<PAGE>

                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 June 30, 2000

                                       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 OF                       (IRS EMPLOYER
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 AUGUST 9, 2000
  Common Stock, par value $.01 per share                35,599,192 Shares

<PAGE>


                                24/7 MEDIA, INC.

                                    FORM 10-Q

                                      INDEX

<TABLE>
<S>                                                                                                           <C>
Part I.  Financial Information
Item 1.  Consolidated Financial Statements
Consolidated Balance Sheets as of June 30, 2000 (unaudited) and December 31, 1999 ............................2
Consolidated Statements of Operations for the three and six month periods ended
        June 30, 2000 and 1999 (unaudited) ...................................................................3
Consolidated Statements of Cash Flows for the six month periods ended
        June 30, 2000 and 1999 (unaudited)....................................................................4
Notes to Unaudited Interim Consolidated Financial Statements (unaudited)......................................5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................13
Item 3. Quantitative and Qualitative Disclosure about Market Risk.............................................27
Part II.  Other information
Item 1.  Legal Proceedings....................................................................................28
Item 2.  Changes in Securiteis and Use of Proceeds............................................................28
Item 3.  Defaults Upon Senior Securities......................................................................28
Item 4.  Submission of Matters to a Vote of Security Holders..................................................28
Item 5.  Other information....................................................................................29
Item 6.  Exhibits and Reports on Form 8-K.....................................................................29
Item 7.  Signatures...........................................................................................29
</TABLE>


                                       1
<PAGE>


                                24/7 MEDIA, INC.

                           CONSOLIDATED BALANCE SHEETS

                        (IN THOUSANDS, EXCEPT SHARE DATA)




<TABLE>
<CAPTION>
                                                                                         June 30,    December 31,
                                                                                           2000         1999
                                                                                       -----------   ------------
                               ASSETS                                                  (unaudited)
<S>                                                                                     <C>          <C>
Current assets:

   Cash and cash equivalents .........................................................   $  38,913    $  42,786
   Marketable securities..............................................................       5,505         --
   Accounts receivable, less allowances of $4,441 and $2,522, respectively ...........      59,147       34,004
   Prepaid expenses and other current assets .........................................       5,651        4,846
                                                                                         ---------    ---------
       Total current assets ..........................................................     109,216       81,636

Property and equipment, net ..........................................................      45,827       18,595
Intangible assets, net ...............................................................     645,893       62,398
Investments ..........................................................................     183,942      366,630
Deferred cost of partner agreements, net .............................................       2,854        4,260
Other assets .........................................................................       5,562          493
                                                                                         ---------    ---------
       Total assets ..................................................................   $ 993,294    $ 534,012
                                                                                         =========    =========
                            LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

   Accounts payable ..................................................................   $  43,500    $  24,504
   Accrued liabilities ...............................................................      26,212       13,875
   Current installments of obligations under capital leases ..........................          55           49
   Deferred revenue ..................................................................       8,004        2,019
                                                                                         ---------    ---------
       Total current liabilities .....................................................      77,771       40,447
                                                                                         ---------    ---------
Obligations under capital leases, excluding current installments .....................         177           13
Deferred tax liability ...............................................................      27,103       95,656
Minority interest ....................................................................         105          105

Commitments and contingencies

Stockholders' equity:

    Preferred stock, $.01 par value; 10,000,000 shares authorized;
      and no shares issued or outstanding ............................................         --           --
    Common stock, $.01 par value; 70,000,000 shares authorized; 35,088,124 and
      22,422,516 shares issued and outstanding, respectively .........................         350          224
    Additional paid-in capital .......................................................     954,837      282,806
    Deferred stock compensation ......................................................     (10,978)        (232)
    Accumulated other comprehensive income ...........................................      69,737      194,790
    Accumulated deficit ..............................................................    (125,809)     (79,797)
                                                                                         ---------    ---------
        Total stockholders' equity ...................................................     888,137      397,791
                                                                                         ---------    ---------

       Total liabilities and stockholders' equity ....................................   $ 993,293    $ 534,012
                                                                                         =========    =========
</TABLE>

 See accompanying notes to unaudited interim consolidated financial statements.



                                       2
<PAGE>


                                24/7 MEDIA, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                 (IN THOUSANDS, EXPECT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                       Three months ended June 30,       Six months ended June 30,
                                                                       ---------------------------       -------------------------
                                                                          2000            1999              2000           1999
                                                                       ------------   ------------       -----------   -----------
                                                                               (unaudited)                      (unaudited)
<S>                                                                 <C>             <C>             <C>             <C>
Revenues:
   Network ......................................................   $     40,782    $     16,537    $     77,265    $     27,607
   Email ........................................................          8,535             618          15,419             998
   Technology ...................................................          2,870            --             5,734            --
                                                                    ------------    ------------    ------------    ------------
       Total revenues ...........................................         52,187          17,155          98,418          28,605
                                                                    ------------    ------------    ------------    ------------
Cost of revenues:
   Network ......................................................         31,794          12,815          60,486          21,564
   Email ........................................................          5,712             247           9,978             294
   Technology ...................................................          1,253            --             2,380            --
                                                                    ------------    ------------    ------------    ------------
       Total cost of revenues ...................................         38,759          13,062          72,844          21,858
                                                                    ------------    ------------    ------------    ------------
       Gross profit .............................................         13,428           4,093          25,574           6,747
                                                                    ------------    ------------    ------------    ------------
Operating expenses:
   Sales and marketing (exclusive of $9, $0, $541 and $0,
     respectively, reported below as stock based compensation)...         11,817           4,454          23,707           7,948
   General and administrative (exclusive of $427, $28, $1,922
      and $57, respectively, reported below as stock based
      compensation)..............................................         13,023           4,841          23,879           8,324
   Product development (exclusive of $883, $0, $1,766 and $0,
      respectively, reported below as stock based compensation)..          2,156             320           3,195           1,242
   Amortization of goodwill, intangibles and advances ...........         18,549           2,473          35,241           4,731
   Stock-based compensation .....................................          1,319              28           4,229              57
   Merger related costs .........................................            409             --            5,171            --
                                                                    ------------    ------------    ------------    ------------
       Total operating expenses .................................         47,273          12,116          95,422          22,302
                                                                    ------------    ------------    ------------    ------------
       Loss from operations .....................................        (33,845)         (8,023)        (69,848)        (15,555)
Interest income, net ............................................            259             860             733           1,148
Gain on sale of investments .....................................         11,421            --            23,103            --
                                                                     ------------    ------------    ------------    ------------
       Net loss .................................................   $    (22,165)   $     (7,163)   $    (46,012)   $    (14,407)
                                                                     ============    ============    ============    ============
Net loss per common share - basic and diluted ...................   $      (0.82)   $      (0.37)   $      (1.75)   $      (0.80)
                                                                     ============    ============    ============    ============
Weighted average common shares outstanding ......................     26,980,950      19,360,778      26,270,720      18,053,643
                                                                    ============    ============    ============    ============
</TABLE>


          See accompanying notes to consolidated financial statements

                                       3



<PAGE>


                                24/7 MEDIA, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                                   Six Months Ended June 30,
                                                                                   -------------------------
                                                                                      2000         1999
                                                                                   ------------  -----------
<S>                                                                                <C>          <C>
Cash flows from operating activities:                                                       (unaudited)
Net loss .......................................................................   $ (46,012)   $ (14,407)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of fixed assets ..................................       2,924          690
Write-off of acquired in-process technology ....................................       4,700         --
Provision for doubtful accounts and sales reserves .............................       3,308          497
Amortization of goodwill and other intangible assets ...........................      34,081        4,834
Amortization of partner agreements .............................................       1,160         --
Non-cash compensation ..........................................................       3,891           57
Gain on sale of investments ....................................................     (23,103)        --

Changes in operating assets and liabilities, net of effect of acquisitions:

    Accounts receivable ........................................................     (22,706)      (9,582)
    Prepaid assets and other current assets ....................................          29       (1,246)
    Other assets ...............................................................      (2,347)        (223)
    Accounts payable and accrued liabilities ...................................      12,520        3,509
    Deferred revenue ...........................................................      (1,046)         624
                                                                                   ---------    ---------
         Net cash  used in operating activities ................................     (32,601)     (15,247)
                                                                                   ---------    ---------
Cash flows from investing activities:

Capital expenditures ...........................................................     (16,038)      (8,187)
Proceeds from the sale of investments ..........................................      24,089         --
Cash acquired in acquisitions, net of cash paid ................................      22,121       (1,155)
Cash paid for investments ......................................................      (6,120)     (11,869)
Increase in intangible assets ..................................................        --            (18)
                                                                                   ---------    ---------
         Net cash provided by (used in) investing activities ...................      24,052      (21,229)
                                                                                   ---------    ---------
Cash flows from financing activities:

Proceeds from exercise of stock options and conversion of warrants .............       4,879          708
Payment of capital lease obligations ...........................................         (46)         (45)
Proceeds from secondary offering, net ..........................................        --        100,479
Repayment of short-term borrowings .............................................        --         (1,619)
                                                                                  ---------    ---------
         Net cash provided by financing activities .............................       4,833       99,523
                                                                                   ---------    ---------
         Net change in cash and cash equivalents ...............................      (3,716)      63,047
         Net effect of foreign currency adjustments ............................        (157)          20
Cash and cash equivalents at beginning of period ...............................      42,786       34,049
                                                                                   ---------    ---------
Cash and cash equivalents at end of period .....................................   $  38,913    $  97,116
                                                                                   =========    =========
</TABLE>



                                       4


<PAGE>
                                24/7 MEDIA, INC.

          NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(1)  SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF OPERATIONS

24/7 Media together with its subsidiaries is a provider of advertising and
marketing solutions for Web publishers, online advertisers, advertising
agencies, e-marketers and e-commerce merchants. The Company operates in three
principal lines of business: 24/7 Network, 24/7 Mail and 24/7 Technology
Solutions.

The 24/7 Network operates globally, with operations in the United States,
Europe, Canada, Latin America, and, through the Company's partner, chinadotcom
corporation ("chinadotcom"), the 24/7 Asia Network. 24/7 Mail has operations in
the United States, Canada and Europe where the Company serves as list managers
for permission-based email lists. We have enhanced our email product offerings
through the acquisition of Exactis.com ("Exactis"), a provider of email based
direct marketing services (see note 2). The Company developed 24/7 Technology by
combining Sabela Media, Inc. ("Sabela") and IMAKE Software and Services, Inc.
("IMAKE"), which were acquired in January 2000 (see note 2).

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.

ORGANIZATION AND BASIS OF PRESENTATION

PRINCIPLES OF CONSOLIDATION

The Company's consolidated financial statements as of June 30, 2000 and December
31, 1999 and for the three and six month periods ended June 30, 2000 and 1999
include the accounts of the Company and its majority-owned and controlled
subsidiaries from their respective dates of acquisition (see note 2). All
significant intercompany transactions and balances have been eliminated in
consolidation.

INTERIM RESULTS

The unaudited consolidated financial statements as of June 30, 2000 and for
the three and six month periods ended June 30, 2000 and 1999 have been
prepared by 24/7 Media and are unaudited. In the Company's opinion, the
unaudited consolidated financial statements have been prepared on the same
basis as the annual consolidated financial statements and reflect all
adjustments, which include only normal recurring adjustments, necessary to
present fairly the financial position as of June 30, 2000 and the results of
the Company's operations for the three and six month periods ended June 30,
2000 and 1999, and cash flows for the six month periods ended June 30, 2000
and 1999. The financial data and other information disclosed in these notes
to the consolidated results for the three and six month periods ended June
30, 2000 are not necessarily indicative of the results to be expected for any
subsequent quarter or the entire fiscal year ending December 31, 2000.

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, 1999 as included in the Company's report on Form 10-K.

USE OF ESTIMATES

The preparation of consolidated financial statements in accordance with
generally accepted accounting principles requires management 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
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.



                                       5
<PAGE>


                                24/7 MEDIA, INC.

          NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS


CAPITALIZED SOFTWARE

As of June 30, 2000, the Company has capitalized approximately $15.5 million in
connection with the 24/7 Connect ad serving system, which is being amortized
over four years.

INTANGIBLE ASSETS

Intangible assets are estimated by management 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
intangible assets are amortized on the straight-line basis over the estimated
periods of benefit, which range from two to four years.

INVESTMENTS

Available-for-sale securities are carried at fair value, with the unrealized
gains or losses, net of tax, reported as a separate component of stockholders'
equity. Equity investments in non-marketable equity securities of companies in
which significant influence is not exercised are carried under the cost method.

The fair value of the available-for-sale marketable securities is based on
the quoted market values as of June 30, 2000 as reported on NASDAQ. As of
June 30, 2000, such securities were valued at $143.2 million which included
unrealized gains of $69.9 million, net of $27.6 million in taxes. We also have
$40.7 million in cost based investments.

On January 13, 2000, the Company sold approximately 300,000 shares of
chinadotcom stock at $40.48 per share. The shares had a cost basis of $0.4
million, which resulted in a gain of approximately $11.7 million.

On May 23, 2000, the Company sold approximately 400,000 shares of chinadotcom
stock at $29.96 per share. The shares had a cost basis of $0.6 million, which
resulted in a gain of approximately $11.4 million.

REVENUE AND EXPENSE RECOGNITION

The Company's network 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. Revenues from
advertising are recognized in the period the advertising impressions are
delivered. The Company's email related revenues are derived principally from
short-term delivery based agreements in which the Company delivers email lists
to advertisers and Web sites. Revenues are recognized as services are provided.

The Company's technology revenues are derived from adserving, software
consulting, development and maintenance contracts. Revenues under fixed price
contracts are recognized on a percentage of completion basis based on labor
hours incurred to total estimated contract hours. Revenues under time and
materials contracts are recognized as the hours are incurred.

Fixed monthly maintenance contracts are recognized in the corresponding months.

Third party Web sites that register Web pages with the Company's networks and
display advertising banners on those pages are commonly referred to as
"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." The Company pays Affiliated Web
sites a fee for providing advertising space to the Company's networks. The
Company becomes obligated to make payments to such Affiliated Web sites, which
have contracted to be part of the Company's networks, in the period the
advertising impressions are delivered. Such expenses are classified as cost of
revenues in the consolidated statements of operations.



                                       6
<PAGE>


                                24/7 MEDIA, INC.

          NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS


The Company also has agreements with various list owners in which the Company
services its advertisers and other customers through the use of these lists. The
royalties paid for the use of these email lists are also classified as cost of
revenues.

At June 30, 2000 and December 31, 1999, accounts receivable included
approximately $14.0 million and $7.8 million, respectively, of unbilled
receivables, which are a normal part of the Company's business, as receivables
are generally invoiced only after the revenue has been earned. The increase in
unbilled receivables from December 31, 1999 to June 30, 2000 resulted from the
increase in revenues generated during the period. The terms of the related
advertising contracts typically require billing at the end of each month. All
unbilled receivables as of June 30, 2000 have been subsequently billed.

COMPREHENSIVE INCOME (LOSS)

Total comprehensive loss for the six month periods ended June 30, 2000 and
1999 was $171.1 million and $14.4, respectively. Comprehensive loss resulted
primarily from net losses of $46.0 and $14.4 million respectively as well as
a decrease in unrealized gains, net of tax of marketable securities of $124.9
million and $0 respectively. Accumulated other comprehensive income as of
June 30, 2000 amounted to $69.7 million which is comprised of unrealized
gains of $97.5 million on available-for-sale securities, net of tax of $27.6
million and foreign currency translation adjustment of $(0.2) million.

LOSS PER SHARE

Basic EPS excludes dilution for potentially dilutive securities 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 potentially dilutive securities
are anti-dilutive for each of the periods presented. Diluted net loss per
common share for the three and six months ended June 30, 2000 and 1999 does
not include the effects of options to purchase 7.3 million and 2.3 million
shares of common stock, respectively; 3.0 million and 3.3 million common
stock warrants, respectively, on an "as if" converted basis, as the effect of
their inclusion is anti-dilutive during each period.

Included within weighted average shares outstanding for the three and six month
periods ended June 30, 2000 are 90,000 and 290,000 shares, respectively, related
to contingently issuable shares of common stock in connection with the IMAKE
acquisition (see note 2) whereby certain performance criteria were achieved as
of June 30, 2000.


                                       7
<PAGE>


                                24/7 MEDIA, INC.

          NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(2)  ACQUISITIONS

ACQUISITION OF IMAKE

On January 13, 2000, the Company acquired IMAKE, a provider of technology
products that facilitate the convergence of Internet technologies with
broadband video programming. The purchase price of approximately $35.1
million, excluding contingent consideration of 916,000 shares, consists of
400,000 shares valued at approximately $18.7 million, fair value of options
assumed of $9.9 million, $5.8 million of deferred compensation and $0.7
million in acquisition costs. The deferred compensation relates to 124,000
shares of restricted stock issued to employees of IMAKE. The contingent
shares will be issued when certain revenue targets are attained. The
valuation of in-process technology of $4.7 million in connection with the
acquisition of IMAKE is based on an independent appraisal which determined
that the e.merge technology acquired from IMAKE had not been fully developed
at the date of acquisition. As a result, the Company will be required to
incur additional costs to successfully develop and integrate the e.merge
platform. The remaining purchase price in excess of the value of identified
assets and liabilities assumed of $24.9 million has been allocated as
follows: $1.0 million to workforce and $23.9 million to goodwill. Goodwill
and workforce are being amortized over their expected period of benefit which
is four years for goodwill and two years for workforce. The acquisition was
accounted for as a purchase business combination, effective as of January 1,
2000, for accounting purposes. On July 20, 2000, the contingency relating to
880,000 shares valued at approximately $11.9 million, has been satisfied and
such shares were released from escrow.

PURCHASE OF THE MINORITY INTEREST IN 24/7 MEDIA EUROPE

On January 1, 2000, the Company acquired the remaining interest in 24/7 Media
Europe through the issuance of common stock. The Company issued 428,745 shares
of 24/7 Media common stock, valued at approximately $24.1 million, resulting in
additional goodwill and other intangible assets of $24.1 million. The goodwill
and other intangible assets are being amortized over three years.

ACQUISITION OF SABELA

On January 9, 2000, the Company acquired Sabela, a global ad serving,
tracking and analysis company with products for online advertisers and Web
publishers. The purchase price of approximately $66.3 million consists of
approximately 1.2 million shares of 24/7 Media common stock valued at
approximately $58.3 million, cash consideration of $2.1 million, fair value
of warrants assumed of $1.2 million, fair value of options assumed of $1.7
million and $3.0 million in acquisition costs. The purchase price in excess
of the value of identified assets and liabilities assumed of $66.0 million
has been allocated as follows: $7.1 million to technology, $1.1 million to
workforce and $57.8 million to goodwill. Goodwill and other intangible assets
are being amortized over their expected period of benefit which is four years
for goodwill and technology;

                                       8
<PAGE>


                                24/7 MEDIA, INC.

          NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS


and two years for workforce. The acquisition was accounted for as a purchase
business combination, effective as of January 1, 2000, for accounting purposes.

ACQUISITION OF AWARDTRACK

On February 11, 2000, the Company acquired AwardTrack, Inc. ("AwardTrack"),
which offers a private label loyalty customer relationship management program
that enables Web retailers and content sites to issue points to Web users as
a reward for making purchases, completing surveys or investigating
promotions. The purchase price of approximately $69.9 million consists of
approximately 1.1 million shares of 24/7 Media common stock valued at
approximately $64.0 million, fair value of options assumed of $4.6 million
and $1.3 million in acquisition costs. The purchase price in excess of the
value of identified assets and liabilities assumed of $69.9 million has been
allocated as follows: $7.7 million to technology, $0.5 million to tradename,
$0.4 million to workforce and $61.3 million to goodwill. Goodwill and other
intangible assets are being amortized over their expected period of benefit
which is four years for goodwill, technology and tradename; and two years for
workforce. The acquisition was accounted for as a purchase business
combination effective as of February 11, 2000 for accounting purposes.

ACQUISITION OF EXACTIS

On June 28, 2000, the Company acquired all of the outstanding common stock of
Exactis.com, Inc., a provider of email based direct marketing services, in
exchange for Company common stock. Exactis.com stockholders received shares of
24/7 Media common stock based on an exchange ratio of 0.6 shares of 24/7 Media
common stock for each share of Exactis.com common stock. The purchase price of
approximately $475.6 million consists of approximately 8.2 million shares of
24/7 Media common stock valued at approximately $383.0 million, fair value of
options assumed of $85.7 million, fair value of warrants assumed of $2.3
million, deferred compensation of $2.9 million and acquisition costs of $4.5
million. The purchase price in excess of the value of identified assets and
liabilities assumed of $429.1 million has been allocated $60.8 million to
technology, $1.0 million to tradename, $3.2 million to workforce, $2.1 million
to customer base and $362.0 million to goodwill. Goodwill and other intangible
assets are being amortized over their expected period of benefit which is four
years for goodwill, technology, customer base and tradename; and two years for
workforce. The acquisition was accounted for as a purchase business combination
effective as of June 30, 2000 for accounting purposes.

OTHER ACQUISITIONS

On April 1, 2000, we acquired Kendro Communications, a Swiss based banner
network service, for approximately 26,000 shares of common stock valued at
approximately $487,000, excluding contingent consideration of up to $6.7
million to be paid in common stock. On April 17, 2000, we acquired
iPromotions, Inc., a Seattle based promotions and sweepstakes management
firm, for $2 million in cash and approximately 33,000 shares of common stock
valued at approximately $654,000.

SUMMARY

The acquisitions of Sabela, IMAKE, AwardTrack, Exactis, Kendro Communications,
iPromotions and the purchase of the remaining interest in Europe have been
accounted for using the purchase method of accounting, and accordingly, each
purchase price has been allocated to the tangible and identifiable intangible
assets acquired and liabilities assumed on the basis of their fair values on the
respective acquisition dates. The following summarizes the purchase price
allocation for each of the acquisitions:



                                       9
<PAGE>


                                24/7 MEDIA, INC.

          NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                    Net Tangible
                                 Acquisition           Assets         In Process      Deferred     Intangibles/    Useful Life
 Acquired Entity                    Costs           (Liabilities)     Technology    Compensation     Goodwill       (In Years)
-------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>                 <C>               <C>           <C>            <C>                 <C>
IMAKE.........................  $    35,096         $      (335)      $    4,700    $     5,786    $    24,945         2-4
24/7 Media Europe.............       24,117                  -               -              -           24,117          3
Sabela........................       66,312                 317              -              -           65,995         2-4
Award Track...................       69,884                 (43)             -              -           69,927         2-4
Exactis.......................      475,636              43,688              -            2,870        429,078         2-4
Other.........................        3,281                 (13)             -              -            3,294          4
                                ------------------------------------------------------------------------------
                                $   674,326         $    43,614       $    4,700    $     8,656    $   617,356
                                ------------------------------------------------------------------------------
</TABLE>

The following unaudited pro forma consolidated amounts give effect to all of
the above acquisitions accounted for by the purchase method of accounting as
if they had occurred at the beginning of the respective period by
consolidating the results of operations of the acquired entities for the
three and six month periods ended June 30, 2000 and 1999. The three and six
month period ended June 30, 1999 includes the effect of the acquisitions of
Clickthrough, ConsumerNet and Netbookings which were completed in 1999
subsequent to June 30.

The unaudited pro forma consolidated statements of operations are not
necessarily indicative of the operating results that would have been
achieved had the transactions been in effect as of the beginning of
the periods presented and should not be construed as being representative
of future operating results.


<TABLE>
<CAPTION>
                                             Three Months Ended June 30,       Six Months Ended June 30,
                                             ---------------------------       ---------------------
                                                2000            1999              2000        1999
                                             ------------   ------------       -----------  --------
                                               (in thousands, except share and per share data)

<S>                                       <C>             <C>             <C>             <C>
Total revenues ........................   $     56,361    $     25,049    $    106,872    $     44,949
Net loss ..............................        (55,548)        (56,767)       (112,366)       (111,007)
Net loss per common share -
  basic and diluted ...................   $      (1.59)   $      (1.73)   $      (3.09)   $      (3.52)
Weighted average common shares used
  in net loss per share calculation (1)     34,958,522      32,868,553      36,334,062      31,561,418
</TABLE>

(1) The weighted average common shares used to compute pro forma basic and
diluted net loss per common share for the period ended June 30, 2000 includes
the 1,249,487, 1,129,344 and 8,156,843 shares issued for Sabela, AwardTrack
and Exactis, respectively as if the shares were issued on January 1, 2000.
The weighted average common shares used to compute pro forma basic and
diluted net loss per common share for the period ended June 30, 1999 includes
the actual weighted average common shares outstanding for the historical
period ended June 30, 1999, plus the 1,738,330, 76,875, 41,677, 428,745,
686,484, 1,249,487, 1,129,344 and 8,156,843 common shares issued in
connection with each of the acquisitions of ConsumerNet, Clickthrough
Netbookings, 24/7 Media Europe, IMAKE, Sabela, AwardTrack and Exactis,
respectively, as if each acquisition occurred on January 1, 1999.

MERGER RELATED COSTS

Merger related costs for the six months ended June 30, 2000 shown separately
on the statement of operations include a $4.7 million write-off of in-process
technology and approximately $0.5 million of integration related costs.



                                       10
<PAGE>


                                24/7 MEDIA, INC.

          NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS


(3)  INTANGIBLE ASSETS, NET


<TABLE>
<CAPTION>
                                June 30,     December 31,
                                  2000           1999
                              -------------  -------------
                                    (in thousands)

<S>                             <C>          <C>
Goodwill ....................   $ 615,432    $  83,075
Technology ..................      75,600         --
Workforce ...................       5,700         --
Customer Base ...............       2,100         --
Tradename ...................       1,500         --
Other .......................         319         --
                                ---------    ---------
                                  700,651       83,075
                                ---------    ---------
Less accumulated amortization     (54,758)     (20,677)
                                ---------    ---------
Total .......................   $ 645,893    $  62,398
                                =========    =========
</TABLE>


(4)  COMMON STOCK

On January 18, 2000, the Company issued 31,000 shares of common stock to
employees of the Company. The related compensation expense of approximately
$1.8 million, which includes $0.3 million of employer related taxes, is shown
as part of stock-based compensation.

On February 7, 2000, the Company issued approximately 17,000 shares of its
common stock to Internet Financial Network, Inc. ("IFN") in exchange for less
than 5% of IFN. The investment of approximately $1.0 million is carried at
cost.

On May 23, 2000 the Company issued approximately 285,000 shares of restricted
stock to certain management and employees of the Company, which vest over a
period of three to four years. Such grants resulted in a deferred
compensation expense of approximately $4.5 million, which is being amortized
over the vesting period of those shares.

Warrants to purchase 401,500 shares of our common stock at prices ranging
from $7.62 to $9.96 were exchanged in a cashless exercise, pursuant to their
original terms, for 359,839 shares of common stock during the six months
ended June 30, 2000.

(5)  STOCK INCENTIVE PLAN

For the six month period ended June 30, 2000, we granted approximately 5.5
million stock options under the 1998 Stock Incentive Plan: 42,299 of such
were issued as a result of the acquisition of Sabela at an exercise price of
$9.62 per share, 297,000 were issued as a result of the acquisition of IMAKE
at an exercise price of $56.25 per share, 88,697 were issued as a result of
the acquisition of AwardTrack at exercise prices ranging from $0.97 to $10.65
per share, 2,051,410 were issued as a result of the acquisition of Exactis at
an exercise price ranging from $1.25 to $58.33 per share, and 3.0 million
options were issued to employees of the Company at exercise prices of $13.375
to $64.63 per share, based on the fair market value of the underlying common
stock a the respective times of grant.

(6)  SEGMENT INFORMATION

The Company's business is comprised of network sales, email services and
technology sales. The network sales segment generates the majority of its
revenues by delivering advertisements and promotions to


                                       11
<PAGE>


                                24/7 MEDIA, INC.

          NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS


affiliated web sites. The revenue related to the email segment of the
business is comprised of email service bureau, newsletters and marketing
services to target online users compiled by list management. The technology
segment generates revenue by selling software and technology solutions. The
Company's management reviews corporate assets and overhead expenses for each
segment. The summarized segment information as of and for the three and six
months ended June 30, 2000 and 1999, is as follows:


<TABLE>
<CAPTION>
                                                                               Three months ended June 30,
                                                      --------------------------------------------------------------------------
                                                                       2000                                     1999
                                                      ------------------------------------------   -----------------------------
                                                      Network      Mail     Technology     Total    Network     Mail     Total
                                                      ---------  -------   ------------  --------   --------  --------  --------
                                                                    (In thousands)                          (In thousands)
<S>                                                   <C>         <C>        <C>        <C>        <C>        <C>      <C>
Revenues............................................  $ 40,782    $ 8,535    $ 2,870    $ 52,187   $ 16,537   $  618   $ 17,155
Segment loss from operations........................   (20,006)    (4,267)    (9,571)    (33,845)    (7,925)     (98)    (8,023)
Amortization of goodwill,
 intangibles and advances...........................     8,766      3,908      5,875      18,549      2,473       -       2,473
                                                      --------    -------    -------    --------   --------   ------   --------
</TABLE>

<TABLE>
<CAPTION>
                                                                              Six months ended June 30,
                                                     -------------------------------------------------------------------------
                                                                      2000                                     1999
                                                     ------------------------------------------   ----------------------------
                                                     Network      Mail     Technology     Total    Network     Mail     Total
                                                     ---------  -------   ------------  --------   --------  --------  -------
                                                                   (In thousands)                           (In thousands)
<S>                                                  <C>         <C>        <C>        <C>        <C>       <C>      <C>
Revenues...........................................  $ 77,265   $ 15,419    $ 5,734   $ 98,418   $ 27,607   $ 998   $ 28,605
Segment profit (loss) from operations..............   (38,770)    (7,436)   (23,642)   (69,848)   (15,464)     91    (15,555)
Amortization of goodwill,
 intangibles and advances..........................    16,383      7,228     11,630     35,241      4,731       -      4,731
                                                     --------   --------   --------   --------   --------   ------   --------
Total assets:

June 30, 2000......................................   365,024    540,286     87,984    993,294
December 31, 1999..................................   476,939     57,073        -      534,012

</TABLE>


(7)  SUPPLEMENTAL CASH FLOW INFORMATION

The amount of cash paid for interest was $12,000 and $76,000
for the six month periods ended June 30, 2000 and 1999, respectively.

(8) LITIGATION

In December 1999, DoubleClick, Inc. filed a patent infringement lawsuit
against our subsidiary, Sabela Media, Inc., in the United States District
Court for the Southern District of New York. The suit alleges that Sabela is
infringing, and inducing and contributing to the infringement by third
parties of a patent held by DoubleClick entitled "Method for Delivery,
Targeting and Measuring Advertising Over Networks". DoubleClick is seeking
treble damages in an unspecified amount, a preliminary and permanent
injunction from further alleged infringement and attorney's fees and costs.
This litigation can be expected to result in significant expenses to us and
the diversion of management time and other resources, the extent of which
cannot be quantified with any reasonable accuracy given the early stage of
this litigation. This case is currently in the discovery stage. We believe we
have meritorious defenses to this lawsuit and intend to defend ourselves
vigorously.

On May 4, 2000, we filed suit in the U.S. District Court for the Southern
District of New York against DoubleClick Inc. alleging infringement by
DoubleClick of our U.S. Patent No. 6,026,368, entitled "On-Line Interactive
System and Method for Providing Content and Advertising Information to a
Targeted Set of Viewers." We are seeking monetary damages and have requested
injunctive relief barring DoubleClick from further infringement of the patent.
The litigation may result in significant expense to us and the diversion of
management time and other resources, the extent of which cannot be quantified
with any reasonable accuracy given the early stage of this litigation.



                                       12
<PAGE>


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

THE TERMS "WE" AND "OUR COMPANY" MEAN 24/7 MEDIA, INC., OUR SUBSIDIARIES AND
EACH OF OUR PREDECESSOR ENTITIES.

FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, and Section 21E of the Securities Exchange
Act of 1934. We intend such forward-looking statements to be covered by the
safe harbor provisions for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995, and we are including this
statement for purposes of complying with these safe harbor provisions. We
have based these forward-looking statements on our current expectations and
projections about future events. These forward-looking statements are not
guarantees of future performance and are subject to risks, uncertainties and
assumptions, including those set forth under "Risk Factors".

Words such as "expect", "anticipate", "intend", "plan", "believe", "estimate"
and variations of such words and similar expressions are intended to identify
such forward-looking statements. We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. In light of these risks,
uncertainties and assumptions, the forward-looking events discussed in this
report might not occur.

GENERAL

We are a leading global provider of end-to-end advertising and marketing
solutions for Web publishers, online advertisers, advertising agencies,
e-marketers and e-commerce merchants. We provide a comprehensive suite of
media and technology products and services that enable such Web publishers,
online advertisers, advertising agencies and e-marketers to attract and
retain customers worldwide, and to reap the benefits of the Internet and
other electronic media. Our solutions include advertising and direct
marketing sales, ad serving, promotions, email list management, email list
brokerage, email delivery, data analysis, loyalty marketing and convergence
solutions, all delivered from our industry-leading data and technology
platforms. Our 24/7 Connect ad serving technology solutions are designed
specifically for the demands and needs of advertisers and agencies, Web
publishers and e-commerce merchants. Our business is organized into three
principal lines of business:

     -        24/7 Network;
     -        24/7 Mail; and
     -        24/7 Technology Solutions.

THE 24/7 NETWORK

The 24/7 Network is a global online advertising network. The 24/7 Network
aggregates the advertising inventory of hundreds of Web sites that are
attractive to advertisers, generate a high number of ad impressions and
contribute a variety of online content to the network. Web publishers seeking
to join the network must meet our affiliation criteria, including high
quality content, brand name recognition, significant existing and projected
page views, attractive user demographics, and sponsorship opportunities. For
Web sites on the 24/7 Network, we sell Web site-specific advertising
campaigns and also bundle advertisements for sale in content channels or
across the entire network. For our flagship Web sites on the network, we
actively solicit sponsorships and integrate sales efforts with the Web site's
management. We deliver advertising on our network using our 24/7 Connect
technology, which enables us to offer


                                       13
<PAGE>

advertisers the ability to target Internet users based on a variety of
criteria including on a geo-targeted basis. Our Internet advertising network
is organized as follows:

   -     In the U.S., the network consists of over 425 high profile Web sites
         to which we delivered an aggregate of more than 5.2 billion
         advertisements in June 2000;

   -     In Europe, the network consists of over 520 Web sites to which we
         delivered an aggregate of more than 1.0 billion advertisements in June
         2000. We developed our European operations in 1999 after acquiring
         InterAd Holdings Ltd. (renamed 24/7 Media Europe) in a two-step
         transaction through which we acquired a majority interest in January
         1999 and the remainder in January 2000;

   -     In Canada, the network consists of over 110 high profile Web sites to
         which we delivered an aggregate of more than 10 million advertisements
         in June 2000. We developed our Canadian operations after acquiring
         Clickthrough Interactive Services, Inc. in July 1999;

   -     In Latin America, the network consists of over 60 Web sites to which
         we delivered an aggregate of more than 50 million advertisements in
         June 2000;

   -     In Asia, through our partner chinadotcom corporation, we support the
         operation of the network that consists of more than 500 high profile
         Web sites. This network covers Greater China, the ASEAN nations,
         Australia, South Korea and Japan; and

   -     The 24/7 Network also includes The ContentZone, which consists of over
         4,500 small to medium-sized Web sites to which we delivered an
         aggregate of almost 200 million advertisements in June 2000.

Through the 24/7 Network we also offer network-related value-added solutions
to advertisers, marketers and Web publishers. For example, our AwardTrack
subsidiary offers a private label, loyalty customer relationship management
program that enables Web retailers and content sites to issue points to Web
users as a reward for making purchases, completing surveys or investigating
promotions. We also offer our creative design services, sponsorship
opportunities, sweepstakes management and syndication services.

24/7 MAIL

Our 24/7 Mail business was developed through the integration of our
acquisitions of Sift, Inc. in March 1999 and ConsumerNet, Inc. in August 1999
and subsequent growth. 24/7 Mail provides opt-in email direct marketing
services. Our permission-based email-marketing database of more than 23
million email addresses is the largest such database in the world and enables
direct marketers to target promotional campaigns to consumers who choose to
receive commercial messages. The users can opt out, or stop receiving these
messages, at any time. Currently, 24/7 Mail conducts the majority of its
operations in the U.S. European operations were recently launched, initially
in the UK. Our mail product offerings have been significantly enhanced by the
acquisition of Exactis, the leading provider of permission based outsourced
email marketing and communications solutions.

24/7 TECHNOLOGY SOLUTIONS

24/7 Technology Solutions is comprised of comprehensive service and software
solutions designed specifically for the needs of three targeted customer
segments: advertisers and agencies, Web publishers and e-commerce merchants.
Our technical service team of over 150 employees provides consulting services
and around-the-clock support for our ad serving clients. Products within 24/7
Technology Solutions include:



                                       14
<PAGE>

   -     24/7 Connect, a next generation Internet ad serving system that is
         available on two platforms: 24/7 Connect for Networks, that will
         initially serve the 24/7 Network in the United States, and 24/7
         Connect for Advertisers and Publishers, our third-party ad serving
         solution. We expect to combine the two platforms into a single
         solution later this year. We acquired 24/7 Connect for Advertisers
         and Publishers through our acquisition of Sabela in January 2000; and

   -     e.merge, a fully integrated, customizable suite of business
         applications designed to manage marketing campaigns across multiple
         forms of electronic media including broadband, set-top boxes and
         wireless (WAP) applications. We acquired e.merge through our
         acquisition of IMAKE in January 2000.

We also operate Profilz, a database of Web user profiles that aids in
delivering targeted advertising and marketing messages based on demographic
profiles.

RESULTS OF OPERATIONS

REVENUES

NETWORK REVENUES. Network revenues were $40.8 million and $77.3 million for
the three and six month period ended June 30, 2000, respectively, as compared
to $16.5 million and $27.6 million for the three and six month period ended
June 30, 1999, representing 147% and 180% growth, respectively. This increase
was fueled by a dramatic expansion in the number of ad impressions sold in
the U.S. and Europe network business, a significantly increasing number of
Web sites that we represent, and our expansion globally to Canada and Latin
America. In addition, the number of advertisers and the amount of advertising
spending on the Internet increased significantly during this period.

EMAIL REVENUES. Email revenues increased to $8.5 million and $15.4 million
for the three and six month period ended June 30, 2000, respectively,
compared to $0.6 million and $1.0 million for the three and six month period
ended June 30, 1999, representing 1,281% and 1,445% growth, respectively.
This increase was fueled by a significant expansion in the types of email
services that we offer to include email list management and list brokerage
services in addition to our service bureau offerings, as well as a dramatic
increase in the number of opt-in email addresses under management. The
expansion into these new service offerings was supported by our acquisition
of ConsumerNet in the third quarter of 1999. We believe that strong industry
acceptance on opt-in email advertising has promoted this strong historical
growth and will continue to increase our revenue in the future.

TECHNOLOGY REVENUES. The Technology Solutions segment was formed with the
acquisition of Sabela and IMAKE in January 2000. Technology revenues for the
three and six month period ended June 30, 2000 were $2.9 million and $5.7
million, respectively. We expect significant revenue growth from our
technology solutions products as Connect for Advertisers and Publishers
expands its market share for third-party ad serving and as e.merge further
penetrates the expanding market for broadband convergence.

COST OF REVENUE AND GROSS PROFIT

NETWORK COST OF REVENUES AND GROSS PROFIT. The cost of network 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 Connect ad serving system and Internet access. Gross profit dollars
increased significantly and the gross margin, which is network gross profit
as a percent of total network revenues, was 22% for the three and six month
period ended June 30, 2000. The gross profit declined from 23% for the three
month period ended June 30, 1999, however, remained consistent with the six
month period ended June 30, 1999.

EMAIL COST OF REVENUES AND GROSS PROFIT.  The cost of email revenues consists
primarily of list provider royalties and delivery costs. Gross profit dollars
increased significantly due to the growth in revenues. Gross margin decreased
from 60% and 71% for the three and six month periods ended



                                       15
<PAGE>

June 30, 1999, respectively, to 33% and 35% for the three and six month
periods ended June 30, 2000. The decrease is due to the shift in the mix of
business from service bureau in 1999 to primarily list management and list
brokerage in 2000, each of which has a lower gross margin.

TECHNOLOGY COST OF REVENUES AND GROSS PROFIT. The cost of technology revenues
consists primarily of the salaries of those who provide the service plus the
cost of equipment and bandwith for our third-party ad serving. Gross margin
was 56% and 58% for the three and six month period ended June 30, 2000,
respectively.

OPERATING EXPENSES. Each of sales and marketing, general and administrative,
product development and amortization of goodwill expenses increased in the
three month and six month periods from 1999 to 2000 as (1) we incurred
expenses in connection with the growth of our business; and (2) we included
the operations of 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. Sales and marketing
expenses increased in dollar terms; however, as a percentage of revenue the
expenses decreased from 26% and 28% for the three and six month period ended
June 30, 1999, respectively, to 23% and 24% for the three and six month
period ended June 30, 2000. Sales and marketing expenses increased as a
result of the growth of our business on a global scale and the resulting
additions to sales staff as well as increased marketing expenses. We expect
sales and marketing expenses to increase in dollar terms as we continue to
invest in sales and marketing personnel, expand into new markets, broaden our
visibility, and embark on a global branding campaign; however, we expect that
sales and marketing expenses as a percentage of revenue will decline as our
business matures across multiple product lines and geographic regions.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consist primarily of compensation, facilities expenses and other overhead
expenses incurred to support the growth of our business. General and
administrative expenses increased in dollar terms; however, as a percentage
of revenue the expenses decreased from 28% and 29% for the three and six
month period ended June 30, 1999, respectively, to 25% and 24% for the three
and six month period ended June 30, 2000. General and administrative expenses
increased as a result of the growth of our business, the addition of new
personnel and increased operating expenses. We expect general and
administrative expenses to continue to increase due to the additional
personnel and other expenses required to support our anticipated business
growth; however, we expect that general and administrative expenses as a
percentage of revenues will decline as our business matures across multiple
product lines and geographical regions.

PRODUCT DEVELOPMENT EXPENSES. Product development expenses consist primarily
of compensation and related costs incurred to further develop our ad serving
and other technology capabilities. Product development expenses in 2000 as a
percentage of revenue remained consistent with 1999. 24/7 Connect, our ad
serving solution, reached the application development stage in March 1999 and
we began capitalizing costs related to the project. We capitalized certain
costs through March 2000 when 24/7 Connect became operational. During the
second quarter of 2000, all enhancements to Connect were expensed as incurred
and development of additional capabilities continued to be capitalized.
Product development expenses should increase as we are no longer capitalizing
the majority of costs from the product development department. We continue to
believe that investment in product development, particularly for our broad
range of technology platforms and initiatives, is critical to our strategy of
providing excellent service, and we expect to increase the future amounts
spent on product development.

AMORTIZATION OF GOODWILL, INTANGIBLES AND ADVANCES. Amortization of goodwill,
intangibles and advances was $18.5 million and $35.2 million for the three
and six months ended June 30, 2000, respectively, as compared to $2.5 million
and $4.7 million in the corresponding periods in 1999. Goodwill and
intangible amortization increased due to the timing of our acquisitions which
commenced in July 1999 and lasted through June 2000. The amortization of
partner agreements, NBC and AT&T, which commenced April 1999 and October 2000
respectively, is included for the full three and six months ended June 30,
2000.

                                       16
<PAGE>

STOCK-BASED COMPENSATION. Stock based compensation of $4.2 million for the
six months ended June 30, 2000 consists of a $1.9 million charge for
unregistered shares issued to employees, $2.0 million in amortization of
deferred compensation from the IMAKE acquisition and $0.3 million in
amortization of deferred compensation for restricted shares issued to certain
management and employees. The expense in 1999 relates solely to amortization
of deferred compensation for restricted shares issued to certain employees.

MERGER RELATED COSTS. Merger related costs of $5.2 million for the six months
ended June 30, 2000 consist primarily of acquired in-process technology of
$4.7 million from the acquisition of IMAKE that was immediately charged to
operations. As of the date of the acquisition, the e.merge technology
acquired had not been fully developed and had no alternative future use. As a
result, the Company will be required to incur additional costs to
successfully develop and integrate the technology. The value of the acquired
in-process technology was determined using an independent valuation. The
remaining costs are related to the integration of our recent acquisitions in
the first half of 2000.

INTEREST INCOME, NET. Interest income, net was $0.3 million and $0.7 million
for the three and six months ended June 30, 2000, respectively and $0.9
million and $1.1 million for the comparative period in 1999. The decrease in
interest income was attributable to interest earned on the cash and cash
equivalents from the net proceeds due to our secondary offering of common
stock in May of 1999, which we are using to fund operations.

GAIN ON SALE OF INVESTMENTS. This gain relates to the sale of a portion of
our chinadotcom stock. On January 13, 2000 we sold shares which had a cost
basis of $0.4 million and resulted in a gain of approximately $11.7 million.
On May 23, 2000, we sold shares which had a cost basis of $0.6 million and
resulted in a gain of approximately $11.4 million.

LIQUIDITY AND CAPITAL RESOURCES

Since our inception, we have financed our operations primarily through private
placements of equity securities and public offerings of our common stock.

Net cash used in operating activities was $32.6 million and $15.2 million for
the six month periods ended June 30, 2000 and 1999, respectively. Net cash used
in operating activities resulted from our net operating losses and increases in
accounts receivable, which were partially offset by increases in accounts
payable and accrued liabilities.

Net cash provided by investing activities was $24.1 million for the six month
period ended June 30, 2000 and net cash used in investing activities was
$21.2 for the same period in 1999. During the six months ended June 30, 2000,
we continued to acquire equipment and capitalize internally developed
software costs associated with 24/7 Connect. In addition we continue to
invest in strategic partners both by acquisition and making equity
investments; and we invested the proceeds from the sale of a portion of our
investments. In addition, we received $22.1 million of cash through our
acquisitions in exchange for our common stock.

Net cash provided by financing activities was $4.8 million and $99.5 million for
the six months ended June 30, 2000 and 1999, respectively. Net cash provided by
financing activities consisted primarily of exercise of stock options for the
six months ended June 30, 2000 and proceeds from our secondary offering for the
same period in 1999.

As of June 30, 2000, we had $38.9 million of cash and cash equivalents $9.6
million of short and long term marketable securities and $143.6 million in
available-for-sale securities. Our principal commitment is funding
on-going operations. Our operating expenses will continue to be a material
use of our cash resources as we will continue to experience significant
growth. Although we have no material commitments for capital expenditures, we
anticipate that we will maintain a significant level of capital expenditure
and lease commitments consistent with our anticipated growth in operations,
infrastructure and personnel.

                                       17
<PAGE>

Litigation brought against us by DoubleClick may result in a significant
expense and use of resources (see Part II, Item 1.)

We believe that our existing cash and cash equivalents, short-term
investments and available-for-sale securities which could be sold, will be
sufficient to meet our anticipated cash needs for working capital, operating
losses and capital expenditures for the next 12 months. Our future liquidity
and capital requirements will depend upon numerous factors discussed under
the section entitled "Risk Factors". In addition, we will, from time to time,
consider the acquisition of or investment in complementary businesses,
services and technologies, which might increase our liquidity requirements or
cause us to issue additional equity securities. We cannot assure you that we
will not require additional financing within this time frame or that such
additional funding, if needed, will be available on terms acceptable to us or
at all.

IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 1999, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activity" which
delayed the effective date of SFAS 133 from June 15, 1999 to June 15, 2000.
SFAS 133 established accounting and reporting standards for derivative
instruments and for hedging activities. SFAS 133 requires that an entity
recognize all derivatives as either assets or liabilities and measure those
instruments at fair value. In June 2000, the FASB issued SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities, an Amendment of FASB Statement No. 133" which intended to
simplify the accounting for derivative under SFAS 133 and is effective upon
adoption of SFAS 133. The Company has not yet determined the impact of this
pronouncement on our financial position or results of operations.

On December 3, 1999, the SEC staff issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" (SAB 101). SAB 101 summarizes
certain of the staff's views in applying generally accepted accounting
principles to revenue recognition in financial statements. On March 24, 2000,
the SEC issued SAB 101A which amends the transition guidance for SAB 101. Under
the revised guidance, the staff will not object if registrants that have not
applied the accounting requirements in SAB 101 do not restate prior financial
statements - provided they report a change in accounting principle in accordance
with APB Opinion No. 20, "Accounting Changes". The staff believes that the
change must be reported no later than the first fiscal quarter of the fiscal
year beginning after December 15, 1999, except that registrants with fiscal
years that begin between December 16, 1999 and March 15, 2000 may report a
change in accounting principle no later than their second fiscal quarter of the
fiscal year beginning after December 15, 1999. If a registrant with a fiscal
year beginning between December 16, 1999 and March 15, 2000 elects to avail
itself of this delay, the change must be reported in accordance with FASB
Statement No. 3, "Reporting Accounting Changes in Interim Financial Statements".
The Company has not yet determined the impact of this pronouncement on our
financial position or results of operations.


In March 2000, FASB Interpretation No. 44 "Accounting for Certain Transactions
involving Stock Compensation, an interpretation of APB Opinion No. 25" (FIN 44)
was issued. FIN 44 clarifies the application of APB No. 25 regarding (a) the
definition of EMPLOYEE for purposes of applying APB No, 25, (b) the criteria for
determining whether a plan qualifies as a noncompensatory plan, (c) the
accounting consequence of various modifications to their terms of a previously
fixed stock option or award, and (d) the accounting or an exchange of stock
compensation awards in a business combination. FIN 44 does not address the
application of the fair value method of Statement No. 123. This Interpretation
is effective July 1, 2000, but certain conclusions in the interpretation cover
specific events that occur after either December 15, 1998, or January 12, 2000.
To the extent that the Interpretation covers events occurring during the period
after December 15, 1998 or January 12, 2000, but before the effective date of
July 1, 2000, the effects of applying the is Interpretation are recognized on a
prospective basis from July 1, 2000. There has been no impact due to the
adoption of FIN 44 on the Company's results of operations.



                                       18
<PAGE>

RISK FACTORS

You should carefully consider the following risk factors before you decide to
buy our common stock. These risks may adversely impair our business operations.

WE HAVE A LIMITED OPERATING HISTORY ON WHICH AN INVESTOR CAN EVALUATE OUR
BUSINESS

We were formed as a result of the merger of three companies in February 1998 and
have since acquired twelve companies to date. None of the companies nor any
company that we have since acquired had an operating history of more than five
years prior to acquisition or merger. 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:

   -     develop new relationships and maintain existing relationships with our
         Web sites, advertisers, and other third parties;

   -     further develop and upgrade our technology;

   -     respond to competitive developments;

   -     implement and improve operational, financial and management information
         systems; and

   -     attract, retain and motivate qualified employees.

WE MAY BE UNABLE TO SUCCESSFULLY INTEGRATE THE COMPANIES THAT WE HAVE ACQUIRED

We were formed in February 1998 to consolidate three Internet advertising
companies and have since acquired twelve more companies. 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 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:

   -     the difficulties in the integration and assimilation of the operations,
         technologies, products and personnel of an acquired business;

   -     the diversion of management's attention from other business concerns;
         and

   -     the availability of favorable acquisition financing for
         future acquisitions; and the potential loss of key employees of any
         acquired business.

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

WE ANTICIPATE CONTINUED LOSSES AND WE MAY NEVER BE PROFITABLE

We incurred net loss of $22.2 million and $7.2 million for the three month
periods ended June 30, 2000 and 1999, respectively, and $46.0 million and $14.4
million for the six month period ended June 30, 2000 and 1999, respectively.
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



                                       19
<PAGE>

continue and may not lead to profitability. Even if we do achieve profitability,
we cannot assure you that we can sustain or increase profitability on a
quarterly or annual basis in the future.

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:

   -     the addition of new or loss of clients;

   -     changes in fees paid by advertisers and direct marketers;

   -     changes in service fees payable by us to owners of Web sites or email
         lists, or ad serving fees payable by us to third parties;

   -     the introduction of new Internet marketing services by us or our
         competitors;

   -     variations in the levels of capital or operating expenditures and other
         costs relating to the maintenance or expansion of our operations,
         including personnel costs; and

   -     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 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 and direct marketers mail substantially more
marketing materials in the third quarter each year. Expenditures by advertisers
and direct marketers 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, direct
marketers 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 a marketing 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 marketing other than clickthrough rates, which generally have been
declining. We cannot be certain that such standards will develop to sufficiently
support Internet marketing as a significant advertising medium. Actual or
perceived ineffectiveness of online marketing 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

The majority of our revenues are derived from the delivery of banner
advertisements. If advertisers determine that banner advertising is an
ineffective or unattractive advertising medium, we cannot assure you that we
will be able to effectively make the transition to any other form of Internet
advertising. Also,



                                       20
<PAGE>

there are "filter" software programs that limit or prevent advertising from
being delivered to a user's computer. The commercial viability of Internet
advertising, and our business, results of operations and financial condition,
would be materially and adversely affected by Web users' widespread adoption of
such software.

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.

OUR DEVELOPMENT OF A NEXT GENERATION AD SERVING TECHNOLOGY MAY NOT BE SUCCESSFUL
AND MAY CAUSE BUSINESS DISRUPTION

24/7 Connect is our proprietary next generation ad serving technology that is
intended to serve as our sole ad serving solution. We recently launched 24/7
Connect, and to successfully complete the roll-out of 24/7 Connect, 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, advertisers and direct marketing clients to
transition them to our new system, which could also create a risk of business
disruption and loss of any of our clients.

LOSS OR FAILURE OF OUR THIRD PARTY AD SERVING TECHNOLOGY COULD DISRUPT OUR
BUSINESS

Unless and until the complete roll-out and transition to 24/7 Connect is
consummated, we will be partially dependent on AdForce, Inc. to deliver ads to
our networks of 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, client 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.

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. For the three month
periods ended June 30, 2000 and 1999, approximately 21% and 43%, respectively,
of our total revenues were derived from advertisements on our top ten Web sites.
For the three month period ended June 30, 2000, the top ten Web sites included
AT&T WorldNet Service, NetZero.net, DesktopDollars, Inc., Juno Online Services,
Inc., Mapquest.com, Inc., Goto.com, Earthlink Network, Community Connect, Inc.,
Havas Interactive, and Reuters News Network. 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. Our business, results of
operations and financial condition would be materially adversely affected by the
loss of one or more of the web sites that account for a significant portion of
our revenue from the 24/7 Network.



                                       21
<PAGE>

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. 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 June 30, 2000, our
top ten advertisers and ad agencies accounted for approximately 19% of our total
revenues.

ADVERTISERS AND AD AGENCIES TYPICALLY PURCHASE ADVERTISING UNDER PURCHASE ORDER
AGREEMENTS THAT RUN FOR A LIMITED TIME

Typically, we enter into short-term contracts with advertisers and ad agencies.
Since these contracts are short-term, we will have to negotiate new contracts or
renewals in the future that may have terms that are not as favorable to us as
the terms of existing contracts. 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. In
addition, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase the
ability of their products or services to address the needs of our prospective
clients.

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:

   -     the timing and market acceptance of new products and enhancements of
         existing services developed by us and our competitors;

   -     changing demands regarding customer service and support; o shifts in
         sales and marketing efforts by us and our competitors; and

   -     the ease of use, performance, price and reliability of our services and
         products.

Many of our competitors have longer operating histories, greater name
recognition, larger customer bases and significantly greater financial,
technical and marketing resources than ours. In addition, current and potential
competitors have established or may establish cooperative relationships among
themselves or with third parties to increase the ability of their products or
services to address the needs of our prospective clients. 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, as well as content aggregation companies and other companies
that facilitate Internet advertising. To the extent that the Internet is
perceived to be a limited or ineffective advertising or direct marketing medium,
advertisers and direct marketers may be reluctant to devote a significant
portion of their advertising budgets to Internet marketing, which could limit
the growth of Internet marketing.



                                       22
<PAGE>

WE MAY BE UNABLE TO CONTINUE TO SUCCESSFULLY MANAGE RAPID GROWTH

We continue to increase the scope of our operations both domestically and
internationally, in both sales and marketing as well as technological
development. We expect that we will need to continue to improve our financial
and managerial controls, reporting procedures and systems. 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:

   -     continue to improve our financial and management controls;

   -     enhance our reporting systems and procedures;

   -     continue to scale our ad serving systems and upgrade their functional
         capabilities; and expand, train and manage our work force; and

   -     Expand, train, retain 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.

OUR INTERNATIONAL EXPANSION MAY POSE LEGAL AND CULTURAL CHALLENGES

We have operations in a number of international markets, including Canada,
Europe, Asia, Australia and Latin America. We intend to continue to expand our
international operations and international sales and marketing efforts. To date,
we have limited experience in marketing, selling and distributing our solutions
internationally. International operations are subject to other risks, including:

   -     changes in regulatory requirements;
   -     reduced protection for intellectual property rights in some countries;
   -     potentially adverse tax consequences;
   -     general import/export restrictions relating to encryption technology
         and/or privacy;
   -     difficulties and costs of staffing and managing foreign operations;
   -     political and economic instability;
   -     fluctuations in currency exchange rates; and
   -     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 ownership stake in the 24/7
Network in Asia, we are relying on chinadotcom corporation to conduct
operations, build the network, aggregate Web publishers and coordinate sales and
marketing efforts in Asia. The success of the 24/7 Network in Asia is directly
dependent on the success of chinadotcom corporation and its dedication of
sufficient resources to our relationship.

IF WE LOSE OUR CEO 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. 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.



                                       23
<PAGE>

DEPENDENCE ON PROPRIETARY RIGHTS AND RISK OF INFRINGEMENT

Our success and ability to compete are substantially dependent on our internally
developed technologies and trademarks, which we protect through a combination of
patent, copyright, trade secret and trademark law. We have received five patents
in the United States, and have filed and intend to file additional patent
applications in the United States. In addition, we apply to register our
trademarks in the United States and internationally. We cannot assure you that
any of our patent applications or trademark applications will be approved. Even
if they are approved, such patents or trademarks may be successfully challenged
by others or invalidated. If our trademark registrations are not approved
because third parties own such trademarks, our use of such trademarks will be
restricted unless we enter into arrangements with such third parties that may be
unavailable on commercially reasonable terms.

We generally enter into confidentiality or license agreements with our
employees, consultants and corporate partners, and generally control access to
and distribution of our technologies, documentation and other proprietary
information. Despite our efforts to protect our proprietary rights from
unauthorized use or disclosure, parties may attempt to disclose, obtain or use
our solutions or technologies. We cannot assure you that the steps we have taken
will prevent misappropriation of our solutions or technologies, particularly in
foreign countries where laws or law enforcement practices may not protect our
proprietary rights as fully as in the United States.

We have licensed, and we may license in the future, elements of our trademarks,
trade dress and similar proprietary rights to third parties. While we attempt to
ensure that the quality of our brand is maintained by these business partners,
such partners may take actions that could materially and adversely affect the
value of our proprietary rights or our reputation. We cannot assure you that any
of our proprietary rights will be viable or of value in the future since the
validity, enforceability and scope of protection of certain proprietary rights
in Internet-related industries is uncertain and still evolving.

INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS COULD HINDER OUR ABILITY TO DELIVER
ADVERTISEMENTS OVER THE INTERNET

We may be subject to claims of alleged infringement of the trademarks and other
intellectual property rights of third parties by us or the Web publishers with
Web sites in the 24/7 Network. Such claims and any resultant litigation could
subject us to significant liability for damages and could result in the
invalidation of our proprietary rights. In addition, even if we prevail, such
litigation could be time-consuming and expensive to defend, and could result in
the diversion of our time and attention, any of which could materially and
adversely affect our business, results of operations and financial condition.
Any claims or litigation from third parties may also result in limitations on
our ability to use the trademarks and other intellectual property subject to
such claims or litigation unless we enter into arrangements with the third
parties responsible for such claims or litigation which may be unavailable on
commercially reasonable terms.

In December 1999, DoubleClick, Inc. filed a patent infringement lawsuit against
our subsidiary, Sabela Media, Inc., in the United States District Court for the
Southern District of New York. The suit alleges that Sabela is infringing,
inducing and contributing to the infringement by third parties of, a patent held
by DoubleClick entitled "Method for Delivery, Targeting and Measuring
Advertising Over Networks". DoubleClick is seeking treble damages in an
unspecified amount, a preliminary and permanent injunction from further alleged
infringement and attorneys' fees and costs. This litigation can be expected to
result in significant expenses to us and the diversion of management time and
other resources, the extent of which cannot be quantified with any reasonable
accuracy given the early stage of this litigation. In addition, some of our
contracts with Web publishers require us to indemnify the Web publishers for
losses they incur arising from any infringement by our ad serving technology of
a third party's intellectual property rights. If DoubleClick is successful in
its claims against Sabela or files a similar suit against us, we may be hindered
from competing in the Internet advertising market and our operations could be
severely harmed. The DoubleClick suit could result in limitations on how we
implement our 24/7 Connect for Advertisers and Publishers product, delays and
costs associated with redesigning our 24/7 Connect for Advertisers and


                                       24
<PAGE>

Publishers product and payments of license fees and other monies. An
injunction obtained by DoubleClick could eliminate our ability to deliver
advertisements over the Internet through our 24/7 Connect for Advertisers and
Publishers product. If it is determined that we have infringed on
Doubleclick's patent we may be required to alter our technology in a way that
would not infringe the DoubleClick patent, and we cannot assure you that
these alterations would be successful.

On May 4, 2000, we filed suit in the U.S. District Court for the Southern
District of New York against DoubleClick Inc. allegeing infringement by
DoubleClick of our U.S. Patent No. 6,026,368, entitled "On-Line Interactive
System and Method for Providing Content and Advertising Information to a
Targeted Set of Viewers." We are seeking monetary damages and have requested
injunctive relief barring DoubleClick from further infringement of the patent.
The litigation may result in significant expense to us and the diversion of
management time and other resources, the extent of which cannot be quantified
with any reasonable accuracy given the early stage of this litigation.

INTELLECTUAL PROPERTY LIABILITY

We may be liable for content available or posted on the Web sites of our web
publishers. We may be liable to third parties for content in the advertising we
serve if the music, artwork, text or other content involved violates the
copyright, trademark or other intellectual property rights of such third parties
or if the content is defamatory. Any claims or counterclaims could be time
consuming, result in costly litigation or divert management's attention.

PRIVACY CONCERNS MAY PREVENT US FROM COLLECTING DEMOGRAPHIC OR OTHER CONSUMER
DATA

Our 24/7 Connect technology targets advertising to users through the use of
identifying data, or "cookies" and other non-personally-identifying information.
24/7 Connect enables the use of cookies to deliver targeted advertising, to help
compile demographic information, and to limit the frequency with which an
advertisement is shown to the user. 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. The effectiveness of our 24/7 Connect
technology to deliver targeted advertisements could be limited by any regulation
or limitation in the collection or use of information regarding Internet users.
Since many of the limitations are still in the proposal stage, we cannot yet
determine the full impact of these regulations on our business.

In addition, we are developing our Profilz database to collect data derived from
user activity on our networks and from other sources. We collect and compile
information in databases for the product offerings of all our businesses.
Individuals or entities may claim in the future, that our collection of this
information is illegal. Although we believe that we have the right to use and
compile the information in these databases, we cannot assure you that our
ability to do so will remain lawful, that any trade secret, copyright or other
intellectual property protection will be available for our databases, or that
statutory protection that is or becomes available for databases will enhance our
rights. In addition, others may claim rights to the information in our
databases. Further, pursuant to our contracts with Web publishers using our
solutions, we are obligated to keep certain information regarding each Web
publisher confidential and, therefore, may be restricted from further using that
information in our business.

CHANGES IN LAWS AND STANDARDS RELATING TO DATA COLLECTION AND USE PRACTICES AND
THE PRIVACY OF INTERNET USERS AND OTHER INDIVIDUALS COULD HARM OUR BUSINESS

Growing public concern regarding privacy and the collection, distribution and
use of information about individuals has led to increased federal and state
scrutiny and legislative and regulatory activity. In addition, the
high-technology and direct marketing industries are considering various new,
additional or different self-regulatory standards. This focus, and any
legislation, regulations or standards promulgated, may impact us.



                                       25
<PAGE>

The U.S. federal and various state governments have recently proposed
limitations on the collection and use of information regarding Internet users.
The European Union recently adopted a directive that may limit our collection
and use of information regarding Internet users in Europe. Various technology
and direct marketing industry groups have also been addressing this issue. The
Network Advertising Initiative, an industry self-regulatory group comprised of
third-party ad servers, including us, has proposed a series of self-regulatory
principles that have been publicly supported by the Federal Trade Commission and
the Department of Commerce. Despite this achievement, the government may propose
and implement legislation that may be more adverse than the network Advertising
Initiative's principles. Other trade associations are active as well. The Online
Privacy Alliance, a broad coalition of high-technology companies, is examining
fair information practices and may offer proposals for industry acceptance. The
Direct Marketing Association, or DMA, the leading trade association of direct
marketers, has adopted guidelines regarding the fair use of information which it
recommends that industry participants, including us, follow.

We are also subject to various federal and state regulations concerning the
collection and use of information regarding individuals. These laws include the
Children's Online Privacy Protection Act, and state laws which limit or preclude
the use of voter registration and drivers license information, as well as other
laws that govern the collection and use of consumer credit information. Although
our compliance with applicable federal and state laws, regulations and industry
guidelines has not had a material adverse effect on us, governments, trade
associations and industry self-regulatory groups may enact more burdensome laws,
regulations and guidelines, including antitrust and consumer privacy laws, for
us and our clients. These regulations and guidelines could materially and
adversely affect the business, financial condition and results of operations of
our business.

Also, as a consequence of governmental legislation or regulation or enforcement
efforts or evolving standards of fair information collection practices, we may
be required to make changes to our products or services in ways that could
diminish the effectiveness of the product or service or its attractiveness to
potential customers, which could materially and adversely affect our business,
financial condition or results of operations.

CHANGES IN GOVERNMENT REGULATION COULD DECREASE OUR REVENUES AND INCREASE OUR
COSTS

Laws and regulations directly applicable to Internet communications, commerce
and advertising are becoming more prevalent, and new laws and regulations are
under consideration by the United States Congress and state legislatures. Any
legislation enacted or restrictions arising from current or future government
investigations or policy could dampen the growth in use of the Internet
generally and decrease the acceptance of the Internet as a communications,
commercial and advertising medium. The governments of other states or foreign
countries might attempt to regulate our transmissions or levy sales or other
taxes relating to our activities. The European Union has enacted its own privacy
regulations that may result in limits on the collection and use of certain user
information. The laws governing the Internet, however, remain largely unsettled,
even in areas where there has been some legislative action. It may take years to
determine whether and how existing laws such as those governing intellectual
property privacy, libel and taxation apply to the Internet and Internet
advertising.

In addition, the growth and development of the market for Internet commerce may
prompt calls for more stringent consumer protection laws, both in the United
States and abroad, that may impose additional burdens on companies conducting
business over the Internet. Our business, results of operations and financial
condition could be materially and adversely affected by the adoption or
modification of laws or regulations relating to the Internet.

DEPENDENCE ON THE WEB INFRASTRUCTURE

Our success will depend, in large part, upon the maintenance of the Web
infrastructure, such as a reliable network backbone with the necessary speed,
data capacity and security, and timely development of enabling products such as
high speed modems, for providing reliable Web access and services and



                                       26
<PAGE>

improved content. We cannot assure you that the Web infrastructure will continue
to effectively support the demands placed on it as the Web continues to
experience increased numbers of users, frequency of use or increased bandwidth
requirements of users. Even if the necessary infrastructure or technologies are
developed, we may have to spend considerable amounts to adapt our solutions
accordingly. Furthermore, the Web has experienced a variety of outages and other
delays due to damage to portions of its infrastructure. Such outages and delays
could impact the clients using our solutions and the level of user traffic on
Web sites on our networks.

RISKS ASSOCIATED WITH TECHNOLOGICAL CHANGE

The Internet and Internet advertising markets are characterized by rapidly
changing technologies, evolving industry standards, frequent new product and
service introductions, and changing customer demands. Our future success will
depend on our ability to adapt to rapidly changing technologies and to enhance
existing solutions and develop and introduce a variety of new solutions to
address our customers' changing demands. We may experience difficulties that
could delay or prevent the successful design, development, introduction or
marketing of our solutions. In addition, our new solutions or enhancements must
meet the requirements of our current and prospective customers and must achieve
significant market acceptance. Material delays in introducing new solutions and
enhancements may cause customers to forego purchases of our solutions and
purchase those of our competitors.

POSSIBLE VOLATILITY OF STOCK PRICE

The market price of our common stock has fluctuated in the past and is likely to
continue to be highly volatile and could be subject to wide fluctuations. In
addition, the stock market has experienced extreme price and volume
fluctuations. The market prices of the securities of Internet-related companies
have been especially volatile. Investors may be unable to resell their shares of
our common stock at or above the purchase price. In the past, companies that
have experienced volatility in the market price of their stock have been the
object of securities class action litigation. If we were the object of
securities class action litigation, it could result in substantial costs and a
diversion of management's attention and resources.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

CURRENCY RATE FLUCTUATIONS. 24/7 Media's results of operations, financial
position and cash flows are not materially affected by changes in the relative
values of non-U.S. currencies to the U.S. dollar. 24/7 Media does not use
derivative financial instruments to limit its foreign currency risk exposure.

MARKET RISK. 24/7 Media's accounts receivables are subject, in the normal course
of business, to collection risks. 24/7 Media regularly assesses these risks and
has established policies and business practices to protect against the adverse
effects of collection risks. As a result, 24/7 Media does not anticipate any
material losses in this area.

The Company is exposed to equity price risks on the marketable portion of its
equity securities. The Company's available-for-sale securities at June 30,
2000 include equity positions in companies in the Internet industry sector,
including chinadotcom corporation, Network Commerce, Inc., and i3 Mobile, many
of which have experienced significant historical volatility in their stock
prices. The Company typically does not attempt to reduce or eliminate its
market exposure on these securities. A 20% adverse change in equity prices,
based on a sensitivity analysis of the Company's available-for-sale
securities portfolio as of June 30, 2000, would result in an approximate
$28.6 million decrease in the fair value of the Company's available-for-sale
securities.

INTEREST RATE RISK. 24/7 Media's investments are classified as cash and cash
equivalents with original maturities of three months or less. Therefore, changes
in the market's interest rates do not affect the value of the investments as
recorded by 24/7 media.




                                       27
<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

In December 1999, DoubleClick, Inc. filed a patent infringement lawsuit against
our subsidiary, Sabela Media, Inc., in the United States District Court for the
Southern District of New York. The suit alleges that Sabela is infringing, and
inducing and contributing to the infringement by third parties of a patent held
by DoubleClick entitled "Method for Delivery, Targeting and Measuring
Advertising Over Networks". DoubleClick is seeking treble damages in an
unspecified amount, a preliminary and permanent injunction from further alleged
infringement and attorneys' fees and costs. This litigation can be expected to
result in significant expenses to us and the diversion of management time and
other resources, the extent of which cannot be quantified with any reasonable
accuracy given the early stage of this litigation. This case is currently in the
discovery stage. We believe we have meritorious defenses to this lawsuit and
intend to defend ourselves vigorously.

On May 4, 2000, we filed suit in the U.S. District Court for the Southern
District of New York against DoubleClick Inc. alleging infringement by
DoubleClick of our U.S. Patent No. 6,026,368, entitled "On-Line Interactive
System and Method for Providing Content and Advertising Information to a
Targeted Set of Viewers." We are seeking monetary damages and have requested
injunctive relief barring DoubleClick from further infringement of the patent.
The litigation may result in significant expense to us and the diversion of
management time and other resources, the extent of which cannot be quantified
with any reasonable accuracy given the early stage of this litigation.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

On April 17, 2000, we acquired iPromotions through the issuance of
approximately 32,962 shares of our common stock.

On May 19, 2000, we acquired Kendro Communications through the issuance of
approximately 25,694 shares of our common stock.

On May 23, 2000, we issued approximately 285,000 shares of restricted stock to
certain management and employees of the company.

On June 28, 2000, we acquired Exactis.com for approximately 8.2 million shares
of our common stock plus the assumption of previously outstanding stock options
and warrants which were converted into options and warrants to acquire
approximately 2.1 million shares of our common stock.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

At our special meeting held on June 27, 2000 in connection with our merger with
Exactis.com, Inc., we submitted the following matters to a vote of our
stockholders through a proxy solicitation:

1. To consider and vote upon a proposal to approve the issuance of our shares of
common stock pursuant to a merger agreement with Exactis.com, Inc.

2. To consider and vote upon an amendment of the Certificate of Incorporation of
24/7 Media, Inc.

The results of the voting at the special meeting were as follows:

                                       28
<PAGE>

<TABLE>
<CAPTION>
                                                          AFFIRMATIVE
                     PROPOSAL                             VOTES           VOTES AGAINST     ABSTENTIONS
<S>                                                      <C>                 <C>               <C>
Share Issuance                                           16,342,776          121,152           92,297
Amendment to Certificate of Incorporation                21,237,315          817,915           97,914
</TABLE>



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 June 28, 2000. The report contained
information about the consummation of the acquisition of Exactis.

We filed a Current Report on Form 8-K dated August 2, 2000. The report
contained information about a press release issued by the Company on
August 1, 2000.

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:  August 14, 2000

                                   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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