating on the Web and adversely affect the demand for our advertising solutions or otherwise harm our business, results of operations and financial condition. The United States Congress has enacted Internet legislation regarding children's privacy, copyrights and taxation. Other laws and regulations may be adopted, and may address issues such as user privacy, pricing, intellectual property ownership and infringement, copyright, trademark, trade secret, export of encryption technology, acceptable content, taxation and quality of products and services. This legislation could hinder growth in the use of the Web generally and decrease the acceptance of the Web as a communications, commercial and advertising medium.

Legislation has been proposed recently to prohibit the sending of unsolicited commercial e-mail. We have a consent-based email delivery business that we believe should not, as a matter of policy, be affected by this kind of legislation. However, it is possible that legislation will be passed that requires us to change our current practices, or subject us to increased possibility of legal liability for our practices.

Due to the global nature of the Web, it is possible that, although our transmissions originate in California, Florida and Japan, the governments of other states or foreign countries might attempt to regulate our transmissions or levy sales or other taxes relating to our activities. In addition, the growth and development of the market for Internet commerce may prompt calls for more stringent consumer protection laws, both in the United States and abroad, that may impose additional burdens on companies conducting business over the Internet. The laws governing the Internet remain largely unsettled, even in areas where there has been some legislative action. It may take years to determine how existing laws, including those governing intellectual property, privacy, libel and taxation, apply to the Internet and Internet advertising. Our business, results of operations and financial condition could be materially and adversely affected by the adoption or modification of laws or regulations relating to the Internet, or the application of existing laws to the Internet or Internet-based advertising.

WE COULD BE HELD LIABLE FOR OUR OR OUR CLIENTS' FAILURE TO COMPLY WITH FEDERAL, STATE AND FOREIGN LAWS GOVERNING CONSUMER PRIVACY.

Recent growing public concern regarding privacy and the collection, distribution and use of information about Internet users has led to increased federal, state and foreign scrutiny and legislative and regulatory activity concerning data collection and use practices. Any failure by us to comply with applicable foreign, federal and state laws and regulatory requirements of regulatory authorities may result in, among other things, indemnification liability to our clients and the advertising agencies we work with, administrative enforcement actions and fines, class action lawsuits, cease and desist orders,

and civil and criminal liability. Recently, class action lawsuits have been filed alleging violations of privacy laws by Internet service providers. In October 1998, the European Union adopted a directive addressing data privacy that may result in limitations on our ability to collect and use information regarding Internet users. These restrictions may limit our ability to target advertising in most European countries. Our failure to comply with these or other federal, state or foreign laws could result in liability and materially harm our business.

In addition to government activity, privacy advocacy groups and the high-technology and direct marketing industries are considering various new, additional or different self-regulatory standards. This focus, and any legislation, regulations or standards promulgated, may impact us adversely. Governments, trade associations and industry self-regulatory groups may enact more burdensome laws, regulations and guidelines, including consumer privacy laws, affecting our clients and us. Since many of the proposed laws or regulations are just being developed, and a consensus on privacy and data usage has not been reached, we cannot yet determine the impact these regulations may have on our business. However, if the gathering of profiling information were to be curtailed, Internet advertising would be less effective, which would reduce demand for Internet advertising and harm our business.

Our customers are also subject to various federal and state regulations concerning the collection and use of information regarding individuals. These laws include the Children's Online Privacy Protection Act, the Federal Drivers Privacy Protection Act of 1994, the privacy provisions of the Gramm-Leach-Bliley Act, as well as other laws that govern the collection and use of consumer credit information. We cannot assure you that their clients are currently in compliance, or will remain in compliance, with these laws and their own privacy policies. We may be held liable if our clients use our technology in a manner that is not in compliance with these laws or their own stated privacy standards.

Mediaplex, Inc., ValueClick's wholly-owned subsidiary acquired on October 19, 2001, is involved in three putative class action lawsuits. In July and August 2001, these class action lawsuits were commenced on behalf of all persons who acquired Mediaplex securities between November 19, 1999 and December 6, 2000. The cases are entitled Levovitz vs. Mediaplex, Inc. et al., Atlas vs. Mediaplex, Inc. et al., and Mashayekh vs. Mediaplex, Inc. et al. In addition to Mediaplex and each of its underwriters for its November 1999 initial public offering, Gregory Raifman, Sandra Abbott, Jon Edwards, Lawrence Lenihan, Peter Sealy, James Desorrento, and A. Brooke Seawell, all of whom are former officers and directors of Mediaplex, are named as individual defendants. Mr. Raifman is a current member of the ValueClick board of directors. The cases are pending before the United States District Court for the Southern District of New York.

In October of 2001, ValueClick received a demand letter from 24/7 Real Media, Inc. ("24/7") alleging that the ad-serving technology of both ValueClick and Mediaplex infringes upon 24/7 Real Media's "368 ad-serving patent and including a demand that the companies purchase a license for the patent. ValueClick responded with a detailed letter denying liability. In February 2002, 24/7 Real Media filed a patent infringement suit against ValueClick and Mediaplex in the Southern District of New York. The complaint seeks injunctive relief and unspecified damages relating to alleged patent infringement of 24/7 Real Media's "368 patent. ValueClick believes that neither it's nor Mediaplex's technology violates 24/7 Real Media's patent. In February of 2002, after receiving notice of 24/7 Real Media's lawsuit, ValueClick filed a Declaratory Judgment action in the United States District Court for the Northern District of California. The parties are currently litigating the issue of venue. ValueClick believes that the patent infringement allegations are without merit and intends to vigorously defend itself. ValueClick has not recorded any accrual related to damages, if any, resulting from this case, as an unfavorable outcome is, in management's opinion, not probable and an amount of loss, if any, is not estimable.

On February 22, 2001, a complaint was filed in Los Angeles Superior Court (Case No. BC245538) against ValueClick, its subsidiary ClickAgents, and the two founders of ClickAgents, both of whom remain employees of ClickAgents. The plaintiff, Adam Powell, alleged that the founders of ClickAgents entered into a joint venture agreement and other related agreements with him in early 1999, and that the founders and ClickAgents breached those agreements in July 1999 when the plaintiff's relationship with ClickAgents was terminated. The plaintiff also asserted various other causes of action, including fraud, breach of fiduciary duty, and conversion, arising from the same set of allegations. The plaintiff claimed he was entitled to a percentage of ClickAgents' profits and a percentage of the merger consideration from ValueClick, which the plaintiff estimated in his complaint to exceed $11 million, and to other equitable relief, including appointment of a receiver. On May 4, 2001, the plaintiff filed a First Amended Complaint, removing some of his causes of actions and adding Chase Mellon Shareholder Services, LLC, ValueClick's transfer agent and registrar, as a new defendant.

On May 25, 2001, ValueClick and ClickAgents jointly filed a demurrer and motion to strike with the court. On June 15, 2001, the court granted in part ValueClick's and ClickAgents' demurrer and dismissed all claims against ValueClick and ClickAgents and ordered the plaintiff to file an amended complaint against the remaining individual defendants in the case. On July 18, 2001, the plaintiff filed a petition for a writ of mandate requesting that the Court of Appeals vacate the court's order to dismiss ValueClick and ClickAgents. The Court of Appeals summarily denied that petition on August 7, 2001. The litigation, including the appeal, was settled on January 22, 2002. Pursuant to the terms of the settlement, the plaintiff received 363,409 shares of ValueClick common stock held in an escrow account established in connection with the acquisition of ClickAgents that would have otherwise been distributed to the stockholders of ClickAgents. Immediately upon delivery of these shares, ValueClick purchased the shares from the plaintiff pursuant to a redemption agreement for approximately $1.1 million. The Superior Court complaint and the Court of Appeals proceeding have been dismissed with prejudice, and the litigation is thus concluded.

Other than the 24/7 Real Media, ClickAgents and Mediaplex matters discussed above, we are not a party to any other material legal proceedings, nor are we aware of any pending or threatened litigation that would have a material adverse effect on our business, operating results, cash flows or financial condition. From time to time, we may become subject to additional legal proceedings, claims, and litigation arising in the ordinary course of business. In addition, we may receive letters alleging infringement of patent or other intellectual property rights. Our management believes that these letters generally are without merit and intend to contest them vigorously.

On March 10, 2002, we entered into a merger agreement with Be Free, Inc., a prominent provider of performance-based marketing technology and services. The merger agreement, which has been approved by the board of directors of both companies, provides that each holder of Be Free common stock will receive 0.65882 shares of our common stock for each share of Be Free common stock they own. The merger, anticipated to close by the end of May 2002, is subject to approval by the stockholders of both companies, regulatory approval and other customary closing conditions. In the merger, we expect to issue approximately 43.4 million shares of our common stock for all the outstanding common stock of Be Free and assume Be Free outstanding options to purchase approximately 6.4 million shares of our common stock. The shares to be used in the merger have been registered through a Registration Statement filed on Form S-4, as amended, originally filed with the Securities and Exchange Commission ("SEC") on March 22, 2002 and declared effective by the SEC on April 15, 2002. When the merger is completed, Be Free will become our wholly-owned subsidiary and Be Free's stockholders will own approximately 45% of the combined company's outstanding shares.

The combined company will be named ValueClick, Inc., and will have worldwide headquarters in Westlake Village, California.

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.

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements:
	Condensed Consolidated Balance Sheets as of December 31, 2001 and March 31, 2002 (unaudited)	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three-month Periods Ended March 31, 2001 and 2002 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Three-month Periods Ended March 31, 2001 and 2002 (unaudited)	5
	Notes to the Condensed Consolidated Financial Statements (unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	21
PART II.	OTHER INFORMATION AND SIGNATURES
Item 1.	Legal Proceedings	37
Item 5.	Other Information	38
Item 6.	Exhibits and Reports on Form 8-K	39
Signatures		40

			December 31, 2001			March 31, 2002
						(Unaudited)
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents		$	26,891,000		$	23,969,000
	Marketable securities			136,464,000			135,996,000
	Accounts receivable, net			9,026,000			9,203,000
	Income taxes receivable			257,000			340,000
	Deferred tax assets			1,066,000			1,394,000
	Prepaid expenses and other current assets			933,000			989,000

		Total current assets		174,637,000			171,891,000
	Property and equipment, net			7,125,000			5,535,000
	Intangible assets, net			7,500,000			8,102,000
	Other assets			1,364,000			1,623,000

TOTAL ASSETS			$	190,626,000		$	187,151,000

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
	Accounts payable and accrued expenses		$	11,925,000		$	9,992,000
	Income taxes payable			148,000			5,000
	Deferred revenue			93,000			79,000
	Note payable, current portion			266,000			266,000
	Capital lease obligation, current portion			277,000			277,000

		Total current liabilities		12,709,000			10,619,000
Notes payable, less current portion				869,000			729,000
Capital lease obligation, less current portion				123,000			42,000
Other non-current liabilities				33,000			33,000
Minority interest in consolidated subsidiary				11,385,000			11,321,000
STOCKHOLDERS' EQUITY:
	Preferred stock			—			—
	Common stock			53,000			54,000
	Additional paid-in capital			238,522,000			239,700,000
	Treasury stock, at cost			(2,959,000	)		(4,059,000	)
	Deferred stock compensation			(1,453,000	)		(903,000	)
	Accumulated deficit			(63,634,000	)		(64,749,000	)
	Accumulated other comprehensive loss			(5,022,000	)		(5,636,000	)

		Total stockholders' equity		165,507,000			164,407,000

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY			$	190,626,000		$	187,151,000

			Three-month Period Ended March 31,
			2001			2002
Revenues			$	12,716,000		$	12,356,000
Cost of revenues				6,123,000			4,571,000

	Gross profit			6,593,000			7,785,000
Operating expenses:
	Sales and marketing (excludes stock-based compensation of $303,000 and $174,000 for 2001 and 2002, respectively)			2,965,000			3,966,000
	General and administrative (excludes stock-based compensation of $498,000 and $285,000 for 2001 and 2002, respectively)			3,710,000			3,738,000
	Product development (excludes stock-based compensation of $159,000 and $91,000 for 2001 and 2002, respectively)			1,041,000			2,121,000
	Stock-based compensation			960,000			550,000
	Amortization of intangible assets			462,000			45,000
	Merger-related costs			713,000			17,000

		Total operating expenses		9,851,000			10,437,000

Loss from operations				(3,258,000	)		(2,652,000	)
	Interest income, net			1,390,000			1,277,000
	Foreign currency transaction loss			—			59,000

Loss before income taxes and minority interest				(1,868,000	)		(1,316,000	)
	Provision for (benefit from) income taxes			100,000			(137,000	)

Loss before minority interest				(1,968,000	)		(1,179,000	)
	Minority share of (income) loss of subsidiary			(144,000	)		64,000

Net loss			$	(2,112,000	)	$	(1,115,000	)

Basic and diluted net loss per common share:			$	(0.06	)	$	(0.02	)

Shares used to calculate basic and diluted net loss per common share:				36,436,000			53,250,000

Net loss			$	(2,112,000	)	$	(1,115,000	)
Other comprehensive income (expense):
	Foreign currency translation adjustment			(2,687,000	)		(177,000	)
	Unrealized gain (loss) on marketable securities, net of tax			135,000			(437,000	)

Comprehensive loss			$	(4,664,000	)	$	(1,729,000	)

			Three-month period ended March 31,
			2001			2002
Net cash used in operating activities			$	(2,473,000	)	$	(1,572,000	)
	Cash flows from investing activities:
		Purchase of marketable securities		—			(1,259,000	)
		Proceeds from the sale of marketable securities		—			1,000,000
		Purchases of property and equipment		(641,000	)		(126,000	)
		Purchases of intangible assets		(14,000	)		(13,000	)

Net cash used in investing activities				(655,000	)		(398,000	)

	Cash flows from financing activities:
		Purchase of treasury stock		—			(1,100,000	)
		Proceeds from the exercises of common stock options		19,000			546,000
		Repayments on short-term debt		(101,000	)		—
		Repayments on notes payable and capital leases		(6,000	)		(221,000	)

Net cash used in financing activities				(88,000	)		(775,000	)

		Effect of currency translations		(2,687,000	)		(177,000	)

Net decrease in cash and cash equivalents				(5,903,000	)		(2,922,000	)
Cash and cash equivalents, beginning of period				121,204,000			26,891,000

Cash and cash equivalents, end of period			$	115,301,000		$	23,969,000

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTIING AND FINANCING TRANSACTIONS:
		Issuance of common stock for earnout provision of purchase business combination	$	—		$	633,000

2.1*		Agreement and Plan of Merger, dated as of March 10, 2002, by and among ValueClick, Inc., Bravo Acquisition I. Corp. and Be Free, Inc.
10.1*		Form of Voting Agreement by and between ValueClick, Inc. and Be Free, Inc. stockholders (including a schedule of substantially identical agreements)

	VALUECLICK, INC. (Registrant)
	By:	/s/ KURT A. JOHNSON Kurt A. Johnson Chief Financial Officer (Principal Financial and Accounting Officer)
Dated: May 13, 2002