================================================================================

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark one)
|X| Quarterly Report Pursuant to Section 13 or 15 (d) of the 
    Securities Exchange Act of 1934

For the quarterly period ended March 31,1999

                                       or

|_| Transitional Report Pursuant to Section 13 or 15(d) of the 
    Securities Exchange Act of 1934

For the transition period from         to

                         Commission file number 1-14355


                                24/7 Media, Inc.
             (Exact name of registrant as specified in its charter)


           Delaware                                             13-3995672
(State or other jurisdiction                                   (IRS Employer 
of incorporation or organization)                            Identification No.)

                                      7319
                    (Standard Industrial Classification Code)

          1250 Broadway, New York, NY                      10001
    (Address of principal executive offices)            (Zip Code)
                                                 
                                 (212) 231-7100
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant 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  X  No
                                       ---    --- 


                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

                 Class                            Outstanding at May 4, 1999
 Common Stock, par value $.01 per share                20,169,776 Shares

================================================================================

<PAGE>

                                24/7 MEDIA, INC.

                                      INDEX

<TABLE>
<CAPTION>
                                                                       Page No.
                                                                       --------

<S>                                                                          <C>
PART I.        FINANCIAL INFORMATION

Item 1. Consolidated Condensed Financial Statements (unaudited)

        Consolidated Condensed Balance Sheets................................ 3
                                                                              
        Consolidated Condensed Statements of Operations...................... 4
                                                                              
        Consolidated Condensed Statements of Cash Flows...................... 5
                                                                              
        Notes to Interim Consolidated Condensed Financial Statements......... 6
                                                                             
Item 2. Management's Discussion and Analysis of Financial Condition 
        and Results of Operations ...........................................13


PART II.       OTHER INFORMATION

Item 1. Legal Proceedings....................................................25

Item 2. Changes in Securities and Use of Proceeds............................25

Item 3. Defaults Upon Senior Securities......................................25

Item 4. Submission of Matters to a Vote of Security Holders..................25

Item 5. Other Information....................................................25

Item 6. Exhibits and Reports on Form 8-K.....................................25

Item 7. Signatures...........................................................26
</TABLE>


                                       2
<PAGE>


                                24/7 MEDIA, INC.
                      CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                         March 31,         December 31,
                                                                            1999               1998
                                                                        ------------       ------------
                                                                        (unaudited)
<S>                                                                     <C>                <C>         
                                 ASSETS
Current assets:
  Cash and cash equivalents ........................................    $ 21,302,000       $ 34,049,000
  Accounts receivable, net of allowance for doubtful
     accounts of $224,000 and $268,000, respectively ...............      11,100,000          8,678,000
  Prepaid expenses and other current assets ........................       1,453,000            550,000
                                                                        ------------       ------------
                    Total current assets ...........................      33,855,000         43,277,000
                                                                        ------------       ------------

Property and equipment, net ........................................       4,448,000          2,099,000
Goodwill, net ......................................................      11,345,000         10,935,000
Intangible assets, net .............................................          23,000             16,000
Investments in affiliated company ..................................       6,566,000          6,566,000
Partner agreement ..................................................       3,543,000                 --
Deferred offering costs ............................................         310,000                 --
Other assets .......................................................         355,000            215,000
                                                                        ------------       ------------
       Total assets ................................................    $ 60,445,000       $ 63,108,000
                                                                        ============       ============

                   LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable .................................................       9,657,000          5,797,000
  Accrued liabilities ..............................................       2,558,000          5,201,000
  Loan payable .....................................................              --            593,000
  Short term credit line ...........................................              --            180,000
  Current installments of obligations under capital leases .........          45,000             82,000
  Deferred revenue .................................................         244,000            134,000
                                                                        ------------       ------------
       Total current liabilities ...................................      12,504,000         11,987,000
                                                                        ------------       ------------

Obligations under capital leases, excluding current installments ...          36,000             34,000

Stockholders' equity:
  Convertible preferred stock, $.01 par value;
    10,000,000 shares authorized; no shares issued
    or outstanding .................................................              --                 --
  Common stock, $.01 par value; 70,000,000 shares
    authorized; 17,252,579 and 16,435,494 shares
    issued and outstanding, respectively ...........................         173,000            164,000
  Additional paid-in capital .......................................      96,026,000         92,002,000
  Deferred stock compensation ......................................        (316,000)          (345,000)
  Accumulated deficit ..............................................     (47,978,000)       (40,734,000)
                                                                        ------------       ------------
       Total stockholders' equity ..................................      47,905,000         51,087,000
                                                                        ------------       ------------

Commitments and contingencies
       Total liabilities and stockholders' equity ..................    $ 60,445,000       $ 63,108,000
                                                                        ============       ============
</TABLE>

     See accompanying notes to consolidated condensed financial statements.

                                       3
<PAGE>

                                24/7 MEDIA, INC.
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                        Three months ended March 31,
                                                  -----------------------------------------
                                                         1999                 1998
                                                  -------------------- --------------------
                                                      (unaudited)          (unaudited)
<S>                                                      <C>                   <C>        
Total revenues.................................          $ 11,450,000          $ 1,204,000
                                                 
Cost of revenues...............................             8,796,000              952,000
                                                  -------------------- --------------------
                                                 
                    Gross profit...............             2,654,000              252,000
                                                  -------------------- --------------------
                                                 
Operating expenses:
    Sales and marketing........................             3,494,000              698,000
    General and administrative.................             3,512,000            1,413,000
    Product development........................               922,000               30,000
    Amortization of goodwill...................             2,258,000              335,000
                                                  -------------------- --------------------
                    Total operating expenses...            10,186,000            2,476,000
                                                  -------------------- --------------------
                    Loss from operations.......            (7,532,000)          (2,224,000)
                                                 
Interest income................................               311,000                   --
Interest expense...............................               (23,000)            (188,000)
                                                  -------------------- --------------------
                    Net loss...................            (7,244,000)          (2,412,000)
                                                 
Cumulative dividends on preferred stock........                    --              (33,000)
                                                  -------------------- --------------------
Net loss attributable to common                  
   stockholders................................          $ (7,244,000)        $ (2,445,000)
                                                  ==================== ====================
Net loss per share - basic and diluted.........          $      (0.42)        $      (0.64)
                                                  ==================== ====================
Weighted average shares outstanding............            17,129,479            3,818,053
                                                  ==================== ====================
</TABLE>
                                                                       
     See accompanying notes to consolidated condensed financial statements.


                                       4
<PAGE>


                                24/7 MEDIA, INC.
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                         Three Months Ended March 31,        
                                                                                       -------------------------------
                                                                                           1999               1998
                                                                                       ------------        -----------
                                                                                        (unaudited)        (unaudited)
<S>                                                                                    <C>                 <C>         
Cash flows from operating activities:
    Net loss ......................................................................    $ (7,244,000)       $(2,412,000)
    Adjustments to reconcile net loss to net cash used
    in operating activities:
    Depreciation and amortization .................................................         319,000            110,000
    Amortization of debt discount .................................................              --            150,000
    Gain on dispostion of property and equipment ..................................              --             37,000
    Accrued interest on senior convertible notes-related                                                      
    parties .......................................................................              --              8,000
    Imputed interest on note payable-related party ................................              --              9,000
    Amortization of intangible assets .............................................       2,349,000            335,000
    Non-cash compensation .........................................................          29,000            473,000
    Changes in operating assets and liabilities, net of effect of acquisitions:
        Accounts receivable, net ..................................................      (2,139,000)          (604,000)
        Prepaid expenses and other current assets .................................        (926,000)           (68,000)
        Other assets ..............................................................        (140,000)                --
        Accounts payable ..........................................................       3,373,000            (78,000)
        Accrued liabilities .......................................................      (3,197,000)          (287,000)
        Deferred revenue ..........................................................         110,000            (55,000)
                                                                                       ------------        -----------
              Net cash used in operating activities ...............................      (7,466,000)        (2,374,000)
                                                                                       ------------        -----------

Cash flows from investing activities:
    Increase in intangible assets .................................................          (7,000)                --
    Cash paid for acquisition, net of cash acquired ...............................      (1,107,000)           169,000
    Purchases of property and equipment ...........................................      (2,542,000)           (98,000)
                                                                                       ------------        -----------
              Net cash (used in) provided by investing activities .................      (3,656,000)            71,000
                                                                                       ------------        -----------

Cash flows from financing activities:
    Repayment of loans payable ....................................................      (1,439,000)                --
    Proceeds from issuance of mandatorily
       redeemable convertible preferred stock .....................................              --         10,060,000
    Deferred offering costs .......................................................        (310,000)          (288,000)
    Proceeds from senior convertible notes payable-
       related parties ............................................................              --            150,000
    Payment of capital lease obligations ..........................................         (62,000)           (68,000)
    Net proceeds from exercise of stock options ...................................         366,000                 --
    (Payments)/proceeds of short-term borrowings ..................................        (180,000)           105,000
                                                                                       ------------        -----------
              Net cash (used in) provided by financing activities .................      (1,625,000)         9,959,000
                                                                                       ------------        -----------
              Net change in cash and cash equivalents .............................     (12,747,000)         7,656,000

Cash and cash equivalents at beginning of period ..................................      34,049,000            121,000
                                                                                       ------------        -----------

Cash and cash equivalents at end of period ........................................    $ 21,302,000        $ 7,777,000
                                                                                       ============        ===========
</TABLE>

     See accompanying notes to consolidated condensed financial statements.

                                       5
<PAGE>


                                24/7 MEDIA, INC.
    NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - UNAUDITED

The terms "we" and "our company" mean 24/7 Media, Inc., our subsidiaries and
each of our predecessor entities.

(1) Summary of Operations and Significant Accounting Policies

(a) Summary of Operations

We operate networks of Web sites that enable both advertisers and Web publishers
to capitalize on the opportunities presented by Internet advertising, direct
marketing and electronic commerce. We generate revenues by delivering
advertisements and promotions to Web sites affiliated with us. Our network
properties include The 24/7 Network, The 24/7 Media Europe Network, and The
ContentZone, which are networks of Web sites to which advertisements and
promotions are served. In addition, we provide e-mail based direct marketing
services.

We were incorporated in Delaware on January 23, 1998 as a wholly owned
subsidiary of Interactive Imaginations, Inc. On February 25, 1998, pursuant to
an Agreement and Plan of Merger dated February 2, 1998, we simultaneously
completed the merger of each of Petry Interactive, Inc. and Advercomm, Inc. with
and into us (the mergers, together with a concurrent investment of approximately
$10 million by certain third party investors as well as with an existing
investor of Interactive Imaginations, are referred to herein as the "Initial
Merger"). On April 9, 1998, Interactive Imaginations, our then parent, was
merged with and into us in a manner similar to a pooling of interests. As a
result, our historical results of operations for all periods prior to the
Initial Merger represent those of Interactive Imaginations.

On April 13, 1998, we acquired Intelligent Interactions Corporation, a
corporation that developed and licensed ad serving technology and e-commerce
software. As of June 1, 1998, we acquired CliqNow!, a network of Web sites that
were subsequently folded into The 24/7 Network. On December 29, 1998, we
acquired a 67% interest in CardSecure, Inc. On December 30, 1998, we acquired a
10% common equity interest in China.com Corporation.

Our December 1998 equity investment in China.com is being accounted for under
the cost method of accounting and, accordingly, this investment is carried as a
long-term asset on our balance sheet.

On January 20, 1999, we invested $3.9 million in the aggregate to purchase a 60%
interest in 24/7 Media Europe, Ltd. (formerly InterAd Holdings Limited), which
operates The 24/7 Media Europe Network. Approximately $1.9 million paid in cash
to acquire shares directly from 24/7 Europe. The remaining balance included $1.1
million which was used to acquire shares from existing shareholders and $846,000
which was subsequently used to repay a loan payable. The aggregate purchase
price was allocated to net tangible liabilities consisting primarily of cash,
accounts receivable, property and equipment, accounts payable and accrued
liabilities. The purchase price in excess of the value of identified tangible
assets and liabilities assumed, in the amount of $2.7 million, was allocated to
goodwill and other intangibles and is being amortized over its estimated useful
life of four years.

On March 8, 1999, we acquired Sift, Inc., a provider of e-mail based direct
marketing services, for approximately 763,000 shares of our common stock plus
the assumption of previously-outstanding stock options which were converted into
options to acquire approximately 109,000 shares of our common stock.

The acquisitions of Petry, Advercomm, Intelligent Interactions, CliqNow!,
CardSecure and 24/7 Media Europe have been accounted for using the purchase
method of accounting and, accordingly, their respective financial statements are
included in our consolidated financial statements from their respective dates of
acquisition.


                                       6
<PAGE>

The acquisition of Sift has been accounted for as a pooling-of-interests and,
accordingly, our historical consolidated financial statements have been restated
to include the accounts and results of operations of Sift. The results of
operations previously reported by the separate businesses and the combined
amounts presented in the accompanying consolidated financial statements are
presented below.

<TABLE>
<CAPTION>
                                      Three Months         Three Months
                                          Ended                Ended
                                     March 31, 1999       March 31, 1998
                                     --------------       --------------
                                       (unaudited)          (unaudited)
            <S>                       <C>                   <C>         
            Net revenues
               24/7 Media             $11,071,000            $1,076,000
               Sift                       379,000               128,000
                                      -----------            ----------
               Combined               $11,450,000            $1,204,000
                                      ===========            ==========

            Net income (loss)
               24/7 Media             ($7,263,000)          ($2,298,000)
               Sift                        19,000              (114,000)
                                      -----------           ------------
               Combined               ($7,244,000)          ($2,412,000)
                                      ============          ============
</TABLE>

During the first quarter of 1999, we restated our 1998 first quarter results of
operations by combining Sift's financial statements for the three months ended
February 28, 1998 (Sift's second quarter of fiscal 1998) with our consolidated
financial statements for the three months ended March 31, 1998. The three months
ended March 31, 1999 include both our company's and Sift's results of operations
for the same period. We have also restated the consolidated balance sheet as of
December 31, 1998 to include our balance sheet and Sift's balance sheet as of
December 31, 1998. An adjustment has been made to stockholders' equity as of
December 31, 1998 to record Sift's results of operations for Sift's quarter
ended November 30, 1997 and one month ended December 31, 1998. The equity
accounts of the separate entities were combined. As the common stock and
additional paid in capital accounts of the combining enterprise exceeded the par
value of the common stock issued in the business combination, the excess was
added to our additional paid in capital. There were no significant transactions
between our company and Sift prior to the combination.

In March 1999, we signed an exclusive agreement with NBC-Interactive
Neighborhood, or NBC-IN, that allows us to sell advertising on NBC network
television stations and their associated Web sites at the local market level.
Under the terms of the agreement, we will recruit, train and staff sales and
support personnel who will operate out of the local NBC stations as well as in
our regional offices. We will also jointly provide ad sales consulting and
regional representation services to more than 100 NBC stations that are
currently affiliated with NBC-IN.

We will collaborate with NBC-IN on the development of advertising packages that
leverage the reach and brand-building strengths of NBC local television with the
direct response data collection and marketing functionality of NBC's local
station Web sites. Initial launch markets include NBC-owned and operated
stations in New York, Los Angeles, Chicago, Washington, D.C., Dallas and San
Diego with initial plans to follow in an additional 14 broadcast station
markets. In accordance with the terms of the agreement, we will recognize our
commission income only, using a sliding scale commission formula based upon the
aggregate advertising payments for both on-air and internet advertising sold by
us, as defined.

As part of this agreement, we issued to NBC warrants to purchase up to 150,000
shares of our common stock for $26.05 per share. These warrants shall vest and
expire as follows: (1) at any time on or after March 11, 1999 and on or before
March 11, 2002, NBC shall have the right to purchase 75,000 shares at $26.05 per
share; and (2) the remaining 75,000 shares covered by this warrant will vest in


                                       7
<PAGE>

eighteen increments of 4,167 shares each (except for the last increment, which
will consist of 4,161 shares) on the first day of every month beginning with
October 1, 2000 and ending on March 1, 2002 at $26.05 per share. With respect to
each 4,167 share increment, NBC's right to purchase such shares will expire
three years after the vesting date. In the event that NBC terminates the
agreement, the portion of the shares that have not vested as of such termination
date shall immediately expire. The 150,000 warrants to acquire common stock that
were issued to NBC were valued at $3.6 million using a Black-Scholes pricing
model, based on the following assumptions: risk-free interest rate of 6%,
dividend yield of 0%, expected life of 5 years and volatility of 150%. The value
of this contract is reflected in our balance sheet under partner agreement and
will be amortized using the straight-line method over the life of the three-year
contract.

Inherent in our business are various risks and uncertainties, including our
limited operating history, unproven business model and the limited history of
electronic commerce on the Internet. Our success may depend in part upon the
emergence of the Internet as a communications medium, prospective project
development efforts, and the acceptance of our solutions by the marketplace.

(b) Principles of Consolidation

Our unaudited consolidated condensed financial statements as of March 31, 1999
and for the three month periods ended March 31, 1999 and 1998 include our
accounts and those of our majority-owned and controlled subsidiaries from their
respective dates of acquisition. All historical financial statements have been
restated to reflect the acquisition of Sift using the pooling-of-interests
method. All significant intercompany transactions and balances have been
eliminated in consolidation.

The following unaudited pro forma consolidated amounts give effect to all of the
acquisitions accounted for by the purchase method of accounting as if they had
occurred at the beginning of the respective periods, or date of inception, if
later, by consolidating the results of operations of the acquired entities for
the three month periods ended March 31, 1999 and 1998.

              PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                              Three months ended March 31,
                                                              ----------------------------
                                                                   1999           1998
                                                                   ----           ----
<S>                                                           <C>            <C>        
Total revenues.............................................   $11,511,000    $ 2,947,000
Net loss...................................................    (7,554,000)    (6,017,000)
Net loss attributable to common stockholders...............    (7,554,000)    (6,153,000)
Net loss per share--basic and diluted......................   $     (0.44)   $     (1.05)
Weighted average shares used in basic and
 diluted net loss per share calculation....................    17,129,479      5,877,130
</TABLE>

(c) Interim Results

The unaudited consolidated condensed financial statements as of March 31, 1999
and for the three month periods ended March 31, 1999 and 1998 have been prepared
by us and are unaudited. In our opinion, the unaudited consolidated condensed
financial statements have been prepared on the same basis as the annual
financial statements and reflect all adjustments, which include only normal
recurring adjustments, necessary to present fairly the financial position as of
March 31, 1999 and the results of our operations and our cash flows for the
three month periods ended March 31, 1999 and 1998. The financial data and other
information disclosed in these notes to the consolidated condensed financial
statements related to these periods are unaudited. The results for the three
month period ended March 31, 1999 are not necessarily indicative of the results
to be expected for any subsequent quarter or the entire fiscal year ending
December 31, 1999. The consolidated balance sheet at December 31, 1998 has been
derived from the audited financial statements at that date, adjusted to reflect
the acquisition of Sift using the pooling-of-interests method.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the Securities and Exchange
Commission's rules and regulations. It is suggested that these unaudited
consolidated financial statements be read in conjunction with our audited
consolidated financial statements and notes thereto for the year ended December
31, 1998 as included in our report on Form 10-K.


                                       8
<PAGE>

(d) Use of Estimates

The preparation of financial statements in accordance with generally accepted
accounting principles requires us to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

(e) Intangible Assets

Intangible assets including trademarks and licenses are amortized using the
straight-line method over their estimated useful lives of one to five years.

Goodwill resulting from the acquisition of Internet advertising businesses is
estimated by us to be primarily associated with the acquired workforce,
contracts and technological know how. As a result of the rapid technological
changes occurring in the Internet industry and the intense competition for
qualified Internet professionals and customers, recorded goodwill is amortized
on the straight-line basis over the estimated period of benefit, which is two to
four years.

(f) Deferred Offering Costs

At March 31, 1999, specific incremental costs directly attributable to the
issuance of common stock were deferred. These costs will be charged against
additional paid-in capital as a result of our issuance of common stock during
the three months ended June 30, 1999.

(g) Revenue Recognition

Our revenues are derived principally from short-term advertising agreements in
which we deliver advertising impressions for a fixed fee to third-party Web
sites comprising The 24/7 Network, The 24/7 Media Europe Network and The
ContentZone, and to a lesser extent our Riddler.com Web site. Revenues from
advertising are recognized in the period the advertising impressions are
delivered if collection of the resulting receivables is probable. In addition to
advertising revenues, a portion of our revenues are derived from e-mail services
and other services that are provided to Web sites and advertisers.

Third party Web sites that register Web pages with our networks and display
advertising banners on those pages are commonly referred to as our "Affiliated
Web sites." These third party Web sites are not "related party" relationships or
transactions as defined in Statement of Financial Accounting Standards No. 57,
"Related Party Disclosures." We pay our Affiliated Web sites a service fee for
providing advertising space to our networks. We become obligated to make
payments to such Affiliated Web sites, which have contracted with us to be part
of our networks, in the period the advertising impressions are delivered. Such
expenses are classified as cost of revenues in the consolidated statements of
operations.

At March 31, 1999 and December 31, 1998, accounts receivable included
approximately $4,051,000 and $3,510,000, respectively, of unbilled receivables,
which are a normal part of our business, as receivables are generally invoiced
only after the revenue has been earned. The increase in unbilled receivables
from December 31, 1998 to March 31, 1999 resulted from the increase in revenues
generated during the first quarter of 1999. The terms of the related advertising
contracts typically require billing at the end of each month. All unbilled
receivables as of March 31, 1999 have been subsequently billed.


                                        9
<PAGE>

(h) Product Development Costs

Product development costs and enhancements to existing products are charged to
operations as incurred. Software development costs are capitalized when a
product's technological feasibility has been established by completion of a
working model of the product and ending when a product is available for general
release and use.

(i) Loss Per Share

Loss per share is presented in accordance with the provisions of Statement of
Financial Accounting Standards No. 128, Earnings Per Share, (SFAS 128). Basic
EPS excludes dilution for common stock equivalents and is computed by dividing
income or loss available to common shareholders by the weighted average number
of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock and resulted in the issuance of
common stock. Diluted net loss per share is equal to basic net loss per share
since all common stock equivalents are anti-dilutive for each of the periods
presented.

Diluted net loss per common share for the three month periods ended March 31,
1999 and 1998 does not include the effects of options to purchase 2,276,825 and
293,311 shares of common stock, respectively; 3,327,985 and 3,321,167 common
stock warrants, respectively; and 0 and 2,641,807 shares of convertible
preferred stock on an "as if" converted basis, respectively; as the effect of
their inclusion is anti-dilutive during each period.

Net loss applicable to common stockholders for the three months ended March 31,
1998 has been increased to give effect to $33,000 of cumulative dividends on
mandatorily redeemable convertible preferred stock subsequently converted into
common stock in connection with our initial public offering in August 1998.

(j) Recent Accounting Pronouncements

We adopted Statements of Financial Accounting Standards No. 130 (SFAS 130),
"Reporting Comprehensive Income", as of January 1, 1998. SFAS 130 established
standards for reporting and display of comprehensive income and its components
in a full set of general purpose financial statements. This Statement requires
that all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in annual financial statements
that are displayed with the same prominence as other financial statements. For
the three months ended March 31, 1999 and 1998, comprehensive loss was equal to
consolidated net loss reported on the consolidated statement of operations.

We adopted the provisions of Statement of Position 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use" (SOP 98-1) in
the three month period ended March 31, 1999. SOP 98-1 provides guidance for
determining whether computer software is internal-use software and on accounting
for the proceeds of computer software originally developed or obtained for
internal use and then subsequently sold to the public. It also provides guidance
on capitalization of the costs incurred for computer software developed or
obtained for internal use. In connection therewith, we have capitalized certain
costs related to the development of our Profilz database and next-generation ad
serving technology beginning in the three month period ended March 31, 1999.


                                       10
<PAGE>

(k) New Accounting Disclosures

In June 1998, Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities", was issued. SFAS
133 established accounting and reporting standards for derivative instruments
and for hedging activities. SFAS requires that an entity recognize all
derivatives as either assets or liabilities and measure those instruments at
fair value. SFAS 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. SFAS 133 cannot be applied retroactively to
financial statements of prior periods. At the current time we have not evaluated
the impact that SFAS 133 will have, if any.

(2) Balance Sheet Components

<TABLE>
<CAPTION>
                                                                                                 
                                                                   March 31,        December 31, 
                                                                     1999              1998      
                                                                 ------------       ------------ 
                                                                 (unaudited)
<S>                                                              <C>                <C>          
Property and Equipment, Net
       Computer equipment ...................................    $  4,571,000       $  3,067,000 
       Furniture and fixtures ...............................         350,000            261,000 
       Leasehold improvements ...............................       1,278,000            208,000 
                                                                 ------------       ------------ 
                                                                    6,199,000          3,536,000 
       Less accumulated depreciation and amortization .......      (1,751,000)        (1,437,000)
                                                                 ------------       ------------ 
                                                                 $  4,448,000       $  2,099,000 
                                                                 ============       ============ 

Goodwill, net
       Goodwill .............................................    $ 19,325,000       $ 16,657,000 
       Less accumulated amortization ........................      (7,980,000)        (5,722,000)
                                                                 ------------       ------------ 
                                                                 $ 11,345,000       $ 10,935,000 
                                                                 ============       ============ 

Accrued Liabilities
       Professional fees ....................................    $     85,000       $    479,000 
       Employee commissions, incentives, and expenses .......         493,000          2,739,000 
       Ad management fees ...................................         643,000            406,000 
       Affiliate royalties ..................................         448,000            464,000 
       Rent and lease obligations ...........................         228,000            282,000 
       Other ................................................         610,000            831,000 
                                                                 ------------       ------------ 
                                                                 $  2,507,000       $  5,201,000 
                                                                 ============       ============ 
</TABLE>

(3) Common Stock

In March 1999, as part of the acquisition of Sift, we issued 762,621 shares of
our common stock to the shareholders of Sift.


(4) 1998 Stock Incentive Plan

Subsequent to December 31, 1998 through March 31, 1999, we granted a total of
1,029,631 stock options under the 1998 Stock Incentive Plan: 109,331 of such
were assumed as a result of the acquisition of Sift, Inc. at exercise prices
ranging from $0.66 to $1.83 per share, and 920,300 of such were at exercise
prices of $24.88 to $50.25 per share, based on the fair market value of the
underlying common stock at the respective times of grant.

(5) Supplemental Cash Flow Information

The amount of cash paid for interest was $24,000 and $0 for the three month
periods ended March 31, 1999 and 1998, respectively.

Non-cash financing activities:

Warrants to purchase 625,000 shares of our common stock at $3.81 per share were
exercised in January 1999 in exchange for 546,775 shares of our common stock in
a cashless exercise of the warrants.

During the three months ended March 31, 1998, we converted all outstanding
shares of convertible preferred stock into an aggregate of 4,350,441 shares of
common stock, converted $2,556,250 of senior convertible notes payable-related
parties, plus accrued interest, into 828,036 shares of common stock, and
outstanding warrants were converted into 191,349 shares of common stock.


                                       11
<PAGE>

During the three months ended March 31, 1999, we issued an aggregate of 762,621
shares of common stock in connection with the acquisition of Sift.

In March 1999, we issued warrants to purchase up to 150,000 shares of common
stock to NBC-Interactive Neighborhood as part of a three-year exclusive
agreement to sell advertising on NBC Network television stations and their
associated Web sites at the local market level.

(6) Subsequent Events

On April 5, 1999, we entered into a cross promotion agreement with TechWave Inc.
TechWave provides e-commerce technology and enabling services, an online
shopping network, creative design services, and product fulfillment to more than
15,000 Web sites. Under this agreement, we will promote TechWave's services to
our Web sites while TechWave will promote our advertising representation and
e-mail management services to TechWave's clients. In addition, we will co-brand
our Click2Buy transactional banner service with TechWave's ShopNow e-commerce
Web site, an online shopping destination. Each party will receive a share of the
other party's revenues generated under the cross promotion agreement. We also
agreed to acquire 19.8% of TechWave in exchange for consideration of $5 million
in cash plus shares of our common stock with a value equal to $25.1 million. The
investment in TechWave will be carried under the cost method of accounting.

On April 9, 1999, we made an additional investment of $500,000 in the common
stock of 24/7 Media Europe. Combined with our earlier investment, this increased
our total ownership interest in 24/7 Media Europe from 60% to 63%.

On May 3, 1999, we completed an additional offering of our common stock. In this
offering, we sold 2,339,000 primary shares, and selling shareholders sold
1,161,000 shares. Net proceeds to our company from the sale of the primary
shares was approximately $100.2 million.


                                       12
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion contains forward-looking statements within the meaning
of federal securities law. Such statements can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "anticipate,"
"estimate," "continue" or other similar words. These statements discuss future
expectations, contain projections of results of operations or of financial
condition or state other "forward-looking" information. Although we believe that
the expectations reflected in such forward-looking statements are based on
reasonable assumptions, certain factors such as rapid changes in the markets in
which we compete or general economic conditions might cause a difference between
actual results and such forward-looking statements. When considering such
forward-looking statements, prospective investors should consider the "Risk
Factors" and other cautionary statements in this report.

General

We are the result of several mergers and acquisitions, and the combination of
these entities resulted in an integrated Internet advertising company with both
media sales and technology expertise. We were incorporated in January 1998 to
consolidate three Internet advertising companies:

o Petry Interactive, Inc., which established the network business model and
  contributed its network of Web sites which became the foundation for the 24/7
  Network.
o Advercomm, Inc., which folded several high profile Web sites into the 24/7
  Network, which increased the breadth of content available on the 24/7 Network
  and accelerated our ability to organize the 24/7 Network into channels of Web
  sites with similar content.
o Interactive Imaginations, Inc., which contributed the ContentZone, a network
  that offers advertising solutions for small to medium-sized Web sites.

We subsequently acquired Intelligent Interactions, a developer of ad serving and
targeting technology, and CliqNow!, a network of over 75 medium to large Web
sites. We believe that the combination of these predecessor entities has enabled
us to offer advertisers and Web publishers comprehensive advertising solutions
and to pursue our objective of becoming the leading Internet advertising and
direct marketing firm.

In December 1998, we acquired an initial 67% interest, on an as-converted basis,
in CardSecure, a company which provides e-commerce enabling technology as well
as Web site hosting services. In January 1999, we acquired a 60% interest in
24/7 Media Europe Ltd., formerly known as InterAd Holdings Limited, which
operates the 24/7 Media Europe Network. In March 1999, we acquired Sift, Inc., a
full-service e-mail management company.

We generate substantially all of our revenues by delivering advertisements and
promotions to the Web sites on our networks. We typically sell our
advertisements under purchase order agreements with advertisers which are
short-term in nature or subject to cancellation. We sell our products and
services through our sales and marketing staff located in New York, Atlanta,
Boston, Chicago, Dallas, Detroit, Los Angeles, San Francisco, Seattle and the
Washington, D.C. area and 12 offices in Europe.

The pricing of ads is based on a variety of factors, including the gross dollar
amount spent on the advertising campaign and whether the campaign is delivered
on a specific Web site, a channel of Web sites or across an entire network. We
strive to sell 100% of our inventory through the combination of advertisements
sold on a "CPM" basis, which is the cost to the advertiser to run 1,000 ads, and
a "cost-per-action" basis whereby revenues are generated if the user responds to
the ad with an action, such as an inquiry or a purchase of the product
advertised.


                                       13
<PAGE>

We recognize advertising revenues in the period that the advertisement is
delivered, provided that no significant obligations remain. In nearly all cases,
we recognize revenues generated from advertising sales, net of any commissions
paid to advertising agencies on behalf of their clients. We pay our Web sites a
service fee calculated as a percentage of revenues generated by advertisements
run on the Web site, which amount is included in cost of revenues. In addition,
we are generally responsible for billing and collecting for advertisements
delivered to our networks. We expect to generate the majority of our revenues
for the foreseeable future from advertisements delivered to the Web sites on our
networks.

We recently started to sell sponsorship advertising, which involves a greater
degree of coordination among us, the advertiser and our Web sites. These
sponsorships are generally priced based on the length of time that the
sponsorship runs, rather than on a CPM basis. Revenues relating to sponsorship
advertising are recognized ratably over the sponsorship period.

We delivered an aggregate of over 2.1 billion ad impressions during the month of
March 1999, compared to 1 billion ad impressions during the month of December
1998, an increase of 110 percent. We added a number of marquee Web sites during
the first quarter of 1999, including GoTo.com, MGM and SimCity. According to
Media Metrix, our three networks reached 55.3%, or more than one half, of all
U.S. Internet users in March 1999. We believe that this reach figure is among
the highest in the Internet advertising industry. For the three month periods
ended March 31, 1999 and 1998, approximately 48% and 36% of our revenues were
derived from advertisements on our top ten Web sites, respectively. For the
three months ended March 31, 1999, one of our Web sites accounted for
approximately 9% of our total advertising revenue. In addition, for the three
months ended March 31, 1999, one advertiser accounted for approximately 11% of
our revenues and the top ten advertisers and ad agencies accounted for
approximately 45% of our revenues.

The period-to-period comparisons of our historical operating results should not
be relied upon as indicative of future performance. Our prospects should be
considered in light of the risks, expenses and difficulties encountered by
companies in the early stages of development, particularly companies in the
rapidly evolving Internet market. Although we have experienced revenue growth in
recent periods, we anticipate that we will incur operating losses for the
foreseeable future due to a high level of planned operating and capital
expenditures. In particular, we expect to increase our operating expenses and
capital expenditures in order to expand our sales and marketing organization and
to develop, integrate and scale our Profilz database and proprietary ad serving
technologies.

Recent Developments

On April 5, 1999, we entered into a cross promotion agreement with TechWave Inc.
TechWave provides e-commerce technology and enabling services, an online
shopping network, creative design services, and product fulfillment to more than
15,000 Web sites. Under this agreement, we will promote TechWave's services to
our Web sites while TechWave will promote our advertising representation and
e-mail management services to TechWave's clients. In addition, we will co-brand
our Click2Buy transactional banner service with TechWave's ShopNow e-commerce
Web site, an online shopping destination. Each party will receive a share of the
other party's revenues generated under the cross promotion agreement. We also
agreed to acquire 19.8% of TechWave in exchange for consideration of $5 million
in cash plus shares of our common stock with a value equal to $25.1 million. The
investment in TechWave will be carried under the cost method of accounting.

On April 9, 1999, we made an additional investment of $500,000 into the common
stock of 24/7 Media Europe. Combined with our earlier investment, this increased
our total ownership interest in 24/7 Media Europe from 60% to 63%.


                                       14
<PAGE>

On May 3, 1999, we completed a follow-on offering of our common stock. In this
offering, we sold 2,339,000 primary shares, and selling shareholders sold
1,161,000 shares. Net proceeds to our company from the sale of the primary
shares was approximately $100.2 million. We expect to use the proceeds from this
offering for general corporate purposes, including working capital, expansion of
sales and marketing capabilities, capital expenditures and possible
acquisitions.

Results of Operations

Revenues. Our revenue increased in the three month period ended March 31 from
1998 to 1999 primarily due to an increase in the number of Web sites on the 24/7
Network, the addition of the 24/7 Media Europe Network, and an increase in the
number of advertisers utilizing our advertising solutions and the number of
advertisements delivered to the 24/7 Network and the 24/7 Media Europe Network.
We expect the 24/7 Network to continue to account for a significant portion of
our total advertising revenue for the foreseeable future. In addition to our
advertising revenue, we generated increased revenue from the growth of e-mail
services and solutions that were delivered through Sift.

Cost of Revenues and Gross Profit. Cost of revenues consists primarily of fees
paid to Affiliated Web sites, which are calculated as a percentage of revenues
resulting from ads delivered on our networks. Cost of revenues also includes
third party ad serving costs, depreciation of our ad serving system, Internet
access costs, and direct costs of e-mail services. The increases in gross profit
in the three month period from 1998 to 1999 was caused by (1) the significant
growth in advertising revenue generated by the 24/7 Network; and (2) an increase
in third party ad serving costs related to the growth of the 24/7 Network and
the addition of the ad serving costs related to the 24/7 Media Europe Network.
Until we complete the transition to a single ad serving platform, we expect to
incur ad serving costs that are higher than historical levels. Thereafter, we
expect gross margins to increase because third party ad serving fees will no
longer be paid.

Operating Expenses. Each of sales and marketing, general and administrative,
product development and amortization of goodwill expenses increased in the three
month period from 1998 to 1999 as (1) we incurred expenses in connection with
the growth of our business; and (2) we included the operations of the various
businesses that we acquired in our results of operations.

Sales and Marketing Expenses. Sales and marketing expenses consist primarily of
sales force salaries and commissions, advertising expenditures and costs of
trade shows, conventions and marketing materials. We expect sales and marketing
expenses to increase as we continue to invest in sales and marketing personnel,
expand into new markets and broaden our visibility in the marketplace. Areas of
concentration for future growth are expected to include U.S. advertising,
European advertising, e-mail services and e-commerce initiatives.

General and Administrative Expenses. General and administrative expenses consist
primarily of compensation, facilities expenses and other overhead expenses
incurred to support the growth of the business. We expect general and
administrative expenses to increase as we incur increased levels of expenses to
support future growth.

Product Development Expenses. Product development expenses consist primarily of
compensation and related costs incurred to further develop our database and ad
serving capabilities. We believe that continued investment in product
development, particularly for our Profilz database and ad serving system, is
critical to our strategy of providing excellent service, and we expect to
increase the future amounts spent on product development.

Amortization of Goodwill. We recorded goodwill amortization expense beginning in
the first quarter of 1998, which represents the excess purchase price over the
fair value of net liabilities of the acquired


                                       15
<PAGE>

businesses of Petry, Advercomm, CliqNow!, Intelligent Interactions, CardSecure
and 24/7 Media Europe from their respective dates of acquisition.

Liquidity and Capital Resources

Prior to our initial public offering in August 1998, we financed our operations
primarily from private placements of equity and convertible debt securities.
Concurrently with the merger of Petry and Advercomm into us in February 1998, we
completed a private placement of preferred stock and warrants which resulted in
net proceeds of $9.8 million. In August 1998, we completed our initial public
offering of common stock from which we realized net proceeds of approximately
$44.8 million. As of March 31, 1999, we had cash and cash equivalents of $21.3
million. Subsequent to March 31, 1999, we completed a follow-on offering
including the sale of 2,339,000 primary shares of common stock, resulting in net
proceeds of approximately $100.2 million.

In addition to funding on-going operations, our principal commitments consist of
various obligations under operating and capital leases. During the fourth
quarter of 1998, we entered into a lease line of credit for up to $3.0 million
with Chase Manhattan Bank to finance capital equipment. As of March 31, 1999,
total obligations under this lease line of credit were approximately $600,000.

Furthermore, we incurred approximately $1.0 million in leasehold improvements
prior to moving into additional leased office space at our headquarters in New
York City, which lease runs through 2008. In the aggregate, our annual lease
expense for this office space will be approximately $1.2 million. We believe
that the expenses associated with such additional office space will not have a
material effect on our financial position.

Net cash used in operating activities was $7.5 million and $2.4 million for the
three month periods ended March 31, 1999 and 1998, respectively. Net cash used
in operating activities resulted from our net operating losses, adjusted for
certain non-cash items, including:

o significant increases in accounts receivable, accounts payable and accrued
  liabilities in 1999, resulting from the significant increase in revenues and
  related expenses in the first quarter of 1999 compared to 1998; and
o the  amortization of goodwill in 1999 related to the acquisitions we completed
  in 1998 and 1999.

The significant increase in accounts receivable at March 31, 1999 is partially
attributable to the increase in unbilled receivables from $3.5 million at
December 31, 1998 to $4.1 million at March 31, 1999 that also resulted from the
increase in revenues generated during the first quarter of 1999. Unbilled
receivables, which are a normal part of our business, represent receivables
which are generally invoiced only after the revenue has been earned. The terms
of the related contracts typically require billing at the end of each month. All
unbilled receivables as of March 31, 1999 have been subsequently billed.

Net cash (used in) provided by investing activities was $3.7 million and $71,000
for the three month periods ended March 31, 1999 and 1998, respectively. Net
cash used in investing activities resulted primarily from capital expenditures
relating to computer hardware and capitalized software, and the cash purchase of
a majority interest in 24/7 Media Europe. During 1999, we expect to incur
significant capital expenditures related to the expansion of our business. In
particular, we intend to develop and enhance our proprietary ad serving
technology and our Profilz database, which may involve investments in software
and hardware that in the aggregate could total approximately $15 million. To the
extent that we invest in significant ad serving and database software and
hardware or make cash investments in other businesses in the future, net cash
used in investing activities could increase.


                                       16
<PAGE>

Net cash (used in) provided by financing activities was $1.6 million and $10.0
million for the three month periods ended March 31, 1999 and 1998, respectively.
Net cash provided by financing activities during the 1998 period included
issuances of convertible preferred stock and warrants. Prior to December 31,
1998, all of the previously issued convertible notes, convertible preferred
stock and warrants were converted or exercised into common stock, except for
warrants to purchase approximately 3.8 million shares of common stock with
exercise prices ranging from $3.81 to $11.42 per share.

No provision for federal or state income taxes has been recorded because we
incurred net operating losses for all periods presented. At December 31, 1998,
we had approximately $30.9 million of federal and state net operating loss
carryforwards available to offset future taxable income; such carryforwards
expire in various years through 2018. As a result of various equity transactions
during 1996, 1997 and 1998, we believe that our company has undergone an
"ownership change" as defined by section 382 of the Internal Revenue Code.
Accordingly, the utilization of a portion of the net operating loss carryforward
may be limited. Due to this limitation, and the uncertainty regarding the
ultimate utilization of the net operating loss carryforward, we have not
recorded any tax benefit for losses and a valuation allowance has been recorded
for the entire amount of the net deferred tax asset. In addition, events such as
our initial public offering and other sales of our stock may partially restrict
our ability to utilize our net operating loss carryforwards.

On January 20, 1999, we invested $3.9 million in the aggregate to purchase a 60%
interest in 24/7 Media Europe Ltd. We invested $1.9 million to acquire shares
directly from 24/7 Media Europe, acquired other shares from existing share
holders in the amount of $1.1 million and subsequently paid off a loan of
$846,000.

We expect to invest an additional aggregate of up to $5 million of working
capital in our purchased subsidiaries and majority-owned businesses in 1999 to
support their future operations.

We believe that our current cash and cash equivalent balances, combined with the
net proceeds from our recently completed follow-on offering, will be sufficient
to fund our requirements for working capital and capital expenditures for at
least the next 12 months. To the extent that we encounter unanticipated
opportunities, we may need to raise additional funds sooner, in which case we
may sell additional equity or debt securities or borrow funds from banks or
other financial sources. Sales of additional equity or convertible debt
securities may result in additional dilution of our stockholders. We cannot be
certain that we will be able to sell additional equity or debt securities in the
future or that additional financing will be available to us when needed on
commercially reasonable terms, or at all.

Year 2000 Compliance

Beginning in the year 2000, the date fields coded in some software products and
computer systems will need to accept four digit entries in order to distinguish
21st century dates from 20th century dates and, as a result, many companies'
software and computer systems may need to be upgraded or replaced in order to
comply with such "Year 2000" requirements. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail. Significant uncertainty exists in the software industry concerning the
potential effects associated with such compliance issues.

State of Readiness. We have developed a remediation plan for our Year 2000 issue
that involves identification, assessment and testing of the equipment and
systems affected:

o We have assessed our information technology (IT) equipment and systems, which
  includes our ad servers and ad serving technology.
o We have identified and assessed non-information technology (non-IT) embedded
  systems such as building security, voice mail, fire prevention, climate
  control and other systems.
o We are analyzing the readiness of significant third party vendors and
  suppliers of services.


                                       17
<PAGE>

Our evaluation, which we expect to complete by the second quarter of 1999,
covers the following phases:

o identification of all IT equipment and systems, and non-IT systems;
o assessment of repair or replacement requirements;
o repair or replacement;
o testing;
o implementation; and
o creation of contingency plans in the event of Year 2000 failures.

We have reviewed our non-IT systems and internally developed programs, and we do
not consider them to be date sensitive to the Year 2000. Based on this
evaluation, we do not believe that our systems and programs present Year 2000
issues, and we generally believe that we will be Year 2000 compliant.

We have internally developed ad serving systems and a financial system and are
using a service bureau for ad serving and payroll. We believe that our IT
systems are sensitive to Year 2000. We have determined that none of our IT
systems require replacement but that approximately 80% of our IT systems require
moderate remediation to be Year 2000 compliant. However, our internal systems
are significantly less complex than bank or brokerage systems for achieving Year
2000 compliance. With no legacy hardware, our late model systems require patches
and updates to reach compliance. We also plan to implement a Year 2000 compliant
standard software image across desktops by the second quarter of 1999.

All of our internal systems have been inventoried and all non-compliant third
party components have been identified and are in the process of being upgraded.
Test equipment to facilitate Year 2000 testing has been installed and testing
will begin in the second quarter of 1999. Our current financial system will be
replaced with a Year 2000 compliant system in the third quarter of 1999. All
mission critical non-IT systems have been identified and will be tested by the
end of the second quarter of 1999.

Although we believe that we will be Year 2000 compliant, we use third party
equipment and software that may not be Year 2000 compliant. We are currently in
the process of evaluating the Year 2000 compliance of the third party products
used in our internal systems and our major vendors, but are unable to predict
the extent to which:

o the Year 2000 issue will affect our suppliers; or
o we would be vulnerable to the suppliers' failure to remediate any Year 2000
  issues on a timely basis.

We have placed each of our vendors and suppliers in a priority category
according to their importance to our business. We have sent letters to all
critical third party service suppliers asking about the status of their Year
2000 program. Vendor readiness is being assessed and tracked. We have received
responses to these letters from 29% of our vendors. All vendors responding to
date have asserted that their products will be Year 2000 compliant. In the event
we do not receive satisfactory commitments from a key supplier, we are making
plans for continuing availability of service through alternate channels. We
expect to have certification that all key vendors and suppliers are Year 2000
compliant by the third quarter of 1999.

The failure of such a major supplier to convert its systems on a timely basis or
in a manner compatible with our systems causing us to incur unanticipated
expenses to remedy any problems, could adversely affect our business.

In addition, the software and hardware products used by Web publishers,
advertisers, governmental agencies, public utilities, telecommunication
companies and others, may not be Year 2000 compliant. If these products are not
Year 2000 compliant, our customers' ability to use our products may be
disrupted. Furthermore, the purchasing patterns of advertisers may be affected
by Year 2000 issues as companies expend significant 


                                       18
<PAGE>

resources to become Year 2000 compliant. These expenditures may result in
reduced funds available for Web advertising or sponsorship of Web services,
which could adversely affect our business.

Costs to Address Our Year 2000 Issue. To date, we have not incurred any material
expenditures in connection with identifying or evaluating Year 2000 compliance
issues. Most of our expenses have related to the opportunity cost of time spent
by our employees evaluating our software, the current versions of our products,
and Year 2000 compliance matters generally. We do not believe that the costs to
evaluate or address Year 2000 issues will be material. However, the full impact
of the Year 2000 issues cannot be determined at this time. The failure by
certain third parties to address their Year 2000 issues on a timely basis could
adversely affect our business.

Contingency Plan. We have not developed a Year 2000-specific contingency plan.
If Year 2000 compliance issues are discovered, we then will evaluate the need
for contingency plans relating to such issues. We intend to actively work with
and encourage our suppliers to minimize the risks of business disruptions
resulting from Year 2000 issues and develop contingency plans where necessary.
Such plans may include, but are not limited to, using alternative suppliers and
establishing contingent supply arrangements. We expect to have such plans in
place by the second quarter of 1999.

The worst case scenario related to Year 2000 issues would involve a major
shutdown of the Internet, which would result in a total loss of revenue to us
until it were resolved. Internally, the most likely worst case scenario would be
that we would have problems with our offline batch processes that stall or
generate incorrect information for Web site reporting. This could result in a
substantial delay in reporting to our Web sites, billing our customers and
preparing our financial statements.


Impact of Recently Issued Accounting Pronouncements

In June 1998, Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities", was issued. SFAS
133 established accounting and reporting standards for derivative instruments
and for hedging activities. SFAS requires that an entity recognize all
derivatives as either assets or liabilities and measure those instruments at
fair value. SFAS 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. SFAS 133 cannot be applied retroactively to
financial statements of prior periods. At the current time we have not evaluated
the impact SFAS 133 will have, if any.


                                       19
<PAGE>

Risk Factors

This report contains forward-looking statements that are based largely on our
current expectations and that are subject to a number of risks and
uncertainties, including those set forth below. Our actual results could differ
materially from the results discussed in "Risk Factors" below, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere in this report.

We have an extremely limited operating history on which an investor can evaluate
our business. None of our predecessor companies had an operating history of more
than four years. We, therefore, have an extremely limited operating history. You
must consider the risks, expenses and difficulties typically encountered by
companies with limited operating histories, particularly companies in new and
rapidly expanding markets such as Internet advertising. These risks include our
ability to:

o develop new relationships and maintain existing relationships with our Web
  sites, advertisers, and other third parties;
o further develop and upgrade our technology;
o respond to competitive developments;
o implement and improve operational, financial and management information
  systems; and 
o attract, retain and motivate qualified employees.

We may be unable to successfully integrate several companies that we have
acquired. We were formed in January 1998 to consolidate three Internet
advertising companies and have since acquired three companies and a majority
interest in two others. In combining these entities, we have faced risks and
continue to face risks of integrating and improving our financial and management
controls, ad serving technology, reporting systems and procedures, and
expanding, training and managing our work force. This process of integration may
take a significant period of time and will require the dedication of management
and other resources, which may distract management's attention from our other
operations.

We anticipate continued losses and we may never be profitable. We incurred net
losses of $7.2 million and $2.4 million for the three month periods ended March
31, 1999 and 1998, respectively, and each of our predecessors had net losses in
every year of their operation. We anticipate that we will incur operating losses
for the foreseeable future due to a high level of planned operating and capital
expenditures. Although our revenue has grown rapidly in recent periods, such
growth may not continue and may not lead to profitability.

Our future revenues and results of operations may be difficult to forecast. Our
results of operations may fluctuate significantly in the future as a result of a
variety of factors, many of which are beyond our control. These factors include:

o the addition of new or loss of current advertisers or Web sites;
o changes in fees paid by advertisers;
o changes in service fees payable by us to owners of Web sites, or ad serving
  fees payable by us to third parties;
o the introduction of new Internet advertising services by us or our
  competitors;
o variations in the levels of capital or operating expenditures and other costs
  relating to the expansion of our operations; and
o general economic conditions.

Our future revenues and results of operations may be difficult to forecast due
to the above factors.

In addition, our expense levels are based in large part on our investment plans
and estimates of future revenues. Any increased expenses may precede or may not
be followed by increased revenues, as we may be


                                       20
<PAGE>

unable to, or may elect not to, adjust spending in a timely manner to compensate
for any unexpected revenue shortfall.

As a result, we believe that period-to-period comparisons of our results of
operations may not be meaningful. You should not rely on past periods as
indicators of future performance. In future periods, our results of operations
may fall below the expectations of securities analysts and investors, which
could adversely affect the trading price of our common stock.

Our revenues are subject to seasonal fluctuations. We believe that our revenues
are subject to seasonal fluctuations because advertisers generally place fewer
advertisements during the first and third calendar quarters of each year.
Expenditures by advertisers tend to vary in cycles that reflect overall economic
conditions as well as budgeting and buying patterns. Our revenue could be
materially reduced by a decline in the economic prospects of advertisers or the
economy in general, which could alter current or prospective advertisers'
spending priorities or budget cycles or extend our sales cycle.

Our business may not grow if the Internet advertising market does not continue
to develop. The Internet as an advertising medium has not been in existence for
a sufficient period of time to demonstrate its effectiveness. Our business would
be adversely affected if the Internet advertising market fails to continue to
develop. There are currently no widely accepted standards to measure the
effectiveness of Internet advertising. We cannot be certain that such standards
will develop to sufficiently support Internet advertising as a significant
advertising medium. Actual or perceived ineffectiveness of online advertising in
general, or inaccurate measurements or database information in particular, could
limit the long-term growth of online advertising and cause our revenue levels to
decline.

Banner advertising, from which we currently derive most of our revenues, may not
be an effective advertising method in the future. We cannot be certain that any
other forms of Internet advertising will be developed or accepted by the market.
Even if new methods are developed, we may not be able to take advantage of them.

Growth of our business depends on the development of online direct marketing.
Adoption of online direct marketing, particularly by those entities that have
historically relied upon traditional means of direct marketing, such as
telemarketing and direct mail, is an important part of our business model.
Intensive marketing and sales efforts may be necessary to educate prospective
advertisers regarding the uses and benefits of our products and services to
generate demand for our direct marketing services. Enterprises may be reluctant
or slow to adopt a new approach that may replace, limit, or compete with their
existing direct marketing systems. In addition, since online direct marketing is
emerging as a new and distinct market apart from online advertising, potential
adopters of online direct marketing services will increasingly demand
functionality tailored to their specific requirements. We may be unable to meet
the demands of our clients.

Loss of our major Web sites would significantly reduce our revenues. The 24/7
Network generates substantially all of our revenues and it consists of a limited
number of our Web sites that have contracted for our services under agreements
cancelable generally upon a short notice period. Loss of our major Web sites
would significantly reduce our revenues. For the three month periods ended March
31, 1999 and 1998, approximately 48% and 36%, respectively, of our total
revenues were derived from advertisements on our top ten Web sites. For the
three month period ended March 31, 1999, the top ten Web sites included AT&T
WorldNet Service, Netscape Communications, MapQuest, EarthLink, Encompass,
TreeLoot, Small World Sports, Blizzard Entertainment, Live World Productions and
Reuters. We experience turnover from time to time among our Web sites, and we
cannot be certain that the Web sites named above remain or will remain
associated with us.


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<PAGE>

Loss of our client Web sites could lower our reach levels. Our Web sites
generally measure satisfaction by acceptable revenue levels, high levels of
customer service and timely and accurate reporting. Levels of traffic on our Web
sites may not remain consistent or increase over time, and we may be unable to
replace any departed Web site with another Web site with comparable traffic
patterns and user demographics. The loss or reduction in traffic on these Web
sites may cause advertisers or Web sites to withdraw from the our networks which
in turn could lower our reach levels.

Loss of our advertisers or ad agencies would reduce our revenues. We generate
our revenues from a limited number of advertisers and ad agencies that purchase
space on our Web sites. Loss of our advertisers or ad agencies would reduce our
revenues. We expect that a limited number of these entities may continue to
account for a significant percentage of our revenues for the foreseeable future.
For the three month period ended March 31, 1999, our top ten advertisers and ad
agencies accounted for an aggregate of approximately 45% of our total revenues.

Advertisers and ad agencies typically purchase advertising under purchase order
agreements that run for a limited time. We cannot be certain that current
advertisers and ad agencies will continue to purchase advertising from us or
that we will be able to attract additional advertisers and ad agencies
successfully, or that agencies and advertisers will make timely payment of
amounts due to us.

Our development of a next generation ad serving technology may not be successful
and may cause business disruption. We are currently developing a next generation
ad serving technology that is intended to serve as our sole ad serving solution.
To complete this development, we must, among other things, ensure that this
technology will function efficiently at high volumes, interact properly with our
Profilz database, offer the functionality demanded by our customers and
assimilate our sales and reporting functions. This development effort could fail
technologically or could take more time than expected. Even if we successfully
address all these challenges, we must then work with our Web sites to transition
them to our new system, which would also create a risk of business disruption
and loss of any of our Web sites.

Loss or failure of our third party ad serving technology could disrupt our
business. Unless and until the development of and transition to our own ad
serving technology is complete, we will be primarily dependent on AdForce, Inc.
to deliver ads to our networks and Web sites. If such service becomes
unavailable or fails to serve our ads properly or fails to produce the frequent
operational reports required, our business would be adversely affected.

Additionally, our use of multiple systems to serve ads requires us to employ
significant effort to prepare information for billing, Web site statements and
financial reporting. We are upgrading our systems to integrate a new accounting
system with our ad serving technologies to improve our accounting, control and
reporting methods. Our inability to upgrade our existing reporting systems and
streamline our procedures may cause delays in the timely reporting of financial
information.

Our failure to successfully compete may hinder our growth. The markets for
Internet advertising and related products and services are intensely competitive
and such competition is expected to increase. Our failure to successfully
compete may hinder our growth. We believe that our ability to compete depends
upon many factors both within and beyond our control, including:

o the timing and market acceptance of new products and enhancements of existing
  services developed by us and our competitors;
o changing demands regarding customer service and support; 
o shifts in sales and marketing efforts by us and our competitors; and 
o the ease of use, performance, price and reliability of our services and 
  products.


                                       22
<PAGE>

Many of our competitors have longer operating histories, greater name
recognition, larger customer bases and significantly greater financial,
technical and marketing resources than ours. We cannot be certain that we will
be able to successfully compete against current or future competitors.

In addition, the Internet must compete for a share of advertisers' total budgets
with traditional advertising media, such as television, radio, cable and print.
To the extent that the Internet is perceived to be a limited or ineffective
advertising medium, advertisers may be reluctant to devote a significant portion
of their advertising budgets to Internet advertising, which could limit the
growth of Internet advertising.

We may be unable to continue to successfully manage rapid growth. We have
experienced rapid growth and expansion in operations that have placed a
significant strain on our managerial, operational and financial resources. We
expect the number of employees to increase in the future. To successfully
compete in the evolving Internet industry, we must:

o continue to improve our financial and management controls;
o enhance our reporting systems and procedures;
o continue to scale our ad serving systems and upgrade their functional
  capabilities; and
o expand, train and manage our work force.

We cannot be certain that our systems, procedures or controls will be adequate
to support our expanding operations, or that management will be able to respond
effectively to such growth. Our future results of operations also depend on the
expansion of our sales, marketing and customer support departments.

Acquisitions or strategic investments may divert management attention and
consume resources. We intend to continue pursuing selective acquisitions of
businesses, technologies and product lines as a key component of our growth
strategy. Any future acquisition or investment may result in the use of
significant amounts of cash, potentially dilutive issuances of equity
securities, incurrence of debt and amortization expenses related to goodwill and
other intangible assets. In addition, acquisitions involve numerous risks,
including:

o the difficulties in the integration and assimilation of the operations,
  technologies, products and personnel of an acquired business;
o the diversion of management's attention from other business concerns; 
o the availability of favorable acquisition financing for future acquisitions;
  and
o the potential loss of key employees of any acquired business.

Our inability to successfully integrate any acquired company could adversely
affect our business.

Our international expansion may pose new legal and cultural challenges. We have
operations in a number of international markets. To date, we have limited
experience in marketing, selling and distributing our solutions internationally.
International operations are subject to other risks, including:

o changes in regulatory requirements;
o reduced protection for intellectual property rights in some countries; 
o potentially adverse tax consequences; 
o general import/export restrictions relating to encryption technology and/or 
  privacy; 
o difficulties and costs of staffing and managing foreign operations; 
o political and economic instability;
o fluctuations in currency exchange rates; and 


                                       23
<PAGE>

o seasonal reductions in business activity during the summer months in Europe 
  and certain other parts of the world.

In addition to these factors, due to our minority stake in the 24/7 Media Asia
Network, we are relying on China.com Corporation to conduct operations,
establish the network, aggregate Web publishers and coordinate sales and
marketing efforts. The success of the 24/7 Media Asia Network is directly
dependent on the success of China.com Corporation and its dedication of
sufficient resources to our relationship.

If we lose our CEO, principal sales managers or other senior managers we may not
be able to grow. Our success depends upon our senior management and key sales
and technical personnel, particularly David J. Moore, Chief Executive Officer,
and Jacob I. Friesel, Executive Vice President. The loss of the services of one
or more of these persons could materially adversely affect our ability to
develop our business. Our success also depends on our ability to attract and
retain qualified technical, sales and marketing, customer support, financial and
accounting, and managerial personnel. Competition for such personnel in the
Internet industry is intense, and we cannot be certain that we will be able to
retain our key personnel or that we can attract, integrate or retain other
highly qualified personnel in the future. We have experienced in the past, and
may continue to experience in the future, difficulty in hiring and retaining
candidates with appropriate qualifications, especially in sales and marketing
positions. Although we have not experienced any material impact from the
difficulty in hiring and retaining qualified employees, we may be materially
impacted in the future from such hiring difficulties.

Privacy concerns may prevent us from selling demographically targeted
advertising. We are developing our Profilz database to collect data derived from
user activity on our networks and from other sources. We cannot be certain that
any trade secret, copyright or other protection will be available for such data
or that others will not claim rights to such data. We must also keep information
regarding Web publishers confidential under our contracts with Web publishers.

Ad serving technology enables the use of identifying data, or cookies, to
deliver targeted advertising, to help compile demographic information, and to
limit the frequency with which an advertisement is shown to the user. Cookies
are placed on the user's hard drive without the user's knowledge or consent. Any
reduction or limitation in the use of cookies could limit the effectiveness of
our sales and marketing efforts and impair our targeting capabilities. Due to
privacy concerns, some Internet commentators, advocates and governmental bodies
have suggested that the use of cookies be limited or eliminated.

Government regulation and legal uncertainties could add additional burdens to
our doing business on the Internet. Due to the increasing popularity of the Web,
laws and regulations applicable to Internet communications, commerce and
advertising are becoming more prevalent. The adoption or modification of such
laws or regulations could inhibit the growth in use of the Web and decrease the
acceptance of the Web as a communications and commercial medium.

Further, due to the global nature of the Web, governments of states or foreign
countries may attempt to regulate our Internet transmissions or levy sales or
other taxes relating to our activities. We cannot be certain that violations of
local laws will not be alleged by applicable governments or that we will not
violate such laws or new laws will not be enacted in the future. Moreover, the
applicability of existing laws governing issues such as property ownership,
libel and personal privacy is uncertain in regards to the Internet.


                                       24
<PAGE>

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings.

We are not a party to any material legal proceedings.

Item 2.  Changes in Securities and Use of Proceeds.

On March 8, 1999, we acquired Sift, Inc. for approximately 763,000 shares of our
common stock plus the assumption of previously-outstanding stock options which
were converted into options to acquire approximately 109,000 shares of our
common stock.

In March 1999, we signed an agreement with NBC-Interactive Neighborhood pursuant
to which we issued to NBC warrants to purchase up to 150,000 shares of our
common stock for $26.05 per share. The warrants vest and expire as follows: (1)
at any time on or after March 11, 1999 and on or before March 11, 2002, NBC
shall have the right to purchase 75,000 shares of our common stock at $26.05 per
share; and (2) the remaining 75,000 shares of our common stock will vest in
eighteen increments of 4,167 shares each (except for the last increment, which
will consist of 4,161 shares) on the first day of every month beginning with
October 1, 2000 and ending on March 1, 2002 at $26.05 per share. With respect to
each 4,167 share increment, NBC's right to purchase such shares will expire
three years after the vesting date.

Item 3.  Defaults Upon Senior Securities.

None.

Item 4.  Submission of Matters to a Vote of Security Holders.

None.

Item 5.  Other Information.

None.

Item 6.  Exhibits and Reports on Form 8-K .

(a)     Exhibits.

Exhibit 27   Financial data schedule

(b)     Reports on Form 8-K.

We filed a Current Report on Form 8-K dated March 22, 1999, reporting items 2
and 5. The report contained information about the acquisitions of, or
investments in, Sift, Inc., CardSecure, Inc., China.com Corporation and 24/7
Media Europe Ltd.


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<PAGE>

Item 7.  Signatures.

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

24/7 MEDIA, INC.

Date:  May 17, 1999                 By:    /s/ David J. Moore                  
                                           ------------------------------------
                                           David J. Moore
                                           President and Chief Executive
Officer


                                    By:    /s/ C. Andrew Johns       
                                           ------------------------------------
                                           C. Andrew Johns
                                           Chief Financial Officer


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